An Evolutionary Economic Explanation of the SEC's Delay in Issuing Crowd Funding Rules

Abstract

Why Would The SEC Delay Doing What Congress Told Them To Do About Implementing Crowd Funding?Most of the traditional economic equilibrium theory would have a hard time explaining why the SEC has not moved forward with rules for crowd funding, under Title II and III of the JOBS Act of 2012.To summarize this delay, the Congress passed the JOBS Act in April of 2012, and gave the SEC 9 months to come up with rules on certain provisions of the law, so that small firms could benefit by raising capital with the new method of crowd funding.Traditional economic theory would attempt to explain this delay by describing quantity and price adjustments, in very small increments, that would lead the economy to a point of equilibrium. Constitutional economic theory would extend traditional theory by suggesting that the agents who control the SEC may have their own internal goals that they are trying to maximize. James Buchanan called this behavior of both elected and appointed officials “rent seeking,” and his explanation is a big improvement over traditional theory in explaining the behavior of the SEC.