Mr. Cellophane

Whether we’re checking the test scores of local schools or looking for the fat content of a brand of yogurt, we are all players in a new way of life. We’re awash in information, and the decisions and choices demanded of us come from an increasing transparency in almost every aspect of society.

It was nearly a century ago that Louis Brandeis wrote that sunlight is “the best of disinfectants.” That vision of expanded public access to information — whether it’s about the workings of government or the practices of corporations — has become a powerful force in American public policy. In recent years, transparency has given rise to more deliberately crafted systems, such as those reporting health care outcomes, which organize information in ways aimed at making it useful for individual decision making.

But does all this information make our lives better or just more complicated? That’s the question three Boston– area researchers explore in Full Disclosure: The Perils and Promise of Transparency, published last year. Earlier in the decade, Harvard political scientist Archon Fung, attorney Mary Graham (a research fellow at Harvard’s Kennedy School of Government), and David Weil (a Boston University economist) were all doing research at the Kennedy School’s Taubman Center for State and Local Government. They started meeting to discuss a phenomenon each of them had independently been observing: the proliferation of government policies that were not necessarily setting fixed standards that must be met, but instead requiring the disclosure of information that could form the basis for people to make decisions and choices on their own. “This trend raised a fundamental question that no one seemed to be asking,” they write in Full Disclosure. “Does transparency work?”

Their answer: in fits and starts. The Enron and WorldCom debacles exposed huge deficiencies in disclosure laws governing corporate and financial systems. And the authors say the color-coded terrorism warning system put in place following the 9/11 attacks “degenerated into fodder for late-night comedians.” Ineffective transparency policies all fail at some level to deliver the right information in a form that lets citizens make reasonable choices.

Well-constructed transparency policies, on the other hand, can set in motion a virtuous chain of events that can improve market forces, empower citizens, and improve lives. Perhaps the most elegant example the trio offer is also the simplest, a system that provides highly visible grades on the cleanliness of Los Angeles restaurants. Patrons are more inclined to visit establishments that don’t feature flies in their soup, and low-scoring restaurants are motivated to improve their hygiene practices in order to improve their cleanliness grade. “The ingeniousness of targeted transparency lies in its mobilization of individual choice, market forces, and participatory democracy through relatively light-handed government action,” the authors argue. Things get considerably more complicated when trying to apply these principles to highly complex systems such as health care. But the rewards could be significant, if transparency is done the right way, say the three researchers, who co-direct the Transparency Policy Project at the Kennedy School (www.transparencypolicy.net).

After first insisting on full disclosure of the equal role of his two co-authors, Archon Fung, 40, spoke with me about the perils and promise of transparency policies in his office at Harvard. What follows is an edited transcript of our conversation.

—MICHAEL JONAS

COMMONWEALTH: Your book offers some cautionary tales about potential pitfalls of transparency policies, but the overall message is that the right information provided the right way can empower and improve society. What are the roots of the thinking behind transparency policies?

FUNG: You can date it to the decline, over the last couple of decades, of public confidence in government, as well as in private corporations, and what that decline signals — an attitude on the part of people not to take the advice of experts for granted. So whereas maybe my father, your father, if they faced an important decision like a medical procedure, might have just gone to their family doctor and taken their advice and followed it, you or I are much more likely to ask for a second opinion, to ask our friends and family what their experiences have been. That general social trend sets the scene for a new role for government and nonprofit organizations to provide information so that people can make their own decisions wisely. Whereas in the past, the more traditional role for government or for regulators has been to ensure that people are protected in the right ways, without their ever having to make the right decision, by assuring minimum wage or enforcing certain kind of environmental regulations or product regulations. Now, for better or for worse, there’s much more of a premium on people being able to make decisions and choices for themselves.

CW: You write that “targeted transparency,” the term that you and your co-authors use for these systems that provide standardized information on everything from the nutritional content of food to the addresses of sex offenders, has come about through crises of one kind or another that are really unconnected. But there has to be a common context, or something that’s going on, that’s made recent years such fertile ground for such policies. You say it’s a decline in confidence in government or in authority figures, yet we’re relying on the political process to fashion these policies.

