Abstract

http://ssrn.com/abstract=1762266
 
 

Footnotes (170)



 


 



Biased Advice


Christopher T. Robertson


University of Arizona - James E. Rogers College of Law; Harvard University - Edmond J. Safra Center for Ethics; Harvard University - Petrie-Flom Center for Health Law Policy, Biotechnology, and Bioethics

April 12, 2011

Emory Law Journal, Vol. 60, p. 653, 2011
Arizona Legal Studies Discussion Paper No. 11-07

Abstract:     
The modern capitalist society, characterized by decentralized decision making and increasingly sophisticated products and services, turns on relationships of epistemic reliance, where laypersons depend upon advisors to guide their most important decisions. Yet many of those advisors lack real expertise and may be biased by conflicting interests. In such situations, laypersons are likely to make suboptimal decisions that sometimes aggregate into systematic failures, from soaring health care costs to market crashes. Regulators can attempt to manage the symptoms and worst abuses, but the fundamental problem of biased advice will remain. There are many potential policy solutions, from outright bans on conflicting interests to disclosure mandates, yet their comparative effectiveness is poorly understood. By constructing a decision task for human subjects and providing advice in various scenarios, this Article reports new experiments testing alternative policy mechanisms. Prior research has shown that disclosure mandates can be deleterious if they make advisors more biased, but this paper contextualizes those findings. It turns out that disclosures may be valuable in settings where relative expertise is low, but deleterious where relative expertise is high. By also disaggregating the data, one finds that disclosures of conflicting interests may hurt laypersons in the majority of situations where the conflicted advice is not actually biased. Thus, the evidence suggests that, if they are to be at all effective, disclosure mandates should be narrowly tailored. Most importantly, the evidence shows that a disclosure mandate improves layperson performance when unbiased advisors are also available. Yet laypersons appear to be poor judges of their need for unbiased advice, so market mechanisms may be ineffective for provisioning unbiased advice. In the end, the presence of an unbiased advisor is the strongest determinant of layperson performance, and thus policymakers must develop ways of aligning the interests of advisors and laypersons. Pay-for-performance, blinding of experts, and mandatory or subsidized second-opinion policies are likely to be helpful in aligning these interests.

Number of Pages in PDF File: 52

Keywords: conflict of interests, bias, disclosure, advice, empirical

JEL Classification: I18, K49

Accepted Paper Series





Download This Paper

Date posted: February 17, 2011 ; Last revised: November 6, 2013

Suggested Citation

Robertson, Christopher T., Biased Advice (April 12, 2011). Emory Law Journal, Vol. 60, p. 653, 2011; Arizona Legal Studies Discussion Paper No. 11-07. Available at SSRN: http://ssrn.com/abstract=1762266

Contact Information

Christopher T. Robertson (Contact Author)
University of Arizona - James E. Rogers College of Law ( email )
P.O. Box 210176
Tucson, AZ 85721-0176
United States
HOME PAGE: http://www.law.arizona.edu/faculty/getprofile.cfm?facultyid=714

Harvard University - Edmond J. Safra Center for Ethics ( email )
124 Mount Auburn Street
Suite 520N
Cambridge, MA 02138
United States

Harvard University - Petrie-Flom Center for Health Law Policy, Biotechnology, and Bioethics ( email )
23 Everett Street
Cambridge, MA 02155
United States
Feedback to SSRN


Paper statistics
Abstract Views: 1,296
Downloads: 106
Download Rank: 153,153
Footnotes:  170

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo8 in 0.266 seconds