Cost-Benefit Analysis of Financial Regulations: A Response to Criticisms

18 Pages Posted: 14 May 2014 Last revised: 26 Jun 2016

See all articles by Eric A. Posner

Eric A. Posner

University of Chicago - Law School

E. Glen Weyl

Microsoft Research; RadicalxChange Foundation

Date Written: May 14, 2014

Abstract

Financial regulators should use cost-benefit analysis (CBA) to evaluate financial regulations. Finance is an ideal domain for CBA because the direct costs and benefits of financial activity can be easily monetized, and a huge amount of data exists for calculating the relevant valuations. John Coates and others have argued that in fact the valuations are too difficult to determine because of unique features of financial markets that distinguish them from other types of markets where CBA is used. We respond that these features are present in other markets, and that financial valuations are difficult to determine at present only because academic research on them is at an early stage.

Keywords: cost-benefit analysis, financial regulation, administrative law

JEL Classification: D61, G18, G28, K22

Suggested Citation

Posner, Eric A. and Weyl, Eric Glen, Cost-Benefit Analysis of Financial Regulations: A Response to Criticisms (May 14, 2014). Yale Law Journal Forum, Forthcoming, University of Chicago Coase-Sandor Institute for Law & Economics Research Paper No. 683, U of Chicago, Public Law Working Paper No. 473, Available at SSRN: https://ssrn.com/abstract=2436538

Eric A. Posner (Contact Author)

University of Chicago - Law School ( email )

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Eric Glen Weyl

Microsoft Research ( email )

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HOME PAGE: http://www.glenweyl.com

RadicalxChange Foundation ( email )

HOME PAGE: http://www.radicalxchange.org

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