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The Danger of Killing the Referee: A Good Way Toward Annihilation via Activist Groups
Refutation of “Full Disclosure" (by Archon Fung, Mary Graham, & David Weil) by Franz Harter
A little of the partisan rhetoric has heated up my title I see. I have to admit to reading this book with the aim of refuting it, and I did find cause for honestly doing so. I have to admit to reading only the first 30-40 pages and then skimming a few sections inside the book and not reading all of the about 200 pages and the miscellaneous footnotes.
The books tries through a convoluted set of examples to lay out a relatively simple premise: that by increasing liability on companies for wrongdoing and also compelling them to disclose certain facts about their products, companies could be better regulated by consumer choice about their products. A slightly hidden part of this regulation schema is that activist organizations would have the right to take the companies’ legally compelled data and “reformat it” into something that is easier to interpret for consumers. Consumers would not necessarily see the raw data, but would look at a prepared chart made by an activist group they trusted which would “explain to them” what the data actually means. The book gives the example of the SUV and how the data about rollover rates was reduced to a simple five star system to tell consumers which cars were the safest. So the objective of the book is to put data in the consumer’s hands in a simple way to understand available format and let the consumer make the decision What could be wrong with that?
Life Entail Risk
By using the logic in the book, I as the author of this piece could probably try to convince the American public to stop driving, And to be police officers and fire fighters as safe professions. It’s all how you look at the data. While it may be nice to see just a five star system and not know what’s behind it, not having any idea of why something is rated five stars versus four and a half is dangerous. While human deaths are regrettable, how much riskier was the SUV from other cars? Is the risk considered a tolerable amount in other areas of life? The danger that develops from the premise that data can be “re-described”: in a new format is that, an incident or two that is an anomaly can trigger a group to look into a safety feature that isn’t needed , yet the group could continue on and rate every product for some attribute that doesn’t in the end affect overall performance very much, but it will add cost to address this new feature and when the data is summarized in say stars, it doesn’t necessarily correlate well with what’s going on in realty. Many times scientific data should not be characterized in a heuristic like the stars or should be done so cautiously because some of the meaning is lost in the simpler system and only a well thought out simplification accurately describes the breadth of the data. What if all cars are relatively really safe in contrast to what they could be and the “real” difference between the 1 star car and 5 star car is negligible. While cars may make some leery as the change in deaths is 1-2% of total and is significant and here public involvement may have helped, there was a scare of alar apples which appeared to be unfounded and caused people to reconsider eating apples that were considered safe and greatly hurt the apple industry. What can happen in re-interpreting data is that the public can be given a false impression of what the data means. I would go so far as to say the consumer isn’t making the decision, the data interpreter is making it for them because the interpreter decides what view of the data is given to the public and can “sell” the view to the public that is most likely to cause x or y behavior of the public.
Danger of killing Innovation
The Other Big issue to consider is that the public by statistics is risk averse. I had an MIT professor drill that into my head in an AI course that focused on statistics for part of it. The general public will not purse the course of action that gives them the best outcome; if left to their own, they will not pursue an optimum strategy, but a sub-optimum strategy that has less risk involved. So one could say that by giving more information to the public instead of letting it do a better job in regulating industry, you may be causing it to use irrational fears of a product or whatever to destroy the product or service with the general public’s acknowledge risk-adverse behavior. An example of this is danced around in the book as on page 72 it is noted that when people know where a sex offender lives sometimes they stalk the person and even kill him. (And yes I will defend a sex offenders right to a peaceful life while that person is committing no crime. Our society handles issues like that very poorly at the current time.) Another famous and more agreed upon example was that no one would fly or travel for months after 9/11. So letting the public have access to all information may not always be beneficial. The impact could be to kill off innovation as the public is most likely to be risk-adverse when looking at new products and having information about everything that could go wrong with a new product well displayed ahead of it may be a good way to kill off a new product. While public safety should be maintained, is one thing, having an activist group with the ability to “spin” any negative information is another. So this part of the law could destroy the chances of a new product coming to market as it is expected to be completed with every piece of information an established product has. This will hurt small business. This type of policy will also discourage the necessary risk taking that is necessary to produce new products. This type of issue is almost talked about on pages 33 and 34 where that exact words of pubic risk aversion are mentioned, but after getting to that point the book dances around it and just talks about better ways to manipulate the public into the appropriate behavior instead of addressing the issue that a group can use targeted transparency to get the public to do the wrong behavior.
