The Futility of Cost Benefit Analysis in Financial Disclosure Regulation
University of Chicago Law School
Carl E. Schneider
University of Michigan Law School
January 20, 2014
University of Chicago Coase-Sandor Institute for Law & Economics Research Paper No. 680
U of Michigan Public Law Research Paper No. 395
U of Michigan Law & Econ Research Paper No. 14-008
What would happen if cost benefit analysis were applied to disclosure regulations? Mandated disclosure has largely escaped rigorous CBA because it looks so plausible: Disclosure seems rich in benefits and low in cost. This article makes two arguments. First, it previews the thesis in our book More Than You Wanted to Know (Princeton Press, 2014) that disclosure laws do not deliver their anticipated benefits and thus could not easily pass quantified CBA. Second, it describes a previously unrecognized cost of disclosure, one arising from lawmakers’ collective action problem. With the proliferation of disclosures, each new mandate diminishes the attention people can give to other information, including all other disclosures. The problem for CBA is lawmakers’ inability to coordinate disclosure laws across different fields and jurisdictions. The article illustrates this regulatory failure by examining the rigorous cost-effectiveness analysis conducted by the Consumer Financial Protection Bureau in its recent mortgage disclosure regulation.
Number of Pages in PDF File: 21working papers series
Date posted: March 23, 2014 ; Last revised: March 25, 2014
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