Chapter based on an interview appearing in Aftershocks: Economic Crisis and Institutional Choice, edited by Anton Hemerijck, Ben Knapen and Ellen van Doorne, eds., (Amsterdam: Amsterdam University Press):93-102."My first indication of the risks of potential crisis came when the financial press began to speak openly about the 'bets' that international financial institutions were making, whether on the direction of the markets , on takeovers, or the like. Banks were no longer making investments; they were making bets. It was commonly understood that the character of banking had changed over the past 15 years, as financial institutions dramatically increased their leverage using new derivatives. But the level of risk taking described by Susan Strange as 'Casino Capitalism' was a new phenomenon.i A few years prior to the crisis, respected financial publications began explicitly using the word 'bet' to describe the investments institutions were making. That was when I began to worry, realizing that this had become a fundamentally different banking sector than the one I grew up with."
Some of the most fruitful insights generated by social science in recent decades flow from explorations of how institutions, understood as sets of regularized practices with a rule-like quality, structure the behavior of political and economic actors.i It is not surprising that attention has now turned to the second-order problem of explaining when and how institutions change.ii In conceptual terms, however, this task is intrinsically difficult. By their nature, analyses designed to explain why institutions have a persistent impact on behavior tend to overstate the solidity of institutions. Acknowledging their plasticity raises questions about when institutions should be seen as determinants of behavior and when objects of strategic action themselves.
Although democracy is often seen as an achievement secured once and for all at one point in time, when the suffrage was extended to the bulk of the population, for instance, in the late nineteenth or early twentieth century in western Europe, in fact, it is the product of an evolving process in which the institutions and ideals of representative government adapt to recurring challenges.1 Democratic institutions are not static features of the political space but subject to continuous challenge and change.