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Geoffrey Manne on Interesting doesn’t necessarily mean policy relevant

TOTM The problem with behavioral law and economics (and its behavioral economics cousin) is not that it has nothing interesting to say, but rather that the . . .

The problem with behavioral law and economics (and its behavioral economics cousin) is not that it has nothing interesting to say, but rather that the interesting things it has to say do not mean what its proponents think they mean.  It is one thing to claim that people are less rational than we thought.  It even one thing to claim that people are systematically less rational than we thought, in predictable and important ways.  But it is entirely another to presume that the implication of this is a larger scope for government regulation to protect the market and market actors from the depredations of this irrationality.

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Financial Regulation & Corporate Governance

Do Republicans Hate Behavioral Economics?

TOTM Ezra Klein has an interesting blog post covering Peter Diamond’s nomination to Federal Reserve Board.  The standard refrain in this debate has been something like: . . .

Ezra Klein has an interesting blog post covering Peter Diamond’s nomination to Federal Reserve Board.  The standard refrain in this debate has been something like: “See! The Republicans blocked Diamond and now he won the Nobel — don’t they look silly now.”  I don’t find the particular issue of comparing Diamond’s qualifications as an economist to those qualifications required of a Board member all too interesting and so I wont comment on that here.  Though I should say here so we can get to the point of the post that I believe Diamond should be confirmed.

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Financial Regulation & Corporate Governance

Misbehavioral Economics: The Case Against Behavioral Antitrust

TOTM In a policy speech earlier this year, Commissioner J. Thomas Rosch of the Federal Trade Commission advocating the incorporation of behavioral economics into antitrust analysis . . .

In a policy speech earlier this year, Commissioner J. Thomas Rosch of the Federal Trade Commission advocating the incorporation of behavioral economics into antitrust analysis suggested one concern that others might have with the approach was that “behavioral economics was simply liberalism masquerading as economic thinking.”   The Commissioner himself has been a vocal proponent of incorporating insights from behavioral economics into antitrust, as has already been done in the consumer protection realm (see, e.g. CFPB).  Indeed, with Cass Sunstein’s appointment at OIRA, the recent creation of a “Nudge” team in David Cameron’s Cabinet (aka “behavioral insight team”) in the UK, the CFPB, and the calls from at least one Federal Trade Commissioner to modify antitrust analysis suggest the behavioral regulatory regime is no longer right around the corner; it has arrived.

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Antitrust & Consumer Protection

In Elizabeth Warren We Trust?

Popular Media The Obama administration has promised that the Federal Reserve’s new Consumer Financial Protection Bureau will be independent from politics, a model of regulatory expertise grounded . . .

The Obama administration has promised that the Federal Reserve’s new Consumer Financial Protection Bureau will be independent from politics, a model of regulatory expertise grounded in sound data and economics. Naming Harvard Law Prof. Elizabeth Warren as de facto agency head undermines both goals.

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Financial Regulation & Corporate Governance

Which CFPB Will We Get?

TOTM Todd mentions Elizabeth Warren’s “kick off” speech for the CFPB, in which she accepts the new “President and Special Advisor to the Secretary of the . . .

Todd mentions Elizabeth Warren’s “kick off” speech for the CFPB, in which she accepts the new “President and Special Advisor to the Secretary of the Treasury” gig, and tells us what the new Bureau is all about…

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Financial Regulation & Corporate Governance

Behavioral Economics and Consumer Financial Protection for “Nitwits”

TOTM In a recent NY Times column largely devoted to improving soccer in various ways and how those methods might be used to improve financial regulation . . .

In a recent NY Times column largely devoted to improving soccer in various ways and how those methods might be used to improve financial regulation as well, behavioral economist and Nudge author Richard Thaler writes the following about the Consumer Financial Protection Bureau…

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Financial Regulation & Corporate Governance

More on Elizabeth Warren on Theory and Interpreting Data

TOTM With all the talk about the CFPB, Elizabeth Warren has been in the news lately.  The blogs too.  Most of the discussion has been about . . .

With all the talk about the CFPB, Elizabeth Warren has been in the news lately.  The blogs too.  Most of the discussion has been about whether or not Timothy Geithner is a friend or foe to the Democrats’ preferred option of getting Warren nominated as the first chief of the CFPB.  Today, Megan McArdle started on what is a less interesting political topic, but a more interesting one for this blog with a long and detailed post on Elizabeth Warren taking on then-Professor Warren’s use of theory and data in the Two Income Trap and her controversial work on medical bankruptcies.  McArdle later doubled-up with a be re-posting Todd Zywicki’s WSJ op-ed pointing out the odd manner in which tax data are presented in Two Income Trap.  Put directly, Zywicki provides some evidence that the presentation (made in an attempt to show the increasing burdens of mortgage, car and health obligations) presents the data percentage terms in order to obfuscate the fact that changes in tax obligations play a much larger role in the economic burden facing the middle class than convenient for the story told in the book.

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Antitrust & Consumer Protection

When political preferences masquerade as political necessity

TOTM Josh has recently discussed his thoughts about the intellectual trajectory of the newly-minted CFPB and how that intellectual trajectory might influence the selection of the . . .

Josh has recently discussed his thoughts about the intellectual trajectory of the newly-minted CFPB and how that intellectual trajectory might influence the selection of the Bureau’s first director–presumed to be either Michale Barr or Elizabeth Warren.  His is a brief, dispassionate and intellectually-honest assessment.  But given Simon Johnson’s brief, intemperate and intellectually-devoid assessment of the issue, I’m afraid Josh may be a bit naive.

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Antitrust & Consumer Protection

A “Plain Vanilla” Proposal for Behavioral Law and Economics

TOTM I’ve been, for some time, a behavioral law and economics skeptic.  Sometimes this position is confused with skepticism about behavioral economics, as in — believing . . .

I’ve been, for some time, a behavioral law and economics skeptic.  Sometimes this position is confused with skepticism about behavioral economics, as in — believing that behavioral economics itself offers nothing useful to economic science or is illegitimate in some way.   That’s not true.  Now, I have some qualms about the explanatory power of some of the behavioral models as well — but the primary critique (in my view) has always been the threat that behavioral economics will be used as the intellectual cover for regulation judged by the preferences of the regulators rather than rigorous economic analysis of any sort.

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Antitrust & Consumer Protection