Abstract

http://ssrn.com/abstract=2378562
 


 



The Empty Call for Benefit-Cost Analysis in Financial Regulation


Jeffrey N. Gordon


Columbia Law School; European Corporate Governance Institute (ECGI)

July 31, 2014

Journal of Legal Studies, Forthcoming
Columbia Law and Economics Accepted Paper No. 464

Abstract:     
The call for benefit-cost analysis in financial regulation is a category mistake that misunderstands the origins and utility of benefit-cost analysis as a guide to administrative rulemaking. BCA has its core metaphor an omniscient social planner who can calculate costs and benefits from a “natural” system that generates prices (cost and benefits) that do not change (or change much) no matter what the central planner does. For example, the toxicity of chemicals, the health hazards of emissions, the statistical value of life — these do not change in response to health and safety regulation. For the financial sector, by contrast, the system that generates costs and benefits is “constructed” by financial regulation itself and by the subsequent processes of adaptation and regulatory arbitrage. An important new rule will change the system beyond our calculative powers. Instead of a weighing of costs and benefits, financial regulation necessarily is based on a series of trade-offs of normatively-derived values, which may entail principles of pragmatic design.

Number of Pages in PDF File: 25

Keywords: Benefit-cost analysis, financial regulation, Glass-Steagall, market funds, judicial review

JEL Classification: G28, K23, P1

Accepted Paper Series





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Date posted: January 14, 2014 ; Last revised: August 2, 2014

Suggested Citation

Gordon, Jeffrey N., The Empty Call for Benefit-Cost Analysis in Financial Regulation (July 31, 2014). Journal of Legal Studies, Forthcoming; Columbia Law and Economics Accepted Paper No. 464. Available at SSRN: http://ssrn.com/abstract=2378562

Contact Information

Jeffrey N. Gordon (Contact Author)
Columbia Law School ( email )
435 West 116th Street
Ctr. for Law and Economic Studies
New York, NY 10027
United States
212-854-2316 (Phone)
212-854-7946 (Fax)
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
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