Is All Disclosure Junk Disclosure?

You will recall that I’ve posted in the past about “junk disclosure” – that is, legal requirements to disclose information (either in reports or in the form of disclaimers on communications) that do not give the public useful information. A recent article in the University of Pennsylvania Law Review provocatively suggests that disclosure mandates overall fail to provide the targeted beneficiaries with useful information, and whatever benefits do accrue are swamped by costs in money and time, as well as bad unintended consequences.

In this article, titled “The Failure of Mandated Disclosure” professors Omri Ben-Shahar and Carl E. Schneider look at a wide variety of disclosure mandates.  Disclosure requirements are pervasive – they appear in areas of finance, insurance, telecommunications, sales of goods and services, leases, contracts, criminal procedure, education, transportation – and campaign finance of course. Yet, “[t]he great paradox of the Disclosure Empire is that even as it grows, so also grows the evidence that mandated disclosure repeatedly fails to accomplish its ends.”  Take nutrition labeling – an area where the informal view is pretty positive.  This article discusses the empirical evidence that consumers , if they read the labels at all, can’t understand them, have other sources of information that are more useful, and in any case do not improve their eating habits.

The authors observe that the incentives behind disclosure encourage excess.  “Lawmakers have incentives to regulate when regulation is unnecessary, to use mandated disclosure when it is ineffective, to set mandates too broadly, and to articulate standards too loosely.”  Indeed, this is the dynamic in campaign finance disclosure.  As a result, we have low thresholds for reporting, raging debates over what kinds of support needs reporting, and reams of pages of material nobody reviews.  Is there anyone on the planet whose opinion of Barack Obama, Charles Koch or John Boehner is informed AT ALL by FEC filings?  Does too much disclosure crowd out useful information?  Those who do use reports offer inaccurate interpretations – how many times have you seen a report that Corp. X “gave” contributions to a federal candidate, when in fact the donors are merely employees of that company (corporate contributions are illegal in federal campaigns, remember?).  Or the information does not enlighten the candidate’s merits, but instead is used to identify (and harass) donors.  See the Proposition 8 campaign, and the real costs experienced by real people whose only interest was to support a public cause they felt was right.

Is there a better way?  These authors recommend that mandated disclosure be “brief, simple and easy.”  An example is the practice in some jurisdictions of assigning restaurants a sanitation grade of A (good) to C (not so much).  Less is more.

So an advertising disclaimer that required a lengthy recitation of sponsors, supporters, and whatnot is less effective than the short to-the-point disclaimer.  First-dollar contribution disclosure is counterproductive – better to set a threshold at a “truly interesting” level.  Even in politics, the consumer of these disclosures has other (better) sources of information to use in evaluating a political message.  We shouldn’t be mislead into thinking that mandated disclosures are the best, or even a good, source of political information.