Disclosure as Distribution

• Publication year: 2021

DISCLOSURE AS DISTRIBUTION

Jeremy N. Sheff(fn*)

Abstract: This brief response to the work of Professors Omri Ben-Shahr and Carl Schneider on mandated disclosure regimes investigates the normative criteria underlying their claim that those regimes are failures. Specifically, it unpacks the pieces of those authors' implicit cost-benefit analysis, revealing inherently normative judgments about desert and responsibility at the core of their (or any) critique of disclosure regimes. Disclosure regimes may aim to improve human decisionmaking behaviors, but those behaviors are influenced in non-deterministic ways by cognitive capacities that are heterogeneously distributed among subjects of the regimes. Accordingly, any claim regarding the normative desirability of disclosure regimes (or any other regulatory regime that seeks to channel and improve decisionmaking) implicitly rests on judgments regarding individuals' responsibility for their own capacities. I argue that in evaluating such regulatory regimes, focusing on efficiency through cost-benefit analysis distracts from inescapable and logically prior distributive questions regarding desert and responsibility.

INTRODUCTION

Professors Ben-Shahar and Schneider have done legal scholars and policymakers a tremendous service by collecting, in one place,(fn1) various clues and traces of an undeniable truth: that regulatory regimes built on the compelled disclosure of information are endemic, and can be problematic. Reviewing their comprehensive research, I find little if anything to add to their identification of various instances of mandated disclosure regimes, nor of their analysis of the practical effects of those regimes-certainly nothing beyond the points already raised by Professor Craswell in his response to their project.(fn2) So instead, I would like to focus on the normative implications of the evidence and analysis Professors Ben-Shahar, Schneider and Craswell have assembled, an issue which still calls for further development. Like Professor Craswell, I will question whether the phenomenon of mandated disclosure-as documented by Professors Ben-Shahar and Schneider-can properly be characterized as a "failure," if only to clarify what we mean when we use such a pejorative term. (fn3)

If mandated disclosure has failed, certainly we should be able to say with confidence what it has failed to do: to what end is mandated disclosure supposed to serve as a means? But beyond that, we will also have to defend that end as one worth attaining: some normative commitment must justify whatever ends the legal regime might serve. So the purpose of my response is both to expand on Professor Craswell's efforts to identify possible ends for mandated disclosure regimes, and to assess the normative commitments underlying those ends- commitments on which Craswell, Ben-Shahar and Schneider seem to agree, if only in their assumptions.

I. IDENTIFYING NORMATIVE SYSTEMS

In his symposium presentation, Professor Schneider identified two species of "disclosurites"-proponents of mandated disclosure.(fn4) The first species, he explained, appears to be motivated by concerns over dignity or autonomy. They claim that there is a moral obligation to respect this principle of autonomy by providing information to disclosees, regardless of the disclosures' costs, or of their actual effects on the disclosees' decisionmaking.(fn5) But assuming Professor Schneider's characterization of this species of disclosurite is accurate, as far as they are concerned one cannot characterize mandated disclosure as a failure at all. To the contrary, it accomplishes precisely what it should-it satisfies disclosers' moral obligations to respect disclosees' autonomy.

So with respect to the autonomy-based argument in favor of disclosure, Professors Ben-Shahar and Schneider are not really proving a failure, nor do I believe they claim to. Instead, they simply have a normative disagreement with some proponents of mandated disclosure, and have not attempted to justify their own normative framework as superior to the alternative espoused by those proponents. Specifically, they differ with autonomy-focused disclosurites as to the moral implications of disclosure and the appropriate scope, content, or value of autonomy or dignity in public policy-though they don't really join the normative argument over what that scope, content, or value ought to be. Nor, for that matter, does Professor Craswell, who concedes that such a critique is outside his area of expertise.(fn6) The bare fact of this normative disagreement is nevertheless important, because it demonstrates that a plausible set of normative criteria exist under which mandated disclosure is not a failure, but a success. This being the case, the characterization of mandated disclosure as a failure requires some defense of an alternative set of normative criteria as superior. And as I intend to argue, the normative criteria Professors Ben-Shahar, Schneider, and Craswell appear to adopt have more in common with the autonomy-based framework than they seem to realize.

The other class of disclosurites Professor Schneider identified in his remarks appear to be working within a normative framework that Professors Ben-Shahar, Schneider, and Craswell all support. We can glean traces of this framework from Professors Ben-Shahar's and Schneider's Article. They note that policymakers and legislators frequently mandate disclosure as a solution to various perceived "'social problems,'" and that these social problems are often illusory extrapolations of "'individual acts of malfeasance.'"(fn7) They assert that disclosure is a policy measure that "aspires to improve decisions people make in their economic and social relationships and particularly to protect the naive from the sophisticated."(fn8) And they note that the tool for achieving this aspiration is "requiring the revelation of information."(fn9) So we have some hints at the ends that Professors Ben-Shahar and Schneider think mandated disclosure ought to pursue: protecting naifs from harm caused by the decisions they make when interacting with sophisticates who might benefit from those same decisions. The means to that end-the "revelation of information" to the naifs-is, they maintain, supposed to "improve decisions" made by those naifs, presumably so as to avert the harms they would otherwise suffer.(fn10)

However, Professors Ben-Shahar and Schneider further hold that these benefits to naifs cannot in themselves justify disclosure. "Whatever benefits mandated disclosures may offer," they say, "mandates are unjustifiable if their costs outweigh their benefits."(fn11) This, then, appears to be a normative claim grounded in cost-benefit analysis, a staple tool of consequentialist normative systems such as the welfarism typical of the economic analysis of law.(fn12) Professor Craswell-no stranger to this mode of thinking-goes so far as to explicitly adopt such cost-benefit analysis as his normative criterion for assessing the justifiability of disclosure mandates and alternative consumer protection regimes.(fn13) So all three authors would appear to be willing to defend (or assume) something like a welfarist normative framework as superior to the autonomy-based framework they all seem to dismiss. As such, they would have us quantify both the benefits and the costs of disclosure, and then net them against each other. Importantly, these are two separate steps, and the separation between them complicates the normative framework Ben-Shahar, Schneider, and Craswell would have us adopt.

II. CAUSATION, COSTS, AND BENEFITS

Assuming that a welfarist framework applied through cost-benefit analysis is in fact the most defensible one, how might it lead to a conclusion that mandated disclosure fails? Presumably a legal regime will "fail" cost-benefit analysis if it leads to benefits that are too small relative to its costs, which are relatively too large, all measured against some relevant baseline. And on the benefit side, Professors Ben-Shahar and Schneider have assembled an impressive array of evidence and analysis that ought to convince us that mandated disclosure very often fails to completely achieve ends they have set for it-the avoidance of harms to naifs through the improvement of the naifs' decisionmaking.

But the absence of total success is not the same thing as failure. As Professor Craswell points out, there may be other "dynamic" benefits to disclosure-such as providing sophisticates incentives to alter their behavior vis-a-vis naifs(fn14)-which Ben-Shahar and Schneider systematically ignore.(fn15) Moreover, even the "static" benefit of improved decisionmaking appears to be more common than one might conclude after reading Ben-Shahar's and Schneider's Article.(fn16) And indeed, they concede that mandated disclosure does not always generate zero benefits-that in fact sometimes it does achieve the goal of improving disclosees' decisionmaking, at least partially. For example, in contexts where at least some disclosees are themselves relatively sophisticated, Professors Ben-Shahar and Schneider concede that disclosure can "produce[ ] a desirable effect" not only for these sophisticated disclosees but for naifs as well. These contexts-securities markets, hospital...