Disclosure mandates are often considered to be the least paternalistic of all regulatory techniques. Indeed, information provision is believed to enhance both autonomy and efficiency by facilitating more informed decisionmaking. According to this traditional approach, disclosure regulation – a key instrument in the Nudge toolbox – is beyond reproach. Legitimacy concerns might be raised with respect to other Nudge-type interventions (specifically, the setting of default rules), but not disclosure.
I propose a two-pronged challenge to this conventional wisdom: (1) Behaviorally-informed disclosure regulation is not (only) about information provision in the traditional sense; when we move beyond information provision, ethical questions start popping up. (2) Effective disclosure is necessarily selective, and the selection process raises paternalism/legitimacy concerns. This challenge is developed using examples from the regulation of consumer financial markets.
Behavioral economics has transformed disclosure. Disclosure is no longer about the provision of dry, objective information. Framing is crucial. How we disclose can be as important (or more important) than what we disclose. In the mortgage context, consider disclosing the risk of default and foreclosure in a way that invokes the loss frame. Pushing further away from the classical model, disclosure might not even be designed to assist the borrower’s rational System 2 process. Rather, disclosure might be designed to influence decisions through the more intuitive System 1 process. (See Kahneman (2011), Bubb (2014).) Consider graphic warnings on cigarette labels. Or, back to mortgages, vivid descriptions or graphic portrayals of foreclosure. The conventional disclosure model envisions objective provision of information that will then be used by a rational decisionmaker to arrive at better outcomes ...Zum vollständigen Artikel