Birdwood Draft, 1/93

Public Feedback Regulation: Learning to Govern In The Age of
Computers, Telecommunications, and the Media.

Peter P. Swire


This article will describe a phenomenon I will call "public feedback regulation." At least a dozen examples of such regulation have been promulgated at the federal level since 1980. 1 suggest that such regulation is often preferable to traditional, command-and-control regulation.(1) In particular, public feedback regulation takes advantage of advances in computers, telecommunications, and the media. It uses government for the specific tasks to which it is most suited in the computer-intensive "cyberspace" age.(2)

In public feedback regulation, as diagramed in Figure 1. the regulated entity (such as a corporation) is required by law to gather certain information. The regulated entity sends the information to a government agency, typically by modem or other computer-related means. The government agency assembles a database containing information from the various regulated entities. Next, the database is made available in some way to the public. Various groups, such as the media, academics, competitors, or activists, can scrutinize the information and make their own reports about the behavior of regulated entities. These reports may be unpleasant to the regulated entity -- when its own information is publicly "fed back" to the entity, there may be a change in its socially undesirable behavior.

Three diverse examples will be used throughout the Article to clarify how public feedback regulation works. Perhaps the best-known example is the requirement that airlines report flights that arrive late. Airlines gather data on each flight that is more than fifteen minutes late, and send this information, generally on computer tape, to the Federal Aviation Administration. The FAA compiles the information, and releases monthly reports on the percentage of each airline's flights that arrived late. The media often report the airline rankings, and competitors have used the data in advertising. The regulation has achieved one of its major goals, having airlines be more truthful in estimating flight times.(3) The publicity has also apparently improved the on-time arrival of the worst-performing airlines.(4)

In the environmental area, the Toxics Release Inventory (TRI) illustrates how public feedback regulation can reduce toxic emissions without the use of lawsuits against polluters. Since 1987, manufacturing facilities of a certain size must report the total quantities of each of over 300 toxic chemicals that they release to the air, water, land, or elsewhere. This information is sent, usually by modem, to an Environmental Protection Agency (EPA) database. The data, in turn, is made available to libraries and can be publicly accessed by modem. The media and environmental activists have made wide use of the TRI data, highlighting the worst-pofluting companies. As a result, many major companies have reduced pollution, and the General Accounting Office estimates that more than half of all reporting facilities have made changes as a result of TRI.(5)

Recent experience with the Home Mortgage Disclosure Act (HMDA) illustrates a second important effect of public feedback regulation, shown in Diagram 2 -- the way that new information can create the public policy basis for deciding among competing regulatory possibilities. HMDA was amended in 1989 to require for the first time that banks and other mortgage lenders make public a variety of information. Notably, lenders were required to report the number of mortgage applications made by race and income. and the percent actually approved.

The initial data, publicized by the media and activist groups, showed that blacks were turned down for mortgages a startling 2.7 times as often as whites with the same income. In the face of this embarrassing data, banks began to review their internal lending procedures. The data prompted little regulatory response, however, in large measure because the banking community could make a plausible argument that many factors besides income were relevant to the lending decision. Then, researchers at the Boston Federal Reserve Bank found that, after controlling for other relevant factors, the HMDA data showed that blacks were still tumed down 60% more often than whites. In response to this credible finding of lending discrimination, banks have intensified their efforts to reform their lending procedures, the sort of feedback shown in Figure 1. Moreover, regulators and the Congress have used the HMDA statistics as a key basis for an array of reforms and proposed reforms.(6) the sort of feedback shown in Figure 2.(7)

The on-time arrival, TRI, and HMDA examples, together with Appendix I listing other examples, show the wide range of substantive areas that can make use of public feedback regulation. Information about on-time flight arrival, or toxic emissions, or discriminatory loan turn-downs would not be created in an unregulated market. As with on-time arrival, the regulation may be aimed primarily at improving a consumer market, by providing information that ultimately steers the consumer toward an appropriate purchase. As with the TRI, the regulation may be aimed primarily, not at consumers, but at deterring socially undesirable behavior such as pollution. As with HMDA, the regulation may be aimed both at combatting a societal ill such as discrimination and at better matching lenders and borrowers. But in all three examples, the important disclosure is not to consumers directly. One task of this article is to understand when the roundabout route of public feedback regulation is preferable to direct disclosure.

