Shareholder voting is a weak and much-criticized mechanism for controlling managerial opportunism. Among other problems, shareholders are often too uninformed to vote wisely, and majority and supermajority rule permits large shareholders to exploit small shareholders. We propose a new voting...

Calls for benefit-cost analysis in rule-making based on the Dodd-Frank Wall Street Reform Act have revealed a paucity of work on allocative efficiency in financial markets. We propose three principles to help fill this gap. First, we highlight the need to quantify the "statistical cost of a...

The financial crisis of 2008 was caused in part by speculative investment in complex derivatives. In enacting the Dodd-Frank Act, Congress sought to address the problem of speculative investment, but merely transferred that authority to various agencies, which have not yet found a solution. We...

The financial crisis of 2008 was caused in part by speculative investment in sophisticated derivatives. In enacting the Dodd-Frank Act, Congress sought to address the problem of speculative investment, but merely transferred that authority to various agencies, which have not yet found a...

The existing system of private property interferes with allocative efficiency by giving owners the power to hold out for excessive prices. We propose a remedy in the form of a tax on property, based on the value self-assessed by its owner at intervals, along with a requirement that the owner...

Financial regulators should use cost-benefit analysis (CBA) to evaluate financial regulations. Finance is an ideal domain for CBA because the direct costs and benefits of financial activity can be easily monetized, and a huge amount of data exists for calculating the relevant valuations. John...

This paper builds on contributions to a Conference on Benefit-Cost Analysis of Financial Regulation, held at the University of Chicago, to show how benefit-cost analysis (BCA) of financial regulations should be conducted. Our major themes are that (1) on theoretical grounds, BCA should be easier...

Democratic institutions aggregate preferences poorly. The norm of one-person-one-vote with majority rule treats people fairly by giving everyone an equal chance to influence outcomes, but fails to give proportional weight to people whose interests in a social outcome are stronger than those of...

The voting rules in Chapter 11 are supposed to ensure that debtor firms are appropriately liquidated or reorganized. However, these convoluted and internally inconsistent rules are poorly designed to produce such outcomes, and there is no evidence that they do. However, the major proposals for...