Disclosure: the small print we ignore

In New York and a growing number of U.S. cities, diners are encountering sanitary grades in restaurants’ windows — A, B or C. That system is an example of helpful disclosure, researchers say: information that is simple and comprehensible, important to recipients and easily acted upon. I recently chose between outwardly identical Japanese noodle shops based on the system, walking into the A rather than the B.

But as greater disclosure has become the go-to solution for a wide range of problems — from unethical campaign financing to rising corporate carbon emissions — it has often delivered lackluster results, researchers say.

Just last week, the Obama administration announced plans to require drug companies to disclose a wide variety of payments and gifts to doctors, from speaking fees to the purchase of breakfasts for office staffs, in the hope of reducing commercial influence on prescribing practices. U.S. President Barack Obama has promised to run the most open, transparent administration in history. But is more disclosure the solution?

If recent history serves as a guide, disclosure laws — meant to elucidate — do not necessarily lead to greater transparency or prevent the things they were meant to deter. Every holder of a subprime mortgage that is now underwater once signed an elaborate disclosure statement required by the Truth in Lending Act describ- ing precisely the risky terms of their loan. Likewise, super PACS in the presidential campaign are technically compliant with financial disclosure laws, but have so far proved successful at hiding many of the sources of their money.

Everyone agrees that openness is a virtue in a democracy. So what is going wrong?

One fundamental problem is that disclosure requirements merely get information onto the

table, but themselves demand no further action. According to political theory, disclosure is both a citizen’s right and a tool to ensure good government and consumer protection, because it provides information that leads to informed decisions. Instead, disclosure has often become an endpoint in the chain of responsibility, an act of compliance with the letter of the law rather than the spirit of transparency.

“In the beginning, disclosure was a means to an end, and now it’s often an end in itself,” said Kevin Weinfurt, professor of psychiatry and behavioral science at Duke University. “People think, ‘If we’ve disclosed we’ve fulfilled our responsibilities.’ ”

Indeed, disclosure has taken on the gestalt of confession: Dump the information and be absolved of further moral or legal responsibility. How did car-crazy cities like Los Angeles and Phoenix earn an A+ in a study by the Roberts Environmental Center at Claremont Mckenna College? By being superb at disclosing, not controlling, emissions. Clyde Wilcox, a political scientist at Georgetown University, said: “Disclosure by itself is not the solution to any problem. It’s a path to earn trust. But just saying things is not enough, unless you also do something.”

Part of the problem is that the goals of disclosure are often unclear, said Weinfurt, who has studied disclosure in medicine. “We want the information, but often no one knows exactly what to do with the information once they get it.”

For example, how should one respond to the government disclosure letters sent to homes in the United States with information about lo- cal water quality, containing lists of chemical compounds in parts per million? And what was the appropriate reaction to the Homeland Security Department’s recently abandoned program to disclose risk assessments with color-coded warnings at airports ranging from safe green to “severe” red?

Unlike the restaurantgrading system, such threatlevel disclosure “is ineffective because there’s no way to act on it,” said Archon Fung, co-founder of the Transparency Policy Project at the Harvard Kennedy School.

Many disclosure programs today cloud rather than clarify a particular situation. As disclosure statements have become more numerous and more complicated, “consumers just ignore them or don’t understand what they say,” said Jeff Sovern, an expert in consumer law at St. John’s University.

To illustrate how few people actually read its terms and conditions disclosure, the online retailer Gamestation, on April Fools’ Day 2010, replaced the usual text with what it called an “immortal soul clause,” which read: “By placing an order via this website on the first day of the fourth month of the year 2010 anno Domini, you agree to grant us a nontransferable option to claim, for now and forever more, your immortal soul.” Eager to get on with their online purchase, 88 percent of customers clicked the box to sell their souls. (The 12 percent who opted out were rewarded with a cash credit for their diligence.)

But information overload, not consumer laziness, is often to blame, Sovern says. At real estate closings, in less than an hour, buyers sign reams of paper they are seeing for the first time — including the mortgage disclosure form — to take ownership of a residence they’ve already chosen. Everyone signs, Sovern says, adding: “Predatory lenders try to distract people with lots of paper. I think disclosures sometimes create the illusion of consumer protection — enabling legislators to claim credit for consumer protection, without the reality.”

When the Food and Drug Administration in the 1990s first mandated that drug makers list medicines’ side effects in order to advertise prescription drugs, there was a firestorm of protest from the industry. Now the litany of side effects that follows every promotion is so mindnumbing — drowsiness, insomnia, loss of appetite, weight gain — as to make the message meaningless.

Extolling the virtues of transparency, Supreme Court Justice Louis Brandeis famously wrote in 1913 that “sunlight is said to be the best of disinfectants.” But in the cynical world, companies and political groups often deflect that light or diffuse it into 1,000 incomprehensible components.

While regulators and consumers see disclosure as a way to improve transparency, companies often regard it as a risk-management strategy. “Often the goal of disclosure is to reduce or eliminate the legal risk,” Weinfurt said. “It is so they can say, ‘Hey we told you so.’ ”

In light of recent experience, will the Obama plan to require drug makers to disclose payments to doctors and hospitals be useful and make a difference?