One of the things that motivated me to write this book was the continuing widespread misunderstanding of how the issues that beset the financial markets in New York, London, and elsewhere in 2007 blossomed into the global financial crisis soon after. So, it is especially pleasing to have generated an explanation of these events that Professor Copelovitch finds compelling. I have two major responses to some other points he makes.

Professor Copelovitch argues that few crises have been driven by financial innovation as I suggest. He then provides some examples to support his view that capital mobility is the real source of financial instability. In fact, each case he mentioned was linked to financial innovation: Latin America in the 1980s (inflation-indexed sovereign borrowing), East Asia in the 1990s (borrowing in US dollars and lending in local currency), and Europe in the 2010s (government bailouts of banks that had traded in securities associated with structured finance). Indeed, Copelovitch and Singer show in their book that it is the sophistication of securities markets that turns capital flows into crises. Without that sophistication there is no crisis. They note, “There are far more cases of large capital inflows, asset bubbles and macroeconomic imbalances that do not result in banking crises than cases that do” (p. 185).

The other issue is Copelovitch’s contrasting the views of those he calls materialist political economy scholars, who place emphasis on domestic interests, institutions, and the “material distributional consequences of them,” with my approach. My problem is that I do not see separate ideational and material worlds, at least not when it comes to human understanding and action. As Mark Blyth wrote in this journal 20 years ago, “Structures do not come with an instruction sheet.” The material does not—cannot—assert itself without social mediation by us. This shapes how people understand what materialist scholars call incentives. Because of this, I do not see a need to add the material to my inquiry. It is already there. In this book, I provided, for example, evidence of how agents interpreted the competitive circumstances and market share dynamics in the agencies, especially in chapter 5. This is a “materialist” analysis to my mind, and the best sort too, because it does not involve me as a scholar imposing my understanding of what is important. The actors are fully capable of doing that themselves. That is why I do not think a test that distinguishes actors’ “beliefs” about rating agencies from “material political economy factors” about inter-rating agency competition is likely to be insightful. There is no material sphere that is somehow apart from our beliefs about that sphere, because all structures must be understood by people. This intervening processing is required to make the material compelling to us, and this dynamic can certainly give rise to variable outcomes.

I want to thank Professor Copelovitch for his many insightful comments and praise for my book, and to note again how thoughtful and well-constructed I found Banks on the Brink.