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Full-Text Articles in Law
Regulating Financial Guarantors, Steven L. Schwarcz
Regulating Financial Guarantors, Steven L. Schwarcz
Faculty Scholarship
To improve financial regulation, scholars have engaged in extensive research over the past decade to try to understand why systemically important financial firms engage in excessive risk-taking. None of that research fully explains, however, the unusually excessive risk-taking by financial guarantors such as bond insurers, protection sellers under credit-default-swap (CDS) derivatives, credit enhancers in securitization transactions, and even issuers of standby letters of credit. With tens of trillions of dollars of financial guarantees outstanding, the potential for failure is massive. This Article argues that financial guarantor risk-taking is influenced by a previously unrecognized cognitive bias, which it calls “abstraction bias.” …
The Social Value Of Mortality Risk Reduction: Vsl Vs. The Social Welfare Function Approach, Matthew D. Adler, James K. Hammitt, Nicolas Treich
The Social Value Of Mortality Risk Reduction: Vsl Vs. The Social Welfare Function Approach, Matthew D. Adler, James K. Hammitt, Nicolas Treich
Faculty Scholarship
We examine how different welfarist frameworks evaluate the social value of mortality risk reduction. These frameworks include classical, distributively unweighted cost–benefit analysis—i.e., the “value per statistical life” (VSL) approach—and various social welfare functions (SWFs). The SWFs are either utilitarian or prioritarian, applied to policy choice under risk in either an “ex post” or “ex ante” manner. We examine the conditions on individual utility and on the SWF under which these frameworks display sensitivity to wealth and to baseline risk. Moreover, we discuss whether these frameworks satisfy related properties that have received some attention in the literature, namely equal value of …