Towards Better Cost-Benefit Analysis: An Essay on Regulatory Management

20 Pages Posted: 27 Jul 2014

See all articles by John C. Coates, IV

John C. Coates, IV

Harvard Law School; European Corporate Governance Institute (ECGI)

Date Written: July 14, 2014


Cost-benefit analysis of financial regulation (CBA/FR) has become a flashpoint in contemporary legal and political debates, partly due to the Dodd-Frank Act. Yet debates over CBA/FR exhibit terminological confusion, and CBA/FR advocacy has outrun the possible, given data limitations and current research techniques, and has neglected institutional and legal design, relying unreflectively on the dubious idea of judicially enforced quantification in a conventional administrative law framework. The aim of this paper is to take up the institutional design question: how to move towards feasible and net beneficial CBA/FR practices? It argues that just as eliciting shareholder-oriented business decisions in for-profit corporations is a managerial challenge, not susceptible to command and control, so too generating good CBA/FR is a managerial challenge. Courts should have a reduced, not increased, role in reviewing CBA/Fr, and the tools of management – funding, governance, disclosure, regulatory design, and agency culture – are more likely to promote good CBA/FR than simple legal mandates.

Keywords: Cost-benefit analysis, financial regulation, Dodd-Frank Act, administrative law, governance, disclosure, regulatory design, agency culture

JEL Classification: D02, D61, D73, D78, G18, G38, I3, K22, K23, L51

Suggested Citation

Coates, John C., Towards Better Cost-Benefit Analysis: An Essay on Regulatory Management (July 14, 2014). Law and Contemporary Problems, Forthcoming, Available at SSRN:

John C. Coates (Contact Author)

Harvard Law School ( email )

1575 Massachusetts
Hauser 406
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

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