A chief claim of the article is that public feedback regulation is becoming more effective with the advances in computers, telecommunications, and the media. Changing technology is improving the efficiency of each part of the feedback loop. As recently as 1980, the personal computer was practically unknown; today, regulated entities rely on computer technology to gather and process information, and use ever-more-sophisticated management and information systems to make internal and regulatory reports. Regulatory reports can be riled quickly and at low cost by modem or other computer media. The government agency can assemble a computer database at lower cost and with greater flexibility than with older paper filing systems. When the information is made public, a burgeoning number of specialized media, academics, and activist groups can advance their own agendas by analyzing and publicizing the data. In time, each node on the Internet can be thought of as a media outlet, with persons of diverse interests able to analyze and then broadcast the agency data. Competitors, too, can analyze the information at low cost. The regulated entity will thus face an ever-increasing variety of feedback, raising its costs of continuing socially undesirable behavior.

The role of government in public feedback regulation is a -limited and achievable one. The coercive power of the-state is used to require disclosure of socially useful information that is not otherwise generated. The government then ministerially ensures that the required reports are in fact made, perhaps aided by citizen suits targeted to ensure disclosure.(8) Finally, the government performs the routine task of assembling the data, in a form usable by private parties. In the current era, where many government agencies face myriad tasks and constrained budgets, this limited government role is sustainable and sensible. Enforcement is increasingly left to the computer-assisted private sector of the cyberspace age, with its widely distributed ability and willingness to analyze and broadcast the information.

One notable feature of public feedback regulation is that it does not depend on lawsuits to change the behavior of the regulated entity. The FAA has no regulation punishing excessive tardy arrivals. The TRI predominantly lists legal, although often embarrassing, levels of toxic emissions. And HMDA data by itself will rarely or never create the predicate for an enforcement suit. The lack of legal enforcement will sometimes make public feedback regulation less strict than command-and-control schemes. But it accepts Carol Rose's invitation "to pay more attention to the relatively underdiscussed management strategy of norm-production -- that is moral suasion or exhortation."(9)

Part I of the Article compares public feedback regulation to command-and-control regulation. Part II compares it to the unregulated market. Part III suggests criteria for understanding when public feedback regulation is appropriate. Part IV offers some tentative thoughts on lessons about learning to govem in the age of computers, telecommunications, and the media.

I. Comparing Public Feedback Regulation to Command-and-Control Regulation.

"Command-and-control" regulation involves a legally enforceable requirement by government that the regulated entity act in a certain way, usually to prevent harm or reduce risk to other parties. For instance, airlines are subject to precise safety requirements by the FAA, polluters are required to use specific technologies to comply with the Clean Air and Clean Water Acts, and banks must meet minimum capital levels in order to reduce the risk of insolvency.

This Part compares public feedback regulation to command-and-control approaches. Public feedback regulation has important efficiency advantages, such as avoiding the high marginal compliance costs of uniform rules, encouraging innovation, allowing private analysis to supplement the government's, and avoiding difficulties in defining the enforceable standard. Public feedback also has democracy-reinforcing advantages compared to command-and-control. A major role of course remains for legally enforceable regulation, which sometimes best works in tandem with public feedback regulation. The comparison will first assume only government enforcement of command-and-control regulation, and then include citizen suit enforcement in the analysis.

A. Advantages of Public Feedback Regulation.

1. Avoiding the high marginal compliance costs of uniform rules. As leading critics of command-and-control regulation, Bruce Ackerman and Richard Stewart focus their critique on best available technology (BAT) controls in the environmental area.(10) These criticisms do not apply to public feedback regulation, such as the TRI. Probably most importantly, "BAT requirements waste many billions of dollars annually by ignoring variations among plants and industries in the costs of reducing pollution and by ignoring geographic variations."(11) A new regulation will typically involve compliance expenditures by all or most of an industry, at widely varying marginal cost.

By contrast, public feedback regulation will generally operate "worst, first." The worst transgressors receive the bulk of the bad publicity, creating the pressure to change behavior.(12) The worst transgressors are also likely to be able to reduce their undesirable behavior at relatively low cost -- marginal compliance costs typically rise sharply as they approach the limits of technical feasibility.(13) The worst transgressors on average will be far from those limits, on relatively inexpensive parts of their cost curves.(14) An additional benefit of 'worst, first" compliance is that, for many industries, a large portion of the undesirable behavior results from a fairly small portion of the industry. A "worst, first" strategy tends to produce most of the achievable reduction in undesirable behavior while imposing compliance costs predominantly on those who can do so at lower marginal cost.

