In theory, social  1  That view is certainly not unanimous, as I argue in "Capitalizing on the Commodity Boom: the Role of Monetary Policy" (speech to the Commodities, the Economy, and Money conference, Calgary, 19 June 2008). BIS Review 85/2008  1  welfare is reduced when there are constraints on the ability of policy-makers to optimize economic adjustment.
The post-crisis phase of this cycle has been characterised by an understandable tendency to strengthen regulation and supervision. This is natural when the memory of the consequences of light-touch regulation is still fresh. However, as the memory of the crisis fades, the cycle usually enters a phase where regulation and strong supervision are perceived as a hindrance to growth and markets.