Monday, September 15, 2014
This is the first in a series of posts that are part of a virtual symposium on the new book by Omri Ben-Shahar and Carl E. Schneider, More Than You Wanted to Know: The Failure of Mandated Disclosure. Biographies for the first week's contributors can be found here. The authors' introduction to the symposium can be found here.
Aditi Bagchi teaches Contracts and Labor Law at the Fordham University School of Law, where she is an Associate Professor.
Omri Ben-Shahar and Carl Schneider make a persuasive case that mandatory disclosure is no panacea for complex decisions. We do not use much of the information we are given, nor would we make objectively superior decisions were we to try. Since disclosure is expensive, though not for the state that requires it, we should not take on its costs with exaggerated expectation of benefit. Some regulatory effort should be redirected to other methods, including mandatory regulation of conduct.
In the course of making these important points, Ben-Shahar and Schneider make other, harder claims. Fundamentally, they boil down to the one in the title, i.e., mandatory disclosure gives us more than we want to know. In particular, they claim “mandated disclosure is based on “false assumptions about what people think, do, and want.” (p.94) But the authors provide more evidence of what we do than evidence of what we think or want. Revealed preferences about disclosure (preferences gleaned ex post from how we use it, or don’t) may diverge from both considered individual preferences and collective preferences about an aggregate state of affairs.
One of the interesting moves Ben-Shahar and Schneider make is to talk about mandatory disclosure as such, generalizing across contexts. For example, their claims apply both to standard terms in consumer contracting and medical information relevant to patient decision-making. It is useful, though, to distinguish between small and big decisions because distinct considerations bear on each.
Let us start with big decisions, such as whether to undergo a proposed medical treatment, or which mortgage or retirement plan to select. Ben-Shahar and Schneider argue that people lack the ability and desire to process technical information relevant to these decisions. We appropriately rely instead on advisers to direct us to the best treatment, mortgage or retirement plan. Although the authors might be right about some of the political dynamics that best explain growth of mandatory disclosure in these areas, they do not consider one of the arguments that may best justify disclosure.
Our demand for information may be aspirational. Because we see ourselves as agents directing our lives rather than passively experiencing them, we want to make the basic contour of our lives as much the product of our own agency as possible. Yet we do not always act in accord with our reflective view of ourselves; we forfeit the chance to direct our lives in meaningful ways. We want to know more about our bodies and what will happen to us than we can muster the will to learn. Financial consumers infer from our responsibility for our choice of mortgage or retirement plan – responsibility that our systems of contract, employment, bankruptcy and social security impute to us – that we should acquire knowledge sufficient to exercise control prudently. But we do not make it happen.
Ben-Shahar and Schneider observe that most people are unable to understand financial decision-making. It seems likely, though, that we can understand enough to exercise better control than we do, but fail even to do that. Maybe Ben-Shahar and Schneider are right that complexity and frequency of choice make it very hard to proceed through life as we aspire to do in principle. Although they characterize this as rational conservation of energy, in light of my own reflective judgment that I should know more, my failure to do so should be regarded as just that.
Failure to exercise my own agency in a manner I endorse is a common moral failure, as human as the aspiration to agency itself. But in this context, the state can make it marginally easier to avoid the shortfall by lowering the marginal cost of processing critical facts. Exercising better judgment about a retirement plan need not entail, for example, acquiring the skill to predict which fund will perform best. It can be enough to learn just enough about funds to be able to identify those that have characteristics suitable for someone with my retirement aims. These characteristics may be reductive and legally defined.
Of course, I cannot report that individuals want more information; I am only suggesting some good reasons to think we might want it even though we don’t always use it. It is difficult to show directly how people think about major decisions. But consider a counterfactual: The information we are now provided about mortgages and funds is simply taken away. Doctors cease to explain treatment options in detail. Would we react to this change favorably? Actually, we need not rely on the hypothetical. Notwithstanding the evidence that people do not choose their health care plans or doctors with great care, they are told that henceforth they will be deprived of such choice. Contrary to an aside in the book (p.63), people did seem to get quite upset at the prospect.
One might dismiss our preferences about information and choice as ill-considered because meeting them does not assure satisfaction of our preferences over concrete goods and services. But why credit our preferences about the objects of choice over our considered preferences about the process of choice? Our desire for information, derivative as it may be from our very self-conception, is no less worthy of satisfaction in its own right, even at a cost.
Ben-Shahar and Schneider mischaracterize the “autonomy” interest at issue and the discontent that drives mandatory disclosure. That studying disclosure is unpleasant and may even make us “feel” less autonomous (p. 74) does not imply that disclosure in fact undermines autonomy, because autonomy is not an emotional state. Autonomy is served by making it easier for people to abide by their own regulative principles even where the principles are burdensome and we have a poor track record. The principles of conduct we endorse upon reflection are the work-products of our capacity for practical reason. We are not always adequately motivated by the judgments we make in that mode. But those judgments about who we are and how we should live have special standing, even in the face of evidence that we are not quite what we aspire to be.
Ben-Shahar and Schneider may be right that information about products and services will only result in more efficient consumption if we know ourselves (p. 108). But advocates of disclosure need not assume that we know ourselves as an empirical matter. A liberal state should usually operate under a regulative presumption that each of us knows ourselves better than anyone else because we are in important ways of our own making, constituting ourselves by way of the values we endorse. Because, for many of us, those values likely include a commitment to navigating important life decisions with understanding and deliberateness, our related preference for information to aid us in that effort should not be set aside lightly.
Because the best argument for disclosure sometimes lies in our self-understanding as choosing agents rather than our knowledge of ourselves as consumers or even patients, we can decline to defer to experts without suspecting that they are cheating or tricking us. We vary on a range of dimensions implicated by big decisions – we value different aspects of physical experience, we have different levels of risk aversion, our financial aims reflect broader life projects. Big decisions rely on and substantially impact fundamental features of ourselves. Sometimes, we do not wish to put ourselves on auto-pilot even if we are less likely to hit a bump.
Other times we are okay with auto-pilot. Turning to the small decisions (which cell-phone carrier?), it seems unlikely that our self-conceptions are very bound up with exercising judgment in a thoughtful way (though a case could be made, with respect to the totality of such decisions). But there is an alternative way to conceptualize our preferences about information in the retail context too.
Boilerplate is usually more than any one of us wants to know about each of the transactions we enter. But key to boilerplate is its uniformity and pervasiveness. The terms that govern your transaction probably apply to me too; in fact, they govern most of us. We collectively prefer that terms that govern our life are disclosed to us, even if most of us will not undertake to read those terms. We may not care much about particular terms but we do care about living in a society where legally binding rules are public. Indeed, we have long required laws that govern us to be published, even though most of us do not read those either.
Disclosing standard terms to each of us effectively discloses terms to “us” as a political and economic community (though thinking of it this way may alter the form of disclosure we require). Not only for instrumental reasons but also for reasons having to do with transparency, legitimacy and access, we want the rules by which we operate to be out there for us to jointly reference, evaluate and perhaps revise, by way of public discourse and politics. The mandatory regulation that Ben-Shahar and Schneider recommend as occasional substitutes for disclosure can only come about once we, as a community, know the terms that we reject.
In other words, sometimes I really do want to know more. And sometimes I don’t, but we do.