David Skeel Paper on Behavioral Economics and the CFPB

David A. Skeel Jr. of NYU, Penn, and the European Corporate Governance Institute has written Behavioralism in Finance and Securities Law.  Here is the abstracgt:

In this Essay, I take stock (as something of an outsider) of the behavioral economics movement, focusing in particular on its interaction with traditional cost-benefit analysis and its implications for agency structure.  The usual strategy for such a project — a strategy that has been used by others with behavioral economics — is to marshal the existing evidence and critically assess its significance.  My approach in this Essay is somewhat different.  Although I describe behavioral economics and summarize the strongest criticisms of its use, the heart of the Essay is inductive, and focuses on a particular context: financial and securities regulation, as recently revamped by the Dodd-Frank Act and subsequent rule making.   To lay the foundation for the Essay, I begin by briefly describing behavioral economics and by surveying the most significant critiques of its use.  I then consider how behavioral economics has informed, or might inform, the work of the Consumer Financial Protection Bureau; SEC rulemaking on proxy access; and the efforts of the new financial legislation to ban bailouts.  I suggest, among other things, that behavioralism’s implications are quite different for rules and rulemaking than for questions of regulatory structure.

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