For entities that face high costs of compliance, even where they are among the worst transgressors, there is no government mandate that they perform costly compliance. Those entities may explain publicly why they have difficulty complying. For instance, Alaska Airlines has reasonably explained its weak on-time arrival rate as due to the large portion of its flights that encounter winter storms and other bad weather.(15) If there is not such a good explanation for unusually bad behavior, the information created by the public feedback regulation can provide a sound basis for deciding whether additional government action targeted at the worst behavior is indeed appropriate.

2. Encouraging innovation. Ackerman and Stewart next explain how BAT controls impose disproportionate penalties on new products and processes. Technology controls have usually been stricter on new sources because there is no risk of shutdown. New plants and products face lengthy regulatory and legal proceedings to win approval, discouraging innovation. In addition, "BAT strategies impose disproportionate burdens on more productive and profitable industries because they can 'afford' more stringent controls."(16)

Public feedback regulation avoids penalizing innovative technology or profitable industries. The information generated places a premium on performance, rather than on the specific technology used by the regulated entity. New technology will rarely place an entity among the worst transgressors that receive bad publicity. Profitable companies and industries, many of them influenced by the "total quality management" movement.(17) Will often hold themselves to non-embarrassing levels of performance even without government action. Companies and industries that use lagging technology or have lower profits will become the proper subject of a more informed public debate, in order to assess whether their poor performance on the public feedback regulation warrants additional government action, with other relevant factors considered. 

3. Allowing private analysis to supplement the Government's. A key criticism is its "centralized, uniform determination of complex scientific, engineering, and economic issues."(18) Such determinations "impose massive information-gathering burdens on administrators and provide fertile ground for litigation" based on protracted rulemaking proceedings and almost-inevitable judicial review.(19) Due to the high cost of compliance, and the opportunity to delay or defeat the regulation in litigation, industry often finds it more cost-effective to litigate rather than comply. Because each rulemaking is so contested, regulators can act only with respect to the projects having the highest political priority, with the result that nothing is done for many potentially significant risks to the public.(20)

Public feedback regulation short-circuits litigation and reduces regulatory inertia. Lengthy and costly litigation about command-and-control standards is replaced by simpler government action of specifying what information should be reported. The public feedback regulation is thus likely to take effect more quickly than command-and-control regulation. Because public feedback regulation requires the regulated entity only to collect information, and not necessarily to change its behavior, the scope of the public feedback regulation can err somewhat on the side of being over-broad. For instance. the TRI requires disclosure concerning over 300 toxins, and HMDA requires disclosure of the mortgage applicant's sex as well as race. The HMDA data on sex seem to show no troubling trends. When the data shows no undesirable behavior, government and industry will have been spared the costs of drafting, litigating, enforcing, and complying with an enforceable regulation. Abolition of the information disclosure can be considered.

Public feedback regulation also distributes the burden of analyzing and broadcasting information to those best able to do it. For technology-based regulation, government employees have to make detailed engineering and economic decisions,(21) and then defend the proposed rule in court against detailed criticisms from industry and other experts. Public feedback regulation certainly permits the agency to perform its own analysis of the reported data. The agency may wish to spend its limited resources in doing so, such as when it is considering additional legal responses to a regulated industry.

But public feedback regulation also empowers others to perform the analysis: competitors, academics, activists, and the media. As in the airline industry, profit-seeking competitors can play a key role in publicizing the on-time arrival rates. Academics, in search of research findings that promote professional success,(22) can perform sophisticated analyses of the data. Activist groups, drawing on the talents of computer experts, can further their agendas by disseminating the information. For instance, environmental and community development groups have been vital to raising the visibility of the TRI and HMDA data, respectively.(23) Finally, the media, in its search for newsworthy stories, can receive information from the above sources, or use computers and other technology to perform its own analysis.(24) The number of media outlets for embarrassing regulatory information is growing rapidly, in the form of cable television channels, narrowly-focused newsletters, and many other specialized media.(25) Individual analysts can increasingly gain wide circulation for their findings at low cost, through media in constant need for stories, and through broader participation in the Internet and other computer outlets.(26)