FUNG: Yes, that’s right. One way to think about transparency and disclosure policies is maybe as regulation with a lighter touch or a lighter hand, so whenever there’s some public crisis like lead in the paint on Chinese toys, or SUVs rolling over because of defective tires, or a pension fund crisis, or, most recently, the mortgage meltdown, there’s often a public cry for government to do something about it. More often now than in the past, the response takes the form of disclosure — requiring whoever was responsible for that bad action or got blamed for the crisis to become more transparent, more public about how they do business, whether it’s politicians’ campaign finance contributions or mortgage lending terms.

CW: When you look at the subprime meltdown, do you think this crisis is primarily a problem of a lack of regulation or a lack of transparency or some of both?

FUNG: I think it’s a lot of both. I think that the best transparency system in the world probably wouldn’t have prevented fully the mortgage meltdown. But what you’re after in that case is, in part, for people who are taking mortgages to be able to envision the full consequences of the contract they’re signing. And that’s a hard thing to do because people want a better rate now and want to worry about tomorrow when tomorrow comes. Part of the job of an effective disclosure and transparency system is to make people really understand what the reality is going to be like several years down the road. That would have taken care of some of the problem. But on the other side of it, I think that other kinds of more traditional regulation are required as well, because part of it has to do with activities and transactions that are occurring well upstream of the consumer who’s actually taking the mortgage.

CW: One of the hallmarks of a good transparency system is that it provides information that is easily comprehended by the population it is intended for, and that these information users really do alter their choices or decisions based on this added information. What is a good example of this in action?

FUNG: One of the examples of transparency that works that we really like is the Los Angeles restaurant disclosure system. If you go out to eat anywhere in Los Angeles County, when you walk through the front door of the restaurant, you’ll see a letter grade from A to C, which represents how clean their kitchen is. It’s the result of their last hygiene inspection. It’s a really good system, because everybody who’s going to a restaurant wants to eat in a clean restaurant, and the way that the information is provided is very accessible.

CW: Another example of a system that seems very easy for the public to understand, and also simple in its basic reporting, is the terrorism warning system that relies on color codes. But you and your co-authors say this system is riddled with deficiencies.

FUNG: The main problem that we see with that system is that it’s not clear what the user is supposed to do with that information. I don’t know what color the alert status is right now. It’s probably yellow or something like that. We could go on the Web and look it up but—

CW: Then what?

FUNG: We’d know what the color was, but it’s very unclear what steps one is supposed to take in response to that notification. That’s exactly the opposite of the restaurant case, in which the step is very clear: Eat there or don’t eat there. The designers of the terrorism warning system didn’t do what we strongly urge in the book, which is to take the point of view of the audience that you expect to use this information. What is a citizen supposed to do once they know that it’s a yellow status or an orange status or a red status? We urge policymakers to think through all of the steps of whether information is going to be received or known by the potential user at all—and how they’re going to figure out what it means to them and their lives and their values and how, if at all, they’re supposed to act on that information. Unless as a policymaker you can tell yourself a pretty good story about that whole sequence of events, it’s probably not a very well-conceived transparency policy.

CW: Is there a broader concern that if there’s a proliferation of what are essentially ineffective transparency policies, it damages or harms the ability to get others adopted that might actually provide some real value?

FUNG: I think that that’s probably a danger down the road. Information disclosure is, for better or for worse, kind of a fad now. It’s one of the first things policymakers and legislators reach for in response to some policy crisis, and maybe they reach too quickly for it or they don’t think it all the way through. A second danger is that the information will be misused. One example that we talk about is Megan’s Laws, which are the criminal sexual offender registries that are basically in every state now.

CW: There’s some question about whether these laws have made communities safer and whether some perpetrators or offenders, as a result of the laws, have become victims themselves of attacks.

FUNG: We have several experiences where that’s been the case, where people have kind of taken vigilante justice into their own hands. Megan’s Law is also like the terrorist alert system in that’s it’s pretty unclear what a policymaker or someone looking at a criminal sexual offender registry is supposed to do with that information, what the range of actions is that the user of that information is supposed to take to protect a legitimate set of interests, such as the safety of their children. Again, it seems like the kind of policy in which policymakers stop at the thought that once the information is out there, that by itself is a good thing.

