1 Article submitted to Annals of Public and Cooperative Economics February 10, 2020 PUBLIC GOOD, PUBLIC ACTION AND FINANCIAL REGULATION Faruk ÜLGEN Director of the Distance Learning Department Director of International Relations and Conventions Deputy Director, Center of Research in Economics of Grenoble (CREG) Faculty of Economics of Grenoble (FEG) – University Grenoble Alpes 1241, rue des Résidences BP47 – 38040 Grenoble Cedex 9-France Phone: +33-(0)476 82 54 58 - Fax: +33-(0)476 82 59 95) faruk.ulgen@univ-grenoble-alpes.fr Abstract Structural reforms implemented over the last 40 years in major capitalist economies resulted in a system-wide financial liberalization. This process replaced public financial regulation with self-regulation rules that rely on the assumption of global efficiency of market mechanisms. Such a radical transformation of the 21 st century capitalism also resulted in a profound change of the accumulation regime in force and transformed capitalist economies into speculative rent- based market systems that endogenously suffer from “shortness of breath”. The overall catastrophic consequence of such a development was the systemic and global crisis of the 2007-2008. This crisis obviously casts doubt on the relevance of models that support financial liberalization to achieve social welfare in a (Pareto) optimal way. The consistency of regulation-free financial markets is extremely limited when it comes to the systemic viability of capitalist economies that mainly rests on the stability of the monetary and financial framework that is at the core of the socio- economic engine. Therefore, a sustainable working of our open societies requires a public organization and supervision of financial markets and banking activities. This calls for a collective action since systemic stability remains beyond the scope of individual power. In this aim, this article seeks to contribute to the development of a relevant paradigm of collective action in the provision of a particular public good, financial stability, through a particular public action, financial regulation. Drawing upon the institutionalist tradition of Veblen, Polanyi and Minsky, and upon the works of Olson, Hardin and Ostrom related to common-good-issues, the article places the focus on the social provisioning process of financial market regulation, and asserts the publicness of the monetary and financial structure in a capitalist economy. The article then maintains that the continuity of monetary and financial relations requires financial stability that cannot be provided through market mechanisms because of the endogenous limits of individual action. This implies treating finance as a public utility and financial stability as a public good, and leads to regard financial regulation as a collective action problem that requires a public supervision framework through an extra-market macro-regulation apt to allow economy to work in a sustainable manner. Keywords: Collective action, crises, financial regulation, institutions, macro-regulation, public good JEL Classification: E02, G01, G18, H41