4. Difficulties in Defining an Enforceable Standard. Another way to see the advantages of public feedback regulation is to consider the difficulties that arise in defining a precise, enforceable standard of behavior.(27) Sometimes the difficulty may come simply from the inability of the parties to agree on an enforceable rule, so they compromise on a public feedback approach. The difficulties may be institutional, such as when EPA does not have the information or resources to define acceptable levels of emissions for over 300 toxics in the TRI, in widely varying industrial and ecological settings. The difficulties instead can be conceptual or political. For instance, consider what actions should trigger enforcement for racial discrimination in lending. It is conceptually easy to imagine no enforcement, or else the requirement of some sort of race-based quotas. But a politically sustainable result would certainly need to be between these extremes, where it is more difficult to derine a clear, enforceable rule.(28) Industry-wide discriminatory effect may thus exist even when there is no ready way to sue individual lenders.(29) In the face of such conceptual and political difficulties, the current law may be quite sensible - enforcement against institutions where there is a pattern or practice of discrimination,(30) and public feedback regulation to keep public pressure on the many institutions that do not face a credible threat of a lawsuit.

5. Democragy-reinforcing advantapes of public feedback regulation. In addition to the above-mentioned efficiency advantages, the thrust of public feedback regulation is to push information away from centralized agency decision makers and out to a much wider group of potential actors. Under  both republican and interest-group approaches to political theory, this decentralization reinforces democratic values, such as participation, deliberation, better informed decision making, and reduction of rents flowing to privileged interest groups.  As a leading advocate of republicanism,(31) Cass Sunstein has emphasized the role of information disclosure in "promoting citizen participation in and control over government processes."(32) Sunstein 
believes that disclosure will inform the populace, allow critical judgments about government policies, and foster deliberation of important public issues.(33) At the national level, where "sensational anecdotes displace reasoned analysis," public feedback regulation supplies an improved empirical basis for better decisions.(34) As an aid to federalism, public feedback regulation makes important information available to states and localities,(35) allowing decentralized decisions based on local values.

From the interest-group, or pluralist, perspective, public feedback regulation can also reinforce democratic values. Just as information disclosure to consumers can increase the efficiency of a product market,(36) information disclosure to voters and interest groups can improve the efficiency of the political marketplace.(37) First, such disclosure makes it more costly for the regulated industry to "capture" the agency, and get the agency to act (or not act) as desired by any one interest group. Public feedback regulation raises the otherwise-low visibility of agency and industry action, by informing the media, watchdog groups, competing industries, and others about key actions of the regulated industry. The agency thus will be more easily embarrassed away from following the preferences of any one group.(38)

Second, even when the agency wishes to follow industry's preferences, public feedback regulation distributes power away from the agency to the wide array of those who wish to analyze and publicize potentially embarrassing information. By informing and empowering more interest groups, public feedback regulation reduces the likelihood of successful rent-seeking by politically powerful groups.

B. Reasons to Retain Command-and-Control Regulation.

The increased use of public feedback regulation clearly should occur against the backdrop of numerous legally enforceable, command-and-control rules. For instance, criminal or similar sanctions should be retained -- we wish to punish the murderer or the person who ignores important airplane safety rules and not simply report their heinous behavior publicly.(39) Understanding when command-and-control regulation is appropriate requires a clearer specification of when public feedback regulation will be most effective, as discussed further in Part III below.

Public feedback and command-and-control approaches can also work in tandem, First, legally enforceable rules often define a floor of acceptable behavior. For the most egregious behavior, the inefficiencies of command-and-control are relatively slight: society wishes all parties to meet the basic standard; agencies can define rules that industry can feasiblely meet; compliance costs are fairly low; and innovation is not required for compliance.(40) Both HMDA and the TRI are examples of public feedback regulation with command-and-control enforcement for the most egregious behavior.(41) Sophisticated proponents of tradable-rights approaches now recognize similarly that a floor of command-and-control rules is generally appropriate, with trades permitted only after facilities have met these minimal standards.(42) Second, part of the effectiveness of public feedback regulation lies in the possibility that Congress or the agency may next promulgate legally enforceable controls. If the public information is embarrassing, and does not improve over time, the industry may well face the costs of litigating and then complying with a command-and-control regulation. Public feedback regulation thus gives the industry one good chance to comply at low cost, with the likely alternative of higher costs if industry does not respond.

