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Making Transparency Good for You
Photo: the amazing nocò
Americans eat out more than ever before, and their waistlines are showing it. Restaurant foods pack more calories than most patrons imagine—a single entrée or shake can contain as many as 2,000 calories—contributing to the epidemic of obesity, which affects a third of the adult population. Will information help Americans to take better care of themselves? We will soon find out. Due to new regulations, by the end of 2015, calorie counts will appear on the menus and menu boards of large restaurant chains, grocery stores, and even movie theaters.
The calorie-disclosure rule is just one of the recent attempts at legislating transparency in the hope of changing behavior without resorting to more invasive and politically difficult regulatory approaches such as banning products or setting specific product standards. For instance, police departments in Seattle, Phoenix, and Albuquerque have deployed body cameras to reduce police violence, and in December of last year, the White House called for funding to purchase an additional 50,000. Faith in cameras seems well placed: after Rialto, California, adopted cameras, the use of force by police officers dropped by almost 60 percent and complaints declined by almost 90 percent. Transparency has also been used to inspire resource conservation. U.S. utility companies have found that by sending customers information about how their energy usage compares to their neighbors’, they can induce those customers to cut down. In another example, the incidence of food-borne illnesses decreased in Los Angeles after local laws began requiring restaurants to post cleanliness scores they received from hygiene inspections. And thanks to other disclosure requirements, you can learn about school performance, local water quality, crime levels on university campuses, and vehicle safety. The Supreme Court and many others have looked to disclosure as a bulwark against the corrosive effect of money on our democratic political institutions. The applications of transparency seem boundless, its promise to empower consumers and citizens and to discipline corporations and governments considerable.
But more information does not always make things better. Where there is a glut of information, it is often ignored. Worse still, it can be misused and cause harm.
Consider sex offender registries, which reveal the identities and addresses of sex offenders to the public. These registries do not seem to have curbed recidivism. Instead, they have sometimes made predators into victims. For example, in 2012 two sex offenders were murdered by a man who thought he was acting to protect the children of Clallam County, Washington. After the killer was caught, part of the community rallied around him as a hero. Researchers Jill Levenson and Leo Cotter found that about a third of the sex offenders they surveyed experienced traumatic events, including loss of job or home, threats, and harassment.
Many disclosures simply go unheeded. Since the 2008 financial crisis, borrowers have lost more than 5 million homes to foreclosure despite signing lengthy disclosures to inform their decisions. Consumers often ignore allergy labels, drug side effect information, and warnings admonishing safe operation of appliances.
Transparency can create an illusion of protection that leaves consumers more vulnerable.
We are thus in the midst of an intense debate regarding disclosure. At one extreme, transparency optimists since Louis Brandeis have seen enormous benefits in the power of sunshine. At the other, pessimists emphasize the futility of transparency and argue that freedom of information, as applied to government, can undermine the policymaking process, a sensitive negotiation best held behind closed doors. Pessimists point out that when transparency doesn’t work, it can create an illusion of protection that leaves consumers even more vulnerable.
But neither extreme has it right. The usefulness of transparency is simple to evaluate: when consumers and citizens have real choices, and the information is presented the right way, transparency can help them. When they don’t, disclosure changes little.
• • •
Transparency’s promoters focus on the capacity of information disclosure to promote responsible governance and business. Dozens of freedom of information laws worldwide enable citizens to access government documents, a necessary precondition to monitor government activities. “Without first establishing a right to information, by what other route are we otherwise supposed to learn about actors’ misconduct or inefficiency, or that there’s a bad practice that needs correction?” Chris Gates, head of the Sunlight Foundation, asks. Politicians on the left and the right have written transparency into legislation aimed at increasing consumer choices and corporate accountability. The Affordable Care Act, for example, sets minimum transparency standards for the insurance industry, which now has to report information on claim payments, enrollment data, and cost sharing for out-of-network coverage. The law also brought menu labeling and the Physician Payments Sunshine Act, which mandates the disclosure of pharmaceutical companies’ payments to doctors and teaching hospitals in an effort to curb conflicts of interest.
On the other side of this debate, transparency pessimists such as Francis Fukuyama and Bruce Cain believe that too much transparency can cause gridlock in Congress and the illusion of popular participation. Omri Ben-Shahar and Carl Schneider argue persuasively that some disclosure policies are destined to fail because certain choices, such as disease treatment options, are inherently complex and cannot be simplified by good design. They criticize the mantra that the public always welcomes new information; consumers may not want to know more and may find new information overwhelming and confusing, rather than helpful. In their view, government should face up to the hard task of banning products and practices that put the public at risk rather than attempt to regulate through transparency.