CW: There are points in the book where you talk about there being real differences among categories of users of information. You point out that older people, as well as those with lower levels of education, make much less use of information available through transparency policies or are less sure what to do with it. There seems to be a division in society of people who can tap into this wealth of information and make rational choices for themselves and their families versus others who don’t. Is this division a real concern?

FUNG: I think that is a real danger, but I don’t think we have to end up in a place of large informational inequalities. Different kinds of individuals have very different ways of searching out the information to make the decisions that they need in their lives. Whether or not you have to have a graduate degree in computer science to get information that’s important to you is hugely dependent on what the public policy is. To take the LA restaurant example, I think anybody, regardless of their education level, can use that system. In contrast, mortgage disclosures that exist now require a fairly high level of numeracy to be able to really use that kind of information. But public policy could develop ways of providing information about fairly complex kinds of decisions that are much more broadly accessible.

CW: You and your colleagues write that we’re drowning in information. Will we reach a point of information fatigue?

FUNG: We are drowning in information and so a huge part of the problem is developing an informational environment in which people can sort through what they really need to know and what they really need to spend energy on, versus what they can kind of go on autopilot with. Marketing people and psychologists have shown that people make decisions through one of two tracks, the central channel and the peripheral channel. The central channel is where you really invest energy into thinking something through. You’re facing some complicated decision and you’re really weighing the costs and benefits and pros and cons. In the peripheral channel none of that kicks in. You kind of go on autopilot. How do you drive to work? You don’t think about it. You think about it the first time, but every time after that it’s automatic, and so one of the challenges for us as individuals and us as a society is to try to get the right decisions in the central channel and the right decisions in the peripheral channel as a way to kind of economize and take care of the information overload problem that we face.

CW: One area that you would think ought to be in the central channel is health care. You write about the whole question of medical errors. It was almost a decade ago that the Institute of Medicine issued a report estimating that something approaching 100,000 deaths and a million injuries per year may be caused by hospital-based medical errors. Despite that, it’s been very difficult to take what seems like a vital issue and provide the critical information that people would need to adjust their choices. Why has this proven to be such a thorny topic?

FUNG: There are some of the political problems that we talked about before. It’s like the restaurateurs, who were not keen on the hygiene rating system, but with much more political power and organization. But even if that weren’t a part of it, the subject itself is highly complex. What are the dimensions? What are the features of a good hospital or a good physician? There are many, and not everybody is going to look for the same things in a particular medical provider. Another dimension of it is that some rating systems build in pretty bad incentives, so if all you’re measuring is how many people survive cardiac surgery or something like that, then that rating system may create an incentive on the part of the hospitals to take patients who aren’t really that sick and reject the ones that are more sick to get their ratings up.

CW: Hospitals certainly don’t want to disclose stuff that could be used against them legally.

FUNG: Right, although some medical providers are taking the lead on this. One Massachusetts hospital CEO [Paul Levy at Beth Israel Deaconess Medical Center] has decided to voluntarily release their [hospital-acquired] infection rates, which is an extremely bold stroke of leadership, to kind of throw down the gauntlet to everybody else and say, “Why aren’t you making this public as well? First of all, people should be able to know this and make some choices on that basis, and, second, it will get [all hospitals] in the right kind of race to the top.”

CW: There is a real question when you get into health care about people’s ability or interest in using the information to adjust their choices. Of all areas where transparency policies are being introduced, this is one that had been dominated by a very paternalistic model. In the past, most people had an attitude along the lines of: “I want to go to my doctor and feel like they know best how to take care of me.”

