More Than You Wanted to Know: The Failure of Mandated Disclosure

Princeton University Press
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Perhaps no kind of regulation is more common or less useful than mandated disclosure—requiring one party to a transaction to give the other information. It is the iTunes terms you assent to, the doctor's consent form you sign, the pile of papers you get with your mortgage. Reading the terms, the form, and the papers is supposed to equip you to choose your purchase, your treatment, and your loan well. More Than You Wanted to Know surveys the evidence and finds that mandated disclosure rarely works. But how could it? Who reads these disclosures? Who understands them? Who uses them to make better choices?

Omri Ben-Shahar and Carl Schneider put the regulatory problem in human terms. Most people find disclosures complex, obscure, and dull. Most people make choices by stripping information away, not layering it on. Most people find they can safely ignore most disclosures and that they lack the literacy to analyze them anyway. And so many disclosures are mandated that nobody could heed them all. Nor can all this be changed by simpler forms in plainer English, since complex things cannot be made simple by better writing. Furthermore, disclosure is a lawmakers' panacea, so they keep issuing new mandates and expanding old ones, often instead of taking on the hard work of writing regulations with bite.

Timely and provocative, More Than You Wanted to Know takes on the form of regulation we encounter daily and asks why we must encounter it at all.

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About the author

Omri Ben-Shahar is the Leo and Eileen Herzel Professor of Law at the University of Chicago. His books include Boilerplate: The Foundation of Market Contracts. Carl E. Schneider is the Chauncey Stillman Professor of Law and professor of medicine at the University of Michigan. His books include The Practice of Autonomy: Patients, Doctors, and Medical Decisions.
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Additional Information

Publisher
Princeton University Press
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Published on
Apr 20, 2014
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Pages
240
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ISBN
9781400850389
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Language
English
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Genres
Law / Consumer
Political Science / Public Policy / General
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Content Protection
This content is DRM protected.
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Available on Android devices
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Eligible for Family Library

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Consumers routinely enter into long-term contracts with providers of goods and services - from credit cards, mortgages, cell phones, insurance, TV, and internet services to household appliances, theatre and sports events, health clubs, magazine subscriptions, transportation, and more. Across these consumer markets certain design features of contracts are recurrent, and puzzling. Why do sellers design contracts to provide short-term benefits and impose long-term costs? Why are low introductory prices so common? Why are the contracts themselves so complex, with numerous fees and interest rates, tariffs and penalties? Seduction by Contract explains how consumer contracts emerge from the interaction between market forces and consumer psychology. Consumers are short-sighted and optimistic, so sellers compete to offer short-term benefits, while imposing long-term costs. Consumers are imperfectly rational, so sellers hide the true costs of products and services in complex contracts. Consumers are seduced by contracts that increase perceived benefits, without actually providing more benefits, and decrease perceived costs, without actually reducing the costs that consumers ultimately bear. Competition does not help this behavioural market failure. It may even exacerbate it. Sellers, operating in a competitive market, have no choice but to align contract design with the psychology of consumers. A high-road seller who offers what she knows to be the best contract will lose business to the low-road seller who offers what the consumer mistakenly believes to be the best contract. Put bluntly, competition forces sellers to exploit the biases and misperceptions of their customers. Seduction by Contract argues that better legal policy can help consumers and enhance market efficiency. Disclosure mandates provide a promising avenue for regulatory intervention. Simple, aggregate disclosures can help consumers make better choices. Comprehensive disclosures can facilitate the work of intermediaries, enabling them to better advise consumers. Effective disclosure would expose the seductive nature of consumer contracts and, as a result, reduce sellers' incentives to write inefficient contracts. Developing its explanation through a general framework and detailed case studies of three major consumer markets (credit cards, mortgages, and cell phones), Seduction by Contract is an accessible introduction to the law and economics of consumer contracts, and a powerful critique of current regulatory policy.
Boilerplate--the fine-print terms and conditions that we become subject to when we click "I agree" online, rent an apartment, enter an employment contract, sign up for a cellphone carrier, or buy travel tickets--pervades all aspects of our modern lives. On a daily basis, most of us accept boilerplate provisions without realizing that should a dispute arise about a purchased good or service, the nonnegotiable boilerplate terms can deprive us of our right to jury trial and relieve providers of responsibility for harm. Boilerplate is the first comprehensive treatment of the problems posed by the increasing use of these terms, demonstrating how their use has degraded traditional notions of consent, agreement, and contract, and sacrificed core rights whose loss threatens the democratic order.

Margaret Jane Radin examines attempts to justify the use of boilerplate provisions by claiming either that recipients freely consent to them or that economic efficiency demands them, and she finds these justifications wanting. She argues, moreover, that our courts, legislatures, and regulatory agencies have fallen short in their evaluation and oversight of the use of boilerplate clauses. To improve legal evaluation of boilerplate, Radin offers a new analytical framework, one that takes into account the nature of the rights affected, the quality of the recipient's consent, and the extent of the use of these terms. Radin goes on to offer possibilities for new methods of boilerplate evaluation and control, among them the bold suggestion that tort law rather than contract law provides a preferable analysis for some boilerplate schemes. She concludes by discussing positive steps that NGOs, legislators, regulators, courts, and scholars could take to bring about better practices.

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