What If Transparency Isn't All It's Supposed to Be?

Uh-oh. Anyone who's ever read even one of my posts knows my twin mantras of Trust and Transparency.

So what do I do when Jesse Eisinger writes a DealBook piece for the New York Times saying that transparency isn't all it's cracked up to be? (Full post, published 12 February, here)

First thing: Think.

Eisinger starts by quoting famed Supreme Court Justice Louis Brandeis: "Sunlight is said to be the best of disinfectants." And then he goes on:

Over the last century, disclosure and transparency have become our regulatory crutch, the answer to every vexing problem. We require corporations and government to release reams of information on food, medicine, household products, consumer financial tools, campaign finance and crime statistics....

All this sunlight is blinding. As new scholarship is demonstrating, the value of all this information is unproved. Paradoxically, disclosure can be useless -- and sometimes actually harmful or counterproductive.

Double uh-oh.

But then Eisinger, I believe, guts his own argument with a bad example: the "terms of service" agreements to which we all click "I agree" without ever reading the teeny-tiny print because we're on our way to doing something else, and it's like a Stop sign in the middle of nowhere: I'm just blowing through, OK?

Eisinger argues that

Our legal theoreticians have determined these opaque monstrosities work because someone, somewhere reads the fine print in these contracts and keeps corporations honest. It turns out what we laymen intuit is true: No one reads them...

In real life, there is no critical mass of readers policing the agreements. And if there were an eagle-eyed crew of legal experts combing through these agreements, what recourse would they have? Most people don't even know that the Supreme Court has gutted their rights to sue in court, and they instead have to go into arbitration, which usually favors corporations.

Why do I think this is such a bad example? Because the "terms of service" agreements are a perfect example of not disclosing. They're obfuscation pretending to be disclosure. I am confident that Brandeis would have been appalled by these "opaque monstrosities".

What we need isn't less disclosure, it's clear disclosure.

And we need to remember the second half of the Brandeis quote: "Sunlight is said to be the best of disinfectants; electric light the most efficient policeman."

In other words, insist on Plain English disclosure, but don't stop there: Enforce.

This would address Eisinger's further complaint:

The disclosure bonanza is easy to explain. Nobody is against it. It's politically expedient. Companies prefer such rules, especially in lieu of actual regulations that would curtail bad products or behavior. The opacity lobby -- the remora fish class of lawyers, lobbyists and consultants in New York and Washington -- knows that disclosure requirements are no bar to dodgy practices. You just have to explain what you're doing in sufficiently incomprehensible language, a task that earns those lawyers a hefty fee.

(Side note: I love that phrase, "the opacity lobby -- the remora fish class of lawyers, lobbyists and consultants...")

Eisinger's solution to the "bad products or behavior" problem:

Hard and fast rules. If lawmakers want to end a bad practice, ban it. Having them admit it is not enough.

Phew. I knew we didn't really disagree. Disclose, Regulate, Enforce.