7 If this conclusion is valid, then the apparent economies associated with very large balance sheets may be transitory or, more precisely, contingent on the absence of serious shocks to certain asset classes. It is precisely at this intersection between questions of industry structure and of the behavior of financial markets that a joint venture between IO and finance is most important.
As I noted earlier, such an effort could not only help fill out an assessment of the social benefits associated with the size and industry structure of financial firms, but it could also lend insight into the kinds of measures that may be most effective in containing systemic risk.