21 June 2013

Is Transparency Overrated?

In these days of Edward Snowden and his unveiling of "the largest program of suspicionless surveillance in human history" combined with the drive to uncover firms that are salting profits away in tax havens it is hard to be anything but on the side of transparency.

After all, "transparency is the best disinfectant" as politicians from Louis Brandeis to David Cameron are fond of telling us.

But a paper I came across by the George Washington University sociologist, Amitai Etzioni  in the Journal of Political Philosophy from 2010 argues that transparency is overvalued.

When information costs are high and when the personal stakes of relying on transparency are also high, transparency is much less useful.

The paper argues that transparency is no substitute for effective regulation, and indeed that regulation is a much more powerful way of expressing a community's values.

The paper argues that:

1. Strong transparency is regulation -- when something is required by law to be published, and required to be understandable and true (and enforced).

2. But because strong transparency is so rare (it is hard to develop law to make things transparent, understandable and true and then enforce that in a timely way), it transforms into soft transparency and weak regulation. Can softer forms of transparency help substitute for regulation?

3. No. First, there are limits to knowing. Transparency often demands disclosure, but not effective communication. Second, can intermediaries help us sift the data? Up to a point--we still don't know which is the most reliable, and then who will guard the guardians? Third, more information does not necessarily lead to better choices and can often lead to stasis and information overload.

4. The difference between transparency (welcomed by the laissez faire types and the libertarians) and regulation (usually unpopular with the same crowd) is smaller than it may at first seem.

5. The paper concludes by saying "When all is said and done, there is room for increased, validated, and comprehensive transparency (and vetted intermediaries). However, it is not sufficient protection when the disutility and the information costs are high—and often even when they are not."

So where does this leave us? First, more transparency in itself is not necessarily a good thing--it has to be true and easily understood (the new food labels in the UK have to be a good thing, right? Yes, but they are still voluntary and Coca Cola are not playing ball). Second, even if it is both these things, when the downsides of a bad choice are significant, transparency is no substitute for regulation (does the PM think transparency can let him get by with light regulation?). 

Most development people I know see transparency as a complement to--or starting point on the road to--regulation.  

In any case, an interesting, short and well written paper reminding us not to be unthinking "transparenistas".

No comments: