Smart Disclosure: Promise and Perils

Behavioural Public Policy, Cambridge University Press (August 2019)

Posted: 24 Aug 2019

Date Written: August 21, 2019

Abstract

The move to smart disclosure promises to revitalize disclosure mandates and save them from a fate of ignored verbiage. But by making disclosure relevant and effective, this shift to smart disclosure also raises several concerns. Specifically, simple disclosures like genetically modified food disclosures, restaurant hygiene grades, annual percentage rate disclosures, etc., can result in market distortions and inefficiencies as: (1) consumers might draw false inferences from the disclosure; and (2) disclosing one dimension will elevate this dimension relative to other dimensions, and thus distort demand for the product and even alter the product itself. Relatedly, System 1 disclosures, like graphic cigarette labels, might influence behavior by triggering an emotional response rather than through informed deliberation, thus abandoning traditional justifications for disclosure mandates. In light of these concerns, it is more difficult to view disclosure mandates as minimally paternalistic. Government, by tweaking disclosure design, wields substantial power over markets and consumers.

Keywords: disclosure mandates, “smart disclosure,” consumer behavior, behavioral economics

JEL Classification: D18, K29

Suggested Citation

Bar-Gill, Oren, Smart Disclosure: Promise and Perils (August 21, 2019). Behavioural Public Policy, Cambridge University Press (August 2019). Available at SSRN: https://ssrn.com/abstract=3440333

Oren Bar-Gill (Contact Author)

Harvard Law School ( email )

1575 Massachusetts
Hauser 406
Cambridge, MA 02138
United States

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