September 29, 2011
Verret on the Economic Analysis of SEC Rulemaking
J. W. Verret has posted a very interesting outline of an article he is writing on economic analysis of SEC rulemaking. He discusses the proposed article here and here. As I have discussed earlier, when the SEC engages in rulemaking, it has a statutory obligation to consider the effect of its proposed rule on “efficiency, competition, and capital formation.” This requirement, which was added in 1996 by the National Securities Markets Improvement Act, was the basis for the D.C. Circuit’s recent opinion in Business Roundtable v. SEC, striking down the SEC’s proposed proxy access rule.
Verret plans a two-part article. The first part will discuss what he calls the “four pillars” of securities regulation: investor protection, efficiency, competition, and capital formation, the history of the NSMIA requirements, and the logistical problems those requirements create. The second part of the article will try to relate these ideas to various strands of economic theory: public choice, Austrian economics, behavioral economics, and financial economics.
It’s an ambitious undertaking that should be fascinating when he finishes it, but the outline alone is worth reading.