More Than You Wanted to Know: The Failure of Mandated Disclosure

Privacy and Security, Search and Advertising, Internet and Networks, the Internet, and Cloud Computing

Article Snapshot

Author(s)

Omri Ben-Shahar and Carl E. Schneider

Source

Princeton University Press, 2014

Summary

Mandated Disclosure is a common regulatory strategy. However, mandated disclosures do not help people make better decisions. Many people do not read or cannot understand these disclosures. Simplifying disclosures does not help.

Policy Relevance

Policymakers should identify other regulatory strategies tailored to problems mandated disclosure is intended to prevent.

Main Points

  • Mandated disclosures require specialists to disclose information to help consumers make complex decisions; consumers encounter such disclosures in mortgaging a new house, considering surgery, buying software, or being questioned by the police.
     
  • Mandated disclosure is one of the most common regulatory methods and has often been used in past decades to address policy issues such as Internet privacy.
     
    • The goals of disclosure are to address information imbalance by informing buyers.
       
    • Disclosure seems like a “light” form of regulation.
       
  • Mandated disclosure has been a failure because it rarely leads consumers to make better decisions; people tend to make decisions because of the people they consult or because of the place in which they find themselves, but they rarely read or understand disclosures and receive far too many of them.
     
  • To be successful, disclosures would require lawmakers to correctly identify what must be disclosed and for consumers to read and understand it.
     
  • A significant percentage of the population is functionally illiterate or innumerate.
     
  • The poor and less educated need the most help making decisions but mandated disclosures benefit them the least.
     
  • Targeted, simplified disclosures do not work better than complex disclosures; one cannot describe complexity in a simple way.
     
  • The harms of mandated disclosure include the costs to those who must make the disclosures and the fact that disclosure mandates spare lawmakers the trouble of crafting better laws.
     
  • Much of what is disclosed people are sensible to ignore; the disclosures are not wanted or needed, and there are better sources of information, such as Yelp or Amazon reviews.
     

 

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