Cost-Benefit Analysis in Financial Regulation: An Ongoing Debate

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One of our latest posts was focused on a series of papers hosted by the Yale Law Journal on the topic of cost-benefit analysis in financial regulation. We continue to report on the current debate in the US on this topic by featuring a research for the US Chamber of Commerce prepared by Paul Rose and Chris J. Walker in March 2013.

The research follows the sweeping regulatory change triggered in 2011 by the widespread agreement that ineffective regulation greatly contributed to the financial crisis. As regulators sought to address regulatory failure, since 2011 the law requires the use of cost-benefit analysis in financial regulation. By focusing on the SEC, the analysis highlights that the agency responded to regulatory change by engaging in more serious economic analysis that incorporates the core principles of cost-benefit analysis.

According to the authors, the SEC’s course of action is one that other financial regulators should follow. However, Rose and Walker also expressed concerns about judicially enforced review of cost benefit analysis. In a recent post on the blog from the Yale Journal on Regulation, Walker displayed his attraction to the “idea of making financial regulation subject to presidential review via the Office of Information and Regulatory Affairs (OIRA)”.

The Full Report presenting the research is available on SSRN.

(Fabrizio Di Mascio)

Photo credits: Dirk Knight