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Cost-Benefit Analysis and the Conflict Minerals Rule

The SEC made headlines when, in its release announcing the final version of its controversial Conflict Minerals Rule, the agency estimated that the rule would cost industry between $3-$4 billion in the first year alone. These figures have been widely accepted and have anchored a heated debate about the rule’s cost. But this Article proves that the estimate is baseless. The SEC engaged in a dense mathematical discussion of potential compliance expenses, but the core of its analysis rested on inapt and unsound economic models and empirical work. First, this finding means that the SEC’s figures should play a muted role in the ongoing public discourse. Second, our study of the SEC’s work, and the context surrounding it, sheds light on the controversy around cost-benefit analysis. The D.C. Circuit has held that the SEC, like many other agencies, must quantify and weigh the costs and benefits of its regulations. This Article provides an empirical contribution to the growing body of research that calls into doubt the deepening trust that policymakers and courts have bestowed upon this mode of analysis.