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A Rule About Gold

Dec 9, 2010 • 224 Views
EST. TIME TO READ: 1 minute

Yes, gold is a part of Dodd-Frank financial regulation but not exactly the way you would expect.

Dodd-Frank says that businesses have to tell the SEC if the gold, tin, tantalum, and tungsten (the 3 Ts) in their supply chain provide income to rebels in eastern Congo. Because Tungsten is crucial for making cell phones vibrate, Best Buy Co., for example, could be affected. Other firms using the 3 Ts and gold include manufacturers and sellers of laptops, airplane parts, ballpoint pens, and jewelry.

As explained by The Wall Street Journal, the law “aims to pressure companies to spurn so-called conflict minerals…” Firms avoiding conflict minerals can label products “DRC conflict free.”

Your opinion?

The Economic Lesson

An economist could explain the impact of the new regulation. Step one would be to characterize the current price of conflict minerals as a market failure. Then, by increasing the cost of using them through additional regulation, firms are forced to recognize their “true” cost. On a demand/supply graph, the supply curve would shift leftward. 

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