The interesting question about transparency is not whether it is good or bad. Sometimes it works and sometimes it doesn’t. What matters is how to make it work better. Successful transparency policies exhibit several common features. First, they introduce information that is relevant to important decisions, for example, choices affecting one’s health, safety, or financial well-being. Second, that information comes in forms people can understand, such as a letter grade (A, B, C) or straightforward comparison (you used twice as much electricity as your efficient neighbor). Third, this new information relates to real choices people can actually make: this food, not that one; this doctor, bank, restaurant. The success of a transparency initiative becomes clear when consumers and citizens respond to disclosure by making new choices that in turn encourage providers of unsafe, unhealthy, risky products and services to improve. Or third parties—such as journalists, advocacy groups, and app developers—may repackage information collected under disclosure rules to make that information more accessible and press for further exposure.
Consider the new menu-labeling rules in light of these principles. Studies have shown that people are consuming fewer calories in response. Researchers Bryan Bollinger, Phillip Leslie, and Alan Sorensen found that Starbucks patrons in New York City reduced their calories per purchase and started buying fewer items after local health authorities introduced mandatory calorie disclosure in 2008. Importantly, the same study showed that calorie transparency did not affect Starbucks’s revenues and that the chain might even have gained some customers who switched from Dunkin’ Donuts, where the calorie counts are particularly unflattering.
In response to these requirements and consumer demand, several restaurant chains have already reformulated their offerings and added healthier options. Data from the Center for Science in the Public Interest show that Starbucks cut the fat content of its beverages by as much as 36 percent and of its pastries by 15 percent. With lower-fat dressing and a smaller portion of cheese, a salad at Così dropped from 610 to 380 calories. Chains from IHOP to Applebee’s and the Cheesecake Factory introduced menu items with fewer than 600 calories.
Beyond restaurants and their patrons, some companies and nonprofits strive to make information more useful to consumers. Several websites and apps—such as Fooducate and MyFitnessPal—repackage calorie information to help consumers choose the healthiest options and learn how much exercise is needed to burn off what they eat, all while exposing outlier foods with too much fat, sugar, or sodium. The principles of transparency are at work in all of these calorie-counting approaches, which seek to present understandable information upon which consumers know how to act.
The mere word “privacy” misleads consumers, who believe that such policies actually protect their information. In reality, many of these policies confirm that consumers’ information will be sold to other companies. For example, Facebook’s data policy, which makes frequent reference to its roughly 1.5 billion users’ privacy, announces that personal information may be used “to improve our advertising . . . so we can show you relevant ads” and “measure the effectiveness and reach of ads and services.” Ironically, the language of privacy comes to obscure the promised disclosure.
Transparency is more complex than it seems, and sometimes it works, but in unexpected ways. For instance, health care report cards that offer information on hospitals’ and physicians’ performance have surprisingly limited influence on patients’ choices of hospitals. Nevertheless, transparency may have improved the quality of care by encouraging hospitals to conduct periodic physician evaluations and adopt new practices. In New York, improvements “happened because individual hospitals and cardiac surgery programs used the data to make specific changes in the way they provided care,” Mark Chassin—head of the Joint Commission, which accredits health organizations—found. Similarly, the EPA’s Toxics Release Inventory, which requires companies to disclose toxic emissions into air, water, and soil, did not trigger much community action. But some companies reacted by reducing emission out of sustainability concerns or in response to shareholders’ demands.
Good design can be beneficial to transparency. Disclosure is more effective when it translates abstract data into familiar terms. For example, the idea of a calorie is fairly abstract. A food calorie is the amount of energy needed to raise one kilogram of water by one degree Celsius at a certain pressure. Public health scholar Sara Bleich and her coauthors recommend communicating the energy content of foods in more vivid terms, such as, “Did you know that working off a bottle of soda or fruit juice takes about 50 minutes of running?”
This strategy has already been applied in the area of personal finance. The 2009 Credit Card Accountability Responsibility and Disclosure Act improved disclosure requirements for credit cards by requiring banks to report clearly the amount a consumer will save if she pays off her debt in thirty-six months instead of making only minimum required payments.
We all know that paying off our debt more quickly is going to save us money. But seeing the actual amount saved provides further motivation. Economist Sumit Agarwal and his colleagues found that the new regulation did nudge some consumers into repaying their debt more quickly, and a survey conducted by Demos, a progressive think tank, found that a third of households say they are doing so in response to the new information.
