Emotional Impact Analysis in Financial Regulation: Going Beyond Cost-Benefit Analysis

Temple University Legal Studies Research Paper No. 2006-21

Institute for Advanced Study Social Science Economics Working Paper No. 62

58 Pages Posted: 19 Dec 2005  

Peter H. Huang

University of Colorado Law School

Date Written: September 16, 2006

Abstract

This Article advocates that financial regulators analyze, measure, and take into account the emotional impacts of their policies and procedures. Examples of emotional impacts are investor confidence, process concerns, and overall market or social mood. Investor confidence or trust in securities markets, process concerns about how much securities regulators actually deliberate over proposed rules, and financial anxiety or investment stress affect and are affected by financial economic variables, such as consumer debt, consumer expenditures, consumer wealth, corporate investment, initial public offerings, and securities market demand, liquidity, prices, supply, and volume. Cost-benefit analysis does not quantitatively consider interdependencies between regulations' emotional impacts and their financial outcomes. Emotional impact analysis does. This Article addresses general conceptual and measurement issues about emotional impact analysis. Because financial regulations affect investors' confidence, process concerns, and social moods, this Article analyzes how financial regulators can quantitatively analyze emotional impacts of their regulations.

Keywords: Affect, Cost-Benefit Analysis, Emotions, Process Concerns, Securities Regulation

JEL Classification: D61, D63, G18, G38, K22

Suggested Citation

Huang, Peter H., Emotional Impact Analysis in Financial Regulation: Going Beyond Cost-Benefit Analysis (September 16, 2006). Temple University Legal Studies Research Paper No. 2006-21; Institute for Advanced Study Social Science Economics Working Paper No. 62. Available at SSRN: https://ssrn.com/abstract=870453 or http://dx.doi.org/10.2139/ssrn.870453

Peter H. Huang (Contact Author)

University of Colorado Law School ( email )

Colorado Law
401 UCB
Boulder, CO 80309
United States
303 492-4563 (Phone)
303-492-1200 (Fax)

HOME PAGE: http://lawweb.colorado.edu/profiles/profile.jsp?id=456

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