Bloomberg BusinessWeek on Omri Ben-Shahar's New Book

The Limits of Mandatory Disclosure Laws
Peter Coy
Bloomberg BusinessWeek
May 15, 2014

Mandatory disclosure of information is that rare policy embraced by left and right alike. Liberals see disclosure as empowering the little guy, while conservatives view it as improving market efficiency. To combat obesity, Congress requires disclosure of calorie counts on food packages. To improve medical care, Medicare discloses hospital and physician group ratings. To make home buying more transparent, there’s disclosure of mortgage terms. Consumer Financial Protection Bureau Director Richard Cordray was stating the consensus at a hearing last year when he said, “Disclosure is one of the best tools government agencies can use to improve the operation of the marketplace.”

But is mandatory disclosure really that beneficial? During the housing bubble, having to sign 50 documents stuffed with financial disclosures didn’t stop people from taking out ill-advised subprime loans on overpriced houses. An alarming number of female college students are still attacked on campuses despite the federal Jeanne Clery Disclosure of Campus Security Policy and Campus Crime Statistics Act, which imposes stiff crime reporting obligations on school administrators. And disclosure forms in routine transactions, from getting a car fixed to signing for a FedEx package, have become meaningless annoyances.

A new book, More Than You Wanted to Know: The Failure of Mandated Disclosure, takes the critique one step further: It argues that mandatory disclosures aren’t just useless but outright harmful in many cases. The authors are Omri Ben-Shahar, a contracts expert and professor at the University of Chicago Law School, and Carl Schneider, a bioethicist who teaches law and medicine at the University of Michigan. “Mandated disclosure is so indiscriminately used with such unrealistic expectations and such unhappy results,” they write, “that it should be presumptively barred.” Doing so, they add, “would spare the world much pointless regulation and might help drive lawmakers—legislatures, administrative agencies, and courts—to search harder for solutions actually tailored to problems.”

Omri Ben-Shahar