C. The Role of Citizen Suits.

Citizen suit statutes permit diverse parties as well as the government to sue entities that violate a law.(43) As a preliminary matter, citizen suits generally require a degree of public disclosure by the defendant party, so that violations can be detected and well-founded lawsuits can be filed. Compared to government enforcement of command-and-control regulation, citizen suits share with public feedback regulation the advantages of decentralization, but have the disadvantages of legally-enforceable rules.

The shared advantage of decentralized enforcement suggests that citizen suits should be considered as an alternative to public feedback regulation. Both techniques vindicate public values when over-burdened government agencies lack the resources to follow anything close to an optimal enforcement strategy.(44) Both techniques protect against the risk that an Administration, or an agency, will fail to enforce a properly-enacted statute. Both techniques reinforce democratic values, by allowing a broader array of citizens to become informed and then participate in enforcement of the statute.

Nonetheless, citizen suits have many of the disadvantages, discussed above, of government enforcement.(45)

To define the enforceable rule, the agency must make a centralized determination of complex issues. Rules are expensive to draft and defend against judicial review. The uniform rule creates high and wildly variable compliance costs and discourages innovation. The rule may be promulgated even in the absence of helpful information generated by public feedback regulation. And, in some areas. there are institutional, conceptual, and political obstacles to a precise definition of an enforceable rule.

In addition, citizen suits face legal objections that do not apply to public feedback regulation. Some of the-objections apparently apply only to citizen suits against the government.(46) But the reasoning in a recent Supreme Court case suggests that constitutional limits may exist on citizen standing to sue private parties, based on the case-or-controversy requirement of Article III,(47) or the Article II power of the executive branch to retain prosecutorial discretion.(48) In the face of these constitutional uncertainties, citizen suits may not be as widely available in the future, reinforcing the need for other decentralized ways such as public feedback regulation, to monitor and restrict harmful activity. Even where the legal validity of citizen suits is clear, the advantages of increased legal enforcement must be weighed against the often-substantial costs of developing a clearly-defined rule and requiring compliance with it.

II. Comparing Public Feedback Regulation to an Unrey-ulated Market.

Part I highlighted advantages of public feedback regulation compared to enforceable rules. This Part compares public feedback regulation instead to the unregulated market, explaining rationales for disclosure regulation but noting its often-substantial costs.

A- Advantages of Public Feedback Regulation.

Compared to an unregulated market, mandatory disclosure can further democratic, liberty, and efficiency values.(49) Compared to command-and-control, the chief advantage of public feedback regulation is decentralization; compared to the unregulated market, it is allowing the public to assess the risk of harm caused by private actions, such as releases of toxics or lending discrimination. The advantage in terms of liberty is that individuals become more aware of the consequences of their choices, empowering them to act more consistently with their own preferences.

Required information disclosure can enhance efficiency by distributing useful information that unregulated markets would not produce. Required disclosure may be directly from seller to buyer, or indirectly from seller to buyer, or from the seller without regard to a buyer. Previous scholarly work has focused on the first category, direct disclosure to consumers.(50) This Article focuses, instead, on the situations where information disclosure may be beneficial even when consumers may not directly receive any disclosure from the seller.(51) To be sure, there is often no sharp distinction between direct disclosure to consumers and other disclosure, and in many instances there are elements of both. For instance, airline on-time information is available on request to all users of computer reservation services (direct disclosure).(52) What is notable in the airline example is how the public feedback regulation, rather than this direct disclosure, has had the preponderant effect.

Various imperfections can exist in markets for information.(53)

Sellers sometimes profit by misrepresenting their goods. Most generally, information has public good properties. The purchase, production, and use of information by consumers generates external benefits to uninformed consumers, in the form of lower prices or higher qualities.(54) Required information disclosure can correct for a low creation of product information, by requiring the diffusion of information, and allowing product comparisons that would not exist in an unregulated market. To take one example, food labels are printed in a standardized format, making it easier for consumers to compare products directly. By contrast, the airline on-time information typically gets to consumers only indirectly, after the government data has been publicized by competitors or the media. But the effect is the same -- fostering a more efficient market by allowing comparison shopping.(55) A different basis for information disclosure regulation is to correct for externalities. For instance, disclosure regulation can raise the cost to factories of dumping toxins listed on the TRI, or the cost to lenders of racially discriminatory lending. In these examples, consumers play little or no role in disciplining the behavior of the regulated entities.

B. Costs of Public Feedback Regulation.

Compared to an unregulated market, the costs of public feedback regulation include the direct costs of disclosure and dissemination, compliance costs, the costs to the regulated entity of responding to accurate information, and costs of disclosing proprietary business information.

