However, the frequent financial shocks associated with dynamic financial industries, and in particular the recent economic crisis, also highlight the role large financial markets play in downside risk. This combined evidence implies that there is a trade-off between a highly vibrant financial sector and the overall stability of the financial system.
In fact, some scholars have gone as far as to claim that financial instability can only be eliminated by restricting the same productive forces which are responsible for long-term growth. 2 What I will argue in this speech is that one aspect of the financial sector which can give us key insights into this trade-off is its size.