FUNG: Well, there are some decisions, obviously, that people face maybe once in their lives — where to get a procedure done, or something like that. They’re in a state of mind where it’s very difficult to weigh the pros and cons of all these different options, and the main thing they’re after is some comfort and security that things are going to be okay. I don’t know if any transparency system is ever going to get people to choose sensibly or rationally or in a highly informed way between all of those choices when somebody’s in that frame of mind. But for a whole range of other health care decisions, we do know that people do search very hard and expend a huge amount of effort trying to manage the conditions that they have. Already there are groups of people afflicted with a similar chronic disease, diabetes, HIV — or parents with kids who have cancer or something like that — who are forming groups to figure out who the best provider is, what the best facility is, and what the range of promising therapies are, both traditional and experimental. So there are a whole range of health care decisions that do occupy the central channel of information processing and decision making, and then others are hard to get there, and maybe they’ll never be there because of the extreme stress that people are under.

CW: Patient groups that share information on treatments and providers is an example of a development that you write about, which has really been enabled by the Internet, in which users of information also become the disclosers of it. The kind of interest group that might like to keep a lid on the information is really kind of cut out of the process. They don’t really have a choice or an ability to weigh in or dominate the political process, as you say often happens, in working through what kind of transparency system will be acceptable to all parties. It seems like a very powerful development.

FUNG: It is potentially powerful, and it also has some potential downsides. The most dramatic forms of this are what my colleagues and I — we didn’t write about it in this book — call vigilante disclosure. The Internet, as you say, makes this possible, in which people make public what they feel is a pretty big injustice for everybody else to see. A few months ago one of the most popular YouTube videos was a video of rats crawling around in the dining area of a Kentucky Fried Chicken. I think it was in Greenwich Village, in Manhattan. Several public health officials in New York City were fired because of this. So it’s becoming much harder for organizations to keep scandals like that quiet. One of the more serious examples of this comes from London, a project that’s been developed by a nonprofit — with the collaboration, I think, of the Ministry of Justice—called fixmystreet.com, in which you take a picture of trash that hasn’t been collected or potholes, a broken streetlight, an overflowing dumpster. It’s like 311 [phone] systems, which many of your readers probably know are municipal-run systems in US cities for reporting non-emergency problems like these.

CW: The Internet is the ultimate form of democracy in terms of information dissemination, but it’s also the most dangerous. You point this out by highlighting what is often the lack of transparency on the Internet in terms of where information is coming from.

FUNG: That’s a huge danger, and I think we haven’t yet developed the social norms to keep that in check, to mitigate against some of the possibilities that can flow from that fact. The systems that we’d like to see more of — that definitely have that potential — are user discussion groups, social networks around different kinds of public goods like hospitals, schools and child care, etc. One danger, of course, is that people will focus on the one bad teacher, or a principal who’s otherwise a stellar person makes one mistake and that becomes the huge focus of all this attention. We actually don’t know how much of a problem that is compared to the benefits that would be gained from that sort of discussion and accountability.

CW: Massachusetts has taken a lead in trying to provide more transparency on doctor and hospital performance, led by the state Group Insurance Commission, which insures state workers and retirees. And now some of the insurers in Massachusetts are adopting a similar kind of doctor and hospital rating system for subscribers who are outside of the state worker system. But in May the Massachusetts Medical Society filed a lawsuit, alleging the rating system distorts information, is unfair to providers and so forth. They say, for example, that one doctor was getting rated based on patients that he didn’t actually care for, but for whom he might have read one test result. In such a case, you can understand why he or the medical society that represents doctors would feel like the system isn’t working as it should and that it shouldn’t really be operating until it is.

FUNG: I think that’s right. It’s oftentimes an industry group whose members are facing some sort of transparency regulation who would prefer not to have disclosure requirements at all. But if there are going to be disclosure requirements, most parties want them to be fair and accurate rather than random and capricious. So if you can move past the first question — yes, there is going to be a disclosure process — then the political dynamic can help to generate one that is more fair, and less subject to error.

CW: Can you see where this whole transparency policy movement is heading over the next 10 or 15 years?

