IDEAS home Printed from https://ideas.repec.org/a/ucp/jlstud/doi10.1086-676685.html
   My bibliography  Save this article

Efficiency and Benefit-Cost Analysis of the Financial System

Author

Listed:
  • Thomas Philippon

Abstract

Financial intermediation arises from the need for expertise in channeling capital from savers to borrowers in the presence of transaction costs. I present a framework for measuring the overall efficiency of financial intermediation and emphasize some key challenges in applying benefit-cost analysis to finance: long-run cycles in financial activity, the burden of proof between regulators and the regulated, and the interaction between benefit-cost analysis and academic research.

Suggested Citation

  • Thomas Philippon, 2014. "Efficiency and Benefit-Cost Analysis of the Financial System," The Journal of Legal Studies, University of Chicago Press, vol. 43(S2), pages 107-120.
    • Handle: RePEc:ucp:jlstud:doi:10.1086/676685
    DOI: 10.1086/676685
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1086/676685
    Download Restriction: Access to the online full text or PDF requires a subscription.
    File URL: http://dx.doi.org/10.1086/676685
    Download Restriction: Access to the online full text or PDF requires a subscription.
    File URL: https://libkey.io/10.1086/676685?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Bai, Jennie & Philippon, Thomas & Savov, Alexi, 2016. "Have financial markets become more informative?," Journal of Financial Economics, Elsevier, vol. 122(3), pages 625-654.
    2. Thomas Philippon & Ariell Reshef, 2012. "Wages and Human Capital in the U.S. Finance Industry: 1909--2006," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(4), pages 1551-1609.
    3. Nicola Gennaioli & Andrei Shleifer & Robert Vishny, 2014. "Finance and the Preservation of Wealth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(3), pages 1221-1254.
    4. Emiliano S. Pagnotta & Thomas Philippon, 2018. "Competing on Speed," Econometrica, Econometric Society, vol. 86(3), pages 1067-1115, May.
    5. Gorton, Gary B., 2012. "Misunderstanding Financial Crises: Why We Don't See Them Coming," OUP Catalogue, Oxford University Press, number 9780199922901.
    6. Thomas Piketty & Gabriel Zucman, 2014. "Capital is Back: Wealth-Income Ratios in Rich Countries 1700–2010," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(3), pages 1255-1310.
    7. Hirshleifer, Jack, 1971. "The Private and Social Value of Information and the Reward to Inventive Activity," American Economic Review, American Economic Association, vol. 61(4), pages 561-574, September.
    8. Robin Greenwood & David Scharfstein, 2013. "The Growth of Finance," Journal of Economic Perspectives, American Economic Association, vol. 27(2), pages 3-28, Spring.
    9. Dennis Fixler, 2009. "Incorporating Financial Services in a Consumer Price Index," NBER Chapters, in: Price Index Concepts and Measurement, pages 239-266, National Bureau of Economic Research, Inc.
    10. Guillaume Bazot, 2018. "Financial Consumption and the Cost of Finance: Measuring Financial Efficiency in Europe (1950–2007)," Journal of the European Economic Association, European Economic Association, vol. 16(1), pages 123-160.
    11. Patrick Bolton & Tano Santos & Jose A. Scheinkman, 2016. "Cream-Skimming in Financial Markets," Journal of Finance, American Finance Association, vol. 71(2), pages 709-736, April.
    12. Philip Bond & Alex Edmans & Itay Goldstein, 2012. "The Real Effects of Financial Markets," Annual Review of Financial Economics, Annual Reviews, vol. 4(1), pages 339-360, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:hal:spmain:info:hdl:2441/53fhlrk21m95fr2o3ajosmu5jg is not listed on IDEAS
    2. Eric A. Posner & E. Glen Weyl, 2014. "Benefit-Cost Paradigms in Financial Regulation," The Journal of Legal Studies, University of Chicago Press, vol. 43(S2), pages 1-34.
    3. Olivier Godechot, 2015. "Financialization Is Marketization!," SciencePo Working papers Main hal-03459520, HAL.
    4. repec:spo:wpmain:info:hdl:2441/53fhlrk21m95fr2o3ajosmu5jg is not listed on IDEAS
    5. Matthew Jaremski & Ayse Sapci, 2017. "Understanding the Cyclical Nature of Financial Intermediation Costs," Southern Economic Journal, John Wiley & Sons, vol. 84(1), pages 181-201, July.
