The Rule of Discretion versus the Rule of Law: Soros Gets Nailed

by Mario Rizzo

In a previous post I reported a Cato Institute panel discussion of Friedrich Hayek’s The Constitution of Liberty (as reissued in a new edition by The University of Chicago Press). This discussion was among Bruce Caldwell (Duke University), Ronald Hamowy (Cato and the University of Alberta), Richard Epstein (New York University), and George Soros, the mega-financier.

In this discussion, ostensibly about the rule of law, Soros said that the complexities of the financial sector require a new class of regulations that may not be simple, predictable and transparent. They may require considerable discretion on the part of regulators. This is because financial markets are the locus of radical uncertainty. It is thus impossible to predict beforehand the kinds of financial-instrument developments that will occur and, especially, the consequences these will have. Thus the financial regulations must be able to be creative in dealing with such developments. This apparently means the rule of law in its traditional sense will have to be bent or compromised. Continue reading