Disclosure policies work when they point to real alternatives.
What all this suggests is that disclosure policies work when there are real alternatives and transparency clarifies exactly what they are. Buyers can choose a more efficient vehicle after comparing car stickers listing fuel consumption. On the other hand, every year Americans receive reports about the quality of water coming from their taps. But these reports don’t make much of a difference because we don’t choose who supplies water to our houses. And even if people realize that they live in polluted areas, they may lack the resources to relocate. In some circumstances we can vote with our feet, but if we don’t have a choice, transparency is not going to make a large difference.
• • •
Much of the debate about transparency has focused on whether citizens and consumers will benefit from disclosure. These are questions about policy design, individual understanding, and behavior. But the biggest challenges for transparency concern politics more than policy.
Transparency systems that help consumers and citizens usually harm some companies and governments, at least in the short term, by exposing hidden risks in their products, services, and behavior. Banks need to lower the fees they charge; restaurants need to make healthier food and clean up their kitchens; manufacturers have to produce safer vehicles; politicians have to serve their constituents at the expense of donor interests. So it is no surprise that disclosure initiatives are frequently met with intense opposition from those asked to undertake them. For example, the emergency physician Leana Wen faced what she called a “huge backlash” from colleagues when she founded Who’s My Doctor?, an initiative calling for physicians to voluntarily disclose their sources of income. And the Senate has resisted attempts to modernize its campaign finance disclosure requirements. Candidates file paper reports, some of which are not machine readable, often months after an election has occurred, diluting the accountability that might come from greater transparency.
Again and again, when legislators have pushed for transparency, powerful interests have lobbied the other way. And even when disclosure laws pass, some companies do all they can to resist providing meaningful information. The Physician Payments Sunshine Act is a case in point. Under this new law, patients can learn whether their physicians receive fees from pharmaceutical companies to prescribe certain drugs or treatment options and so explore potential conflicts of interests. But change did not come easily. Johnson & Johnson, GlaxoSmithKline, and the American Medical Association, among many others, lobbied against the law. According to Bloomberg Businessweek, the act was mentioned in nearly 2,000 lobbying reports since the original bill was introduced in 2007.
Nonetheless, the law did eventually go through, and, in September 2014, the first batch of disclosures was released in the Open Payments database. But ProPublica found, “The pharmaceutical and medical device industries, even when required by the federal government, have not made it easy to track their expenditures on doctors and teaching hospitals.” Sometimes drug companies list several drugs associated with the same payment, making it impossible to break down the contribution for each drug. Sometimes they misspell the names of drugs or use alternative names for their products. As a result, disclosed data may be unreliable.
The food industry is another source of resistance. Consider the FDA’s 2014 proposal on sugar labeling. The new food labels would require manufacturers to report the amount of sugar they add to their products and would list the amount of added sugar separately from the sugar that occurs naturally in the food. Many believe that added sugar results in empty calories that make us heavier without supplying much nutritional content. While many consumers expect their cookies or jam to contain added sugar, they may be surprised to learn that a significant amount of sugar is added to items such as tomato sauce and canned soup. Consumers may use the proposed labels to switch to products with less or no added sugar, which may in turn induce companies to commercialize healthier options.
Food manufacturers have strongly opposed this measure. Industry groups have questioned the scientific foundation of listing added sugars separately and have criticized the proposed rule for the difficulty of calculating added sugar and for revealing proprietary information. “Sugar is sugar, regardless of the source,” Campbell Soup Company reminded the FDA in a letter. Campbell suggested that the agency should focus on total calories rather than on the origin of the sugar. But in her comments to the FDA, food politics expert Marion Nestle wrote, “Although there is no biochemical difference between intrinsic and added sugars, food and beverage companies know exactly how much sugar they add as part of the recipes for their products.” The only ones who don’t know are consumers. The comment period ended in August 2014, and the FDA has not yet issued its final rule on the revamped nutritional labels.
We live in transparent times. Governments and corporations alike have learned how difficult it is to prevent the disclosure of their secrets. Some political hopefuls preemptively disclose their emails and income statements while others suffer public retribution for trying to conceal theirs. Whether as citizens or consumers, we are demanding more information from the organizations with which we engage. But consumers, citizens, and policymakers should not overestimate the power of sunshine. Transparency is no cure-all. Only careful design combined with a keen awareness of the political forces arrayed against disclosure will bring a next generation of transparency that enables us to guard against manipulation, exploitation, undue risk, and our own poor choices.
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