FUNG: We distinguished in the book between two different ways of disclosing information and two different generations of transparency policy. One is the kind we’ve mostly been talking about, government compelling different kinds of organizations to disclose things to the public. There is quite a bit of that kind of regulation going on now, and we’re likely to see even more of it in response to these crises. You saw it with Enron. You’re seeing it with the subprime mortgage situation. More unclear is whether or not we’ll see more activity in what we call third-generation transparency policies. These are the user-provided information systems like Amazon.com reviews or Trip Advisor or many other websites out there. It is pretty clear to us that we’ll see much more of this in the private sector. An open question is whether the public sector will catch up and harness that kind of dynamic in order to advance the public good and the social objectives that we have like public health, public safety, clean streets, a good neighborhood, etc.

CW: Is all this potentially having an effect of further diminishing the stature of public figures or the political process itself?

FUNG: Yes. I think that that’s a potential risk. In the ’80s, government had a really tough time.

CW: You’re talking about the Reagan era?

FUNG: Right. The Reagan Revolution.

Meet the Author

Michael Jonas

Executive Editor, CommonWealth

About Michael Jonas

Michael Jonas has worked in journalism in Massachusetts since the early 1980s. Before joining the CommonWealth staff in early 2001, he was a contributing writer for the magazine for two years. His cover story in CommonWealth's Fall 1999 issue on Boston youth outreach workers was selected for a PASS (Prevention for a Safer Society) Award from the National Council on Crime and Delinquency.

Michael got his start in journalism at the Dorchester Community News, a community newspaper serving Boston's largest neighborhood, where he covered a range of urban issues. Since the late 1980s, he has been a regular contributor to the Boston Globe. For 15 years he wrote a weekly column on local politics for the Boston Sunday Globe's City Weekly section.

Michael has also worked in broadcast journalism. In 1989, he was a co-producer for "The AIDS Quarterly," a national PBS series produced by WGBH-TV in Boston, and in the early 1990s, he worked as a producer for "Our Times," a weekly magazine program on WHDH-TV (Ch. 7) in Boston.

Michael lives in Dorchester with his wife and their two daughters.

About Michael Jonas

Michael Jonas has worked in journalism in Massachusetts since the early 1980s. Before joining the CommonWealth staff in early 2001, he was a contributing writer for the magazine for two years. His cover story in CommonWealth's Fall 1999 issue on Boston youth outreach workers was selected for a PASS (Prevention for a Safer Society) Award from the National Council on Crime and Delinquency.

Michael got his start in journalism at the Dorchester Community News, a community newspaper serving Boston's largest neighborhood, where he covered a range of urban issues. Since the late 1980s, he has been a regular contributor to the Boston Globe. For 15 years he wrote a weekly column on local politics for the Boston Sunday Globe's City Weekly section.

Michael has also worked in broadcast journalism. In 1989, he was a co-producer for "The AIDS Quarterly," a national PBS series produced by WGBH-TV in Boston, and in the early 1990s, he worked as a producer for "Our Times," a weekly magazine program on WHDH-TV (Ch. 7) in Boston.

Michael lives in Dorchester with his wife and their two daughters.

CW: Government was the problem.

FUNG: It was the problem and there was no real role for the public official other than to get out of the way. The watchwords were choice and freedom, and [the idea was that] as government gets out of the way, things will be better off because it will be the realm of free choice. And now, I think, we’re at a moment in which people do have more choice in all of these areas, and they realize choice is frightening and scary and they’re often too busy to choose or they make the wrong choice. There are at least two ways to respond. One conventional way is to say, well, we have too much choice now and people should have less choice and the city councilor or the federal regulator, who knows what the right thing is, should be able to make that choice and then everybody will be better off. We’re unlikely to pursue that path. The other path, the one that we urge in Full Disclosure, is for there to be more of a partnership between public officials on one hand and citizens and society on the other, in which the role of government is to develop a whole bunch of public policies that make it easier for people to make wise choices that advance their interests. We think citizens and society should recognize that it’s just unrealistic and would be quite bad for a variety of reasons if they operated in the realm of completely free choice without those kinds of supports and help from public policy and regulators. The more appealing vision is to say that government does have a pretty strong regulatory role in the traditional sense, but that the new role, which is more challenging, is to create a real kind of freedom in which people can make the kind of choices where they protect themselves and the people that they care about.