Confusing Disclosure and Information
This is just a great paragraph from Stephen Waldman. It's about financial regulation, but it applies to much more.
One of the great errors in modern policy is to confuse disclosure with information. It is not the case, currently, that banks secretly take your money without itemizing the charge on some statement. (Sometimes when they take your money they call it "service fee" or something equally nondescriptive, and it'd be nice if that practice went away.) Rather, banks intentionally define contracts in such a way that the cost to many customers of understanding and competitively shopping all the dimensions of the product seems higher than the cost of terminating the search and signing the dotted line. More detailed disclosure doesn't eliminate, and can sometimes exacerbate, the real information costs customers face, which derive from the complexity of the required analysis and lack of information about alternatives, not from an absence of product data. Of that we all have pages, with more arriving every month.
In the abstract, this isn't a surprising trend: The world is becoming more complex, and we are not becoming much smarter. What is surprising is that technological innovation has done a lot more for how we compare relatively small and comprehensible items -- books, music, movies -- than large and complex items such as health insurance plans and credit cards. In part, that's because more complex items aren't particularly standardized. That's what the "plain vanilla" provisions of financial regulation might have accomplished, if they hadn't been unceremoniously dumped.
October 1, 2009; 5:31 PM ET
Categories: Financial Regulation
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