New Book Discussion -- Full Disclosure: The Perils and Promise of Transparency
Archon Fung, Associate Professor of Public Policy, and co-director, The Transparency Project, John F. Kennedy School of Government, Harvard University, co-author; Mary Graham, co-director, The Transparency Project, John F. Kennedy School of Government, Harvard University and Visiting Fellow, Brookings Institution, co-author; David Weil, Professor of Economics, Boston University School of Management, and co-director, The Transparency Project, John F. Kennedy School of Government, Harvard University, co-author; Alasdair Roberts, Associate Professor, Maxwell School of Citizenship and Public Affairs, Syracuse University, commentator.
"Sunlight is said to be the best of disinfectants," Mary Graham quoted at the beginning of the Division of U.S. Studies' discussion of Full Disclosure. The phrase, first used in 1914 by soon-to-be Supreme Court Justice Louis Dembitz Brandeis, referred to the benefits of transparency. The idea of transparency in governance – providing the public with the information it needs about goods and public services so as to reduce personal risk – is far from new. Today, there are transparency policies at the local, state, and national levels, but they may not always be effective. Behind news reports of SUV rollovers, inadequate nutritional labeling and exorbitant executive pay lies a transparency system that has in many ways failed. Information that is old, partial, or skewed may well do more harm than good. At a time when national attention is heightened by such crises as the Enron debacle, Graham said, Full Disclosure was written to examine why some transparency policies work, why others do not, and how transparency policies can be improved.
Transparency is beneficial, David Weil explained, when it results in the disclosure of information that is current, that is presented in a simple and readily understood format, and that offers the consumer a choice. In 2005, for example, ABC News reported on the unsanitary conditions in many restaurants in Los Angeles, California. The city did not respond to the report by increasing inspectors but, instead, by establishing a restaurant quality grading system and requiring each restaurant to post the rating on its front window, right next to its menu. Restaurants that were given a quality grade of "C" by the city lost clientele, as compared to restaurants awarded an "A" grade. The policy was so successful that the number of hospitalizations as a result of food poisoning declined. By comparison, a public report about water contamination in Cambridge, Massachusetts contained a dizzying array of information presented in incomprehensible charts, and offered no metrics for decision.
Archon Fung predicted that the advance of technology in the information age will aid transparency. Information disclosure will be more customized (available as an option people can access through their cell phones when choosing products in a supermarket, for example) and transferred horizontally (from consumer to consumer – think about the customer ratings on Amazon.com) rather than vertically (from government to consumer). Disclosure will not depend solely on policy-makers, and the government will become as much facilitator as controller of information flow. The challenge, however, will lie in regulating the transfer and maintaining the quality of information, and that is where the role of government will be crucial. Policy-makers can improve transparency by designing policies that focus on the needs of the end-user, agreeing upon the most effective method of disclosure (standardized tests vs. school report cards, for instance), and standardizing the method of disclosure. Policy-makers must think about when transparency is socially useful and when it is not. In some instances, when variable outcomes are not possible (when people have access to only one utility provider, for example), government regulation may be far more important than transparency policies. Fung emphasized that an effective disclosure system must also have an advocacy base to overcome political forces hostile to transparency.
Alasdair Roberts agreed that transparency policies must be carefully crafted to be effective, and even then they may not always be the best disinfectants. Picking up on Fung's point, Roberts suggested that more discussion is needed about the politics of regulation. Some disclosure advocates may seek transparency as an alternative to regulation, he cautioned. Promoting the disclosure of corporate economic activity in the United States and globally, for example, may serve to help investors make prudent choices, but transparency rather than regulation may also result in giving multinational corporations more influence in the government than the average citizen. At what point, Roberts asked, does the ethic of transparency become no more than a placebo, or the illusion of democratic power? More discussion is needed as well about the public's right to know versus an individual's privacy. Unless these issues are addressed, transparency, intended to empower the public, may actually be used to do quite the opposite.
Drafted by Acacia Reed
Philippa Strum, Director, Division of U.S. Studies 202-691-4147