Lots of Regulation Adds Cost And Can Be Used to Arbitrarily Destroy a Business
The book talks about the government being more active in deciding somewhat arbitrarily when to test companies for the regulations that have been imposed and now require testing. All of these additional costs would be paid for by the company. There are four times listed on pg 40 and 41 that government should use targeted transparency according to the book: “when information imbalances substantially increase the risks borne by the public”, “when lack of information seriously impairs the quality of critical services provided by public or private organizations”, “government intervenes when information imbalances perpetuate unacceptable patterns of discrimination or other social inequalities”, and finally “government intervenes when information imbalances allow corruption to persist in important institutions that serve the public.” . These are very noble sounding standards, but my worry would be that an activist group or interested party could ask for transparency from anyone they wanted because the standards are so broad. And I think the standards should be broad because when a company does something that harms the public it should be questioned, I just don’t think allowing targeted transparency is the right vehicle to do the questioning.
Once the criteria are met the government has the right to demand many testing procedures and testing patterns and the book asks the companies to provide the data in easily read and standardized formats. All of which seem well and fine until looked at closely. Much of the testing will require personnel and equipment for companies and as the book allows people to get companies to test for any reason there seems no restraint on killing a company through testing it to death. My fear in this book’s strategy which is to require testing, allow activist organization to then interpret the results as they see fit in whatever “star” pattern they like, and then -can’t remember what I wanted to say – let’s see if it comes - and then let the general public’s reaction to the company be the enforcement is that the activist organization is put into the position where it can be like a mob boss. It could go to a company and say either do what we want you to or we go to Congress and demand more testing to tie you into very expensive compliance testing first, then we’ll interpret the results in a way to make you look bad and drive away as many customers from you as we possibly can and you’ll have to contend with the public reaction when we call you a baby-killer after we get done skewing the data from one of your test results. An activist organization need not necessarily have any negative motivation per se to be the mafia, but just in being naïve and wanting to force compliance of an industry, targeted transparency – that’s what I wanted to say earlier, the book also increases liability on companies for not giving accurate information which gives the activist organization the additional tool of being able to go after expensive lawsuits if it can find anything that a company could have done better in supplying the data which is always subject to interpretation. – (from before) targeted transparency will give activist organizations more means to go after and essentially blackmail a company into doing whatever it wants them to.
While the book looks on the good this can do if activist organizations rule corporate America, I do see a danger. Many new technologies are strongly disliked by society and the current government role as referee where the government decides when a company is doing something wrong that the general public should know about is necessary and even essentially to protect the new company or idea or industry from being destroyed by a lynch mob. While the authors sites how many companies could be stopped from polluting they fail to look at how other organizations would stop stem-cell research, cloning, abortion, objectionable plays and movies and a lot of other things. The right could decide to use targeted transparency to protect minors from what it considers objectionable material which I think might be a broader base than what the authors’ do. In addition every new scientific procedure would be subject to intense liability and medical science would die as a result of targeted transparency as many proclaimed moral groups have issues with parts of medical science and could now publish every damming set of statistics they could find and require dozens of tests on medicine and force doctors out of business. What the left would like to do that with fatty food makers and giant chemical factories, the right would like to do that with the video game and movie industry and medicine. In short once all the activist groups are done with the new power they would get through targeted transparency there would be nothing left to regulate because everyone in society would be scared of everything once competing activist organizations were allowed to run rampant with stray facts and skewed data. Societal collapse may well be the result of this. (My mother is a scientist and said data can always be interpreted at least two ways so I am aware of two scientists using the same data to support opposite conclusions. )
I think therefore all might agree that while to people who support one side it looks like having even more power to go after a company they don’t like is a good thing, in the end if everyone does that we won’t have any companies or innovators left in society. Government is supposed to be the arbiter between different groups and there is a good reason for that. This book from what I’ve seen of it does not present a compelling case why that should change.
-fah
(One could also add how a real terrorist organization would make use of targeted transparency if it had a public wing calling for intensive regulation of say chemicle, power, water, or some other critical authority and how it needed to know what toxins were checked for in the water, or what compounds a checmicle factory was bringjng in, but I trust I don't even need to mention that idea to scare everyone.)
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