Transparency in Industrial Regulation

Transparency, in the form of mandatory information disclosure, is thought to benefit the public interest in agency rulemaking because it makes regulatory policymaking more responsive to the public's policy preferences, as opposed to preferences of the industrial targets of regulation. This paper presents a formal model of rulemaking that suggests that the benefits of more information disclosure may be overstated. First, benefits are limited when the agency is allowed to publicize more information than it is required to by law. Second, forcing the agency to disclose any information it has may reduce the amount of information that is gathered in the policymaking process. The model results highlight costs to the public of increased transparency to be weighed against its more commonly acknowledged benefits.