    6. Godechot, Olivier, 2015. "Financialization is marketization! A study on the respective impact of various dimensions of financialization on the increase in global inequality," MaxPo Discussion Paper Series 15/3, Max Planck Sciences Po Center on Coping with Instability in Market Societies (MaxPo).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Thomas Philippon, 2015. "Has the US Finance Industry Become Less Efficient? On the Theory and Measurement of Financial Intermediation," American Economic Review, American Economic Association, vol. 105(4), pages 1408-1438, April.
    2. Arnold, Lutz G. & Zelzner, Sebastian, 2022. "Financial trading versus entrepreneurship: Competition for talent and negative feedback effects," The Quarterly Review of Economics and Finance, Elsevier, vol. 86(C), pages 186-199.
    3. Bai, Jennie & Philippon, Thomas & Savov, Alexi, 2016. "Have financial markets become more informative?," Journal of Financial Economics, Elsevier, vol. 122(3), pages 625-654.
    4. Philippon, Thomas, 2016. "The FinTech Opportunity," CEPR Discussion Papers 11409, C.E.P.R. Discussion Papers.
    5. Kirill Shakhnov, 2022. "The Allocation of Talent: Finance versus Entrepreneurship," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 46, pages 161-195, October.
    6. Boris Cournède & Oliver Denk & Peter Hoeller, 2015. "Finance and Inclusive Growth," OECD Economic Policy Papers 14, OECD Publishing.
    7. Strömberg, Per & Metzger, Daniel & Böhm, Michael, 2018. "“Since you’re so rich, you must be really smart†: Talent and the Finance Wage Premium," CEPR Discussion Papers 12711, C.E.P.R. Discussion Papers.
    8. Asano, Koji, 2024. "Ignorant experts and financial fragility," The North American Journal of Economics and Finance, Elsevier, vol. 74(C).
    9. Studer, Sabrina & Falkinger, Josef & Zhao, Yingnan, 2015. "Explaining structural changes towards and within the financial sector," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113004, Verein für Socialpolitik / German Economic Association.
    10. Peress, Joel & Schmidt, Daniel, 2021. "Noise traders incarnate: Describing a realistic noise trading process," Journal of Financial Markets, Elsevier, vol. 54(C).
    11. Asano, Koji, 2024. "Managing financial expertise," International Review of Economics & Finance, Elsevier, vol. 89(PA), pages 351-365.
    12. Glebkin, Sergei & Kuong, John Chi-Fong, 2023. "When large traders create noise," Journal of Financial Economics, Elsevier, vol. 150(2).
    13. Buss, Adrian & Sundaresan, Savitar, 2020. "More Risk, More Information: How Passive Ownership Can Improve Informational Efficiency," CEPR Discussion Papers 14843, C.E.P.R. Discussion Papers.
    14. Itay Goldstein & Shijie Yang & Luo Zuo, 2020. "The Real Effects of Modern Information Technologies: Evidence from the EDGAR Implementation," NBER Working Papers 27529, National Bureau of Economic Research, Inc.
    15. Josef Falkinger, 2014. "In search of economic reality under the veil of financial markets," ECON - Working Papers 154, Department of Economics - University of Zurich.
    16. Gider, Jasmin & Schmickler, Simon & Westheide, Christian, 2019. "High-frequency trading and price informativeness," SAFE Working Paper Series 248, Leibniz Institute for Financial Research SAFE, revised 2019.
    17. Monnet, Cyril & Quintin, Erwan, 2017. "Limited disclosure and hidden orders in asset markets," Journal of Financial Economics, Elsevier, vol. 123(3), pages 602-616.
    18. Mattia Landoni & Stephen P. Zeldes, 2020. "Should the Government be Paying Investment Fees on $3 Trillion of Tax-Deferred Retirement Assets?," NBER Working Papers 26700, National Bureau of Economic Research, Inc.
    19. GUNJI Hiroshi & ONO Arito & SHIZUME Masato & UCHIDA Hirofumi & YASUDA Yukihiro, 2023. "Unit Cost of Financial Intermediation in Japan, 1954 - 2020," Discussion papers 23076, Research Institute of Economy, Trade and Industry (RIETI).
    20. Luigi Zingales, 2015. "Does Finance Benefit Society?," NBER Working Papers 20894, National Bureau of Economic Research, Inc.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ucp:jlstud:doi:10.1086/676685. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Journals Division (email available below). General contact details of provider: https://www.journals.uchicago.edu/JLS .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.