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

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