This chapter considers the theoretical aims of information regulation and the arguments for and against regulatory intervention in the information production chain. It relates the conceptual framework that Fama’s efficient capital markets hypothesis and Gilson and Kraakman’s mechanisms of market efficiency provide policy makers in considering how to regulate information dissemination and informed trading in capital markets. It further describes how behavioral finance and market microstructure theory have challenged that framework. It then considers the common types of market failure that justify regulatory intervention—underinvestment in public goods, dominant market share, agency costs, asymmetry of sophistication and access—while also discussing how public choice theory and regulatory failures may counsel restraint. The chapter ends with a discussion of market failures and regulatory failures in information policy that contributed to the recent financial crisis.
MIT Press Scholarship Online requires a subscription or purchase to access the full text of books within the service. Public users can however freely search the site and view the abstracts and keywords for each book and chapter.
If you think you should have access to this title, please contact your librarian.
To troubleshoot, please check our FAQs, and if you can't find the answer there, please contact us.