Per S.E.

Updated

The Cycle’s S.E. Cupp talks about the “transparency and disclosure” of campaign contributors and Swiss bank accounts.

The Rant:

Full disclosure! It seems like transparency and disclosure – of campaign contributions or Swiss bank accounts – have been given a moral imprimatur. Who would argue, after all, that more information could ever be a bad thing?

But for as much airtime as disclosure and transparency are getting, there’s little evidence that laying it all out there can really change much.

We take as rote that sunlight is the best disinfectant, transparency is the same thing as honesty, and full disclosure can make otherwise onerous transactions work better. Maybe not.

Take, for example, President Obama’s new Consumer Financial Protection Bureau. The premise of the bureau is that consumers need protecting from predatory lending, and some of those protections should come in coercing lending institutions to disclose more about their practices. Sounds reasonable enough. But when the Federal Reserve performed some empirical experiments to see how disclosure impacts behavior, the results were astounding.

As John Gravois explained in a new Washington Monthly piece, “when brokers were required simply to explain that they were working in their own interest and not the borrower’s, borrowers trusted them more for being honest, still without really understanding what was going on.”

Score one for honesty, but that’s hardly good news if the goal is to create smarter consumers.

Part of the problem isn’t just that being brutally honest can actually engender trust while clouding the mind, but disclosure is also a less than effective means of fixing real world problems, because merely requiring disclosure demands no further action.

Disclosure can even have nefarious effects. When researchers in a joint study required subjects in a doctor-patient or broker-buyer relationship to reveal conflicts of interests, it actually encouraged those in the advisory role to give inflated advice, feeling as though the virtue of that one disclosure morally absolved them from giving truthful information.

As much as sunlight may disinfect, it doesn’t always change behavior – or stop the bacteria from growing back again. And government actors can’t fix a broken system by merely demanding that it tell us more about itself. For all the talk of increased regulations and more transparency, voters, consumers, patients and borrowers will still have to get a lot more proactive and better-educated about the big decisions they make.

Read my column in tomorrow’s New York Daily News for more on this.

But you guys get the first crack at me now.

 

Per S.E.

Updated