The cost of disclosure to industry will be an empirical issue for any proposed regulation.(56) Legislators and regulators can readily decide to "punt" on an issue by requiring disclosure by industry, with credit going to the ones imposing the rule for "doing something," and costs going to industry.(57) But the spread of information technology suggests that disclosure costs are often modest and systematically declining. Information disclosure was more expensive when industry had to fill out paper forms and government had to laboriously tabulate the information. But as hardware, software, and telecommunications technologies have advanced, businesses have continually updated their internal management and information systems. A decade ago, spreadsheet and database programs for the personal computer were practically unknown, and modems were a specialty item.(58) Today, almost any regulated industry can collect the information, generate the spreadsheet or other required report, and use modems or other technology to send the information to the government at low cost.(59) In many instances, management has already purchased the required computer and telecommunications technology, and collects the same or similar information for its internal management uses.(60)

Industry may suffer costs responding to misleading publicity, such as the costs to Alaska Airlines of explaining its weak on-time arrival performance. Such costs are likely to be limited, however. Industry is required only to report truthful information, so significant embarrassment is likely to come for the behavior actually targeted by the regulation. And a public choice analysis suggests that the regulated industry will typically be effective at countering regulation based on misleading information. Most public feedback regulation has affected heavily-regulated industries, which already have substantial trade associations and lobbying operations.(61) These trade groups will often be able to prevent government action based on incomplete or misleading information. For instance, banking trade groups were effective at preventing the government from responding to the initial, somewhat misleading, HMDA reports that blacks were turned down for mortgages 2.7 times as often as whites. The agencies began responding much more vigorously only after the respected Boston Fed study found significant discrimination.

In many instances, the regulated industry will object to the release of what it considers proprietary business information.(62) An entity has every reason to publicize favorable information without the need for government regulation. The information required under public feedback regulation thus typically is kept secret for competitive advantage, or because it reflects badly on the regulated entity. Examples of the latter might include the tendency of an airline's planes to arrive late, of a factory to expose neighbors to dangerous toxins, or of a lender to deny credit based on the applicant's race. As Richard Posner has pointed out, there is little social utility in concealing discreditable information.(63)

The tricky empirical question will come in determining whether the industry has a legitimate claim for protecting proprietary information, or whether instead it is seeking to avoid disclosure of discreditable information. Posner and Anthony Kronman agree that a key factor is whether the information is a product of significant investment.(64) Where significant investment exists, required disclosure would tend to reduce the level of investment in socially useful information. The same efficiency concern in protecting investment-backed proprietary information, such as trade secrets, appears to underlie the private business information exemption to the Freedom of Information Act.(65) Aggregation of data may be one helpful technique for reducing disclosure of sensitive information, while gaining at least some of the benefits of public feedback regulation.(66)

III. Toward Understanding When Public Feedback Regulation is Appropriate.

As a general matter, the advantage of public feedback regulation will be greater where there is a pressing market failure or more acute inefficiencies of command-and-control regulation. The previous discussion has suggested issues to consider in comparing public feedback regulation to the alternatives of command-and-control regulation or an unregulated market. Each instance will require empirical estimates of public feedback's costs and benefits compared to the alternatives. The following list of factors, however, can focus attention onto prime candidates for public feedback regulation, as well as situations where it would most clearly be inappropriate.

1. Possibili!y of a clear feedback signal. The core idea of public feedback regulation is that information disclosed by the regulated entity is "fed back" to that entity, in a way that induces more desirable behavior. To get the feedback effect, the signal must be clear and readily understood. Only a strong signal will travel the loop from the regulated entity, to government, to the media and other publicists, and back to the regulated entity. A strong signal is typically one-dimensional and numerical. For instance, it is easy to measure the number of late flights, the quantity of to)dc emissions, or the size of the gap between lending rates to blacks and whites. By contrast, complicated disclosure will be difficult for the media and others to process and then feed back to the regulated entity in a concise, punchy way. For example, the Pollution Prevention Act of 1990 requires companies that submit data to the TRI to include in their reports descriptions of their source reduction and recycling activities.(67) Such qualitative reports seem less likely to be analyzed effectively by the public and fed back to the companies.(68)

