Sarbanes-Oxley Significantly Increased the Number of Companies Going Private

ATR’s conservative estimate of regulatory costs includes only the cost of complying with regulations.  This includes the material resources and labor needed to carry out compliance with this regulatory requirement.  For example, if a regulation requires new pollution control equipment for power plants, compliance costs include the costs of manufacturing, installing, operating and maintaining the equipment.

This estimate ignores the negative economic effects of the costs of regulatory requirements.  These hidden costs slow the economy, as they introduce inefficiencies and distortions, and reduce the economic reward left over for productive activity.  The regulations may prevent new firms from entering the market, or stop existing ones from expanding.  They may even force some existing firms out.  The end result is less overall output, fewer jobs, lower wages and lower economic growth.

These economic costs may be as large as the direct compliance costs of regulation.  Economists at Washington University at St. Louis, leaders in the study of regulation, have estimated these costs to be over $1.5 trillion per year in current dollars.  The full, true burden of regulatory costs may consequently be twice as large as estimated above.  This makes reform to reduce regulatory costs twice as urgent.

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