Debating Mandatory Disclosure as a Popular Form of Information Regulation

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In this book the authors address the flaws of mandatory disclosure, that is the release of information available to the consumers of goods and services. It is a tool designed to protect consumers by helping them to make a well-informed decision about what to purchase. However, disclosures are not read because they describe complex facts in complex language. The very lack of sophistication and expertise that purportedly justifies mandated disclosure means that people will not be able or willing to use the complex information disclosed.

Mandated disclosure, it is often recognized, fails because of the “overload problem”. But mandated disclosure is also defeated by a separate “accumulation problem.” People not only face a clutter of information within each disclosure; they face a clutter across disclosures. The accumulation problem arises because disclosees are confronted with so many disclosures each and every day and this makes futile any attempt to subject individual disclosure to Cost-Benefit Analysis as pointed out by the authors in an article.

In mid-June Reg-Blog hosted a seven-part series of comments on the book, including two essays by the book’s authors who advocate the repeal of all useless disclosure to ease the burden of the accumulation problem.

(Fabrizio Di Mascio)