2. Low costs of disclosure. An important theme of this Article is that every part of the feedback loop is typically getting more efficient with advances in computers, telecommunications, and the media. Public feedback regulation is more likely to be cost beneficial the more that data can be assembled and disseminated automatically. Complying with the TRI, for instance, may involve a.smokestack monitor equipped with a microchip. The monitor automatically feeds its data into the company's computer system, which then automatically includes the data in the required submission to EPA. A reporter or activist group may automatically download the TRI data, perform standard analyses to the data, and then publish its report. Management may discover the report in its routine on-line search of media stories about the company. Each step of the feedback loop happens at much lower cost than was possible a decade earlier.(69)

Entities that do not use these computer capabilities will find it more expensive to comply with public feedback regulation. One perhaps surprising effect of such regulation may therefore be to push companies farther along the learning curve about information technologies. 'ne short-term costs of compliance may be long-term benefits to an industry's competitiveness in the use of computer and related technologies.

3. Need for more information before taking other public policy action. The second feedback loop occurs when government requires disclosure by industry and the information is fed back into deciding whether further public action should be taken. Especially in the face of current budget restraints, public feedback regulation distributes the job of assessing information, so that private analysts as well as government can participate in the creation of policy decisions. Public feedback regulation is thus likely to be especially helpful in the face of great uncertainty, where the first step should be gathering information rather than regulating behavior. The central role of uncertainty is a reason why many good candidates for public feedback regulation are in the area of environmental law.(70)

4. Difficulty of defining and enforcing a command-and-control regulation. As discussed above,(71) there are often conceptual, institutional, or political obstacles to definition or enforcement of a command-and-control regulation. Public feedback regulation may be especially helpful where there is a desire to address a public policy problem, but no consensus on how an enforceable regulation could improve matters. Public feedback regulation can also supply information that can help form such a consensus.

5. Circumstances militating against public feedback regulation. Not surprisingly, public feedback is least appropriate where conditions are most favorable for command-and control regulation, the unregulated market, or direct disclosure to consumers. Command-and-control regulation is most attractive where its characteristic disadvantages are least important, such as when: it is conceptually and institutionally straightforward to define an enforceable rule; the uniform rule does not produce high and varying marginal compliance costs; discouragement of innovation is not a significant concern; and defining the rule does not strain the technical capabilities of regulators. Many criminal laws, for instance, readily fit these criteria.

Bitter experience has taught many analysts the unintended consequences that often result from regulation. This experience urges caution in regulating the market, as does the knowledge that rules are often far easier to enact than to repeal.(72) Assertions of a market failure thus deserve a healthy dose of skepticism, and comparison with the likely governmental failures in regulating.(73) In assessing the appropriateness of public feedback regulation, special attention should be paid to whether the unregulated market would generate much or all of the same useful information.

As a general matter, disclosure regulation is less likely appropriate for "experience goods," where consumers' experience with prior purchases affects their decision to make subsequent purchases.(74) Requirement of direct disclosure is relatively appropriate where the information is straightforward and readily understood by the consumer.(75) Public feedback regulation, by contrast, is more appropriate where the relevant information is not learned by experience and not readily learned by direct disclosure. Examples include where the government requires disclosure of an index of Firm-wide or industry-wide behavior, such as the airline on-time reports or HMDA data. [Suggestions for beefing up this paragraph would be appreciated.]

IV. Toward Leaming How to Govem in the Age of Computers, Telecommunications, and the Media.

[The thoughts in this Part are especially tentative, and will need much more work before appearing in the final paper.]

This concluding Part explores the ways that public feedback regulation can help understand the changing role of government in the age of computers, telecommunications, and the media. The most recent revolutions in communications follow a long pattern of remaking society. Innovations of the past fifteen years, for instance, will not match the printing press in their effects on society.(76) A core feature of current innovations, however, seems to be the distribution of power away from centralized institutions: the mainframe has given way to the personal computer; each home and office can be a modem-based part of cyberspace; and the three television networks have turned into dozens or hundreds of narrowcasting channels.

This distribution of information processing capability would seem to have at least the following effects on government: less hierarchy inside government agencies; less efficient command-and-control regulations on outside entities; less of a monopoly role for government in its traditional statistical and information processing functions; and a relatively greater role for indirect disclosure through public feedback regulation, rather than relying on direct disclosure by the seller.

The Weberian conception of bureaucracy, as a hierarchical enforcer of objective rules, was designed to govern geographically widespread actions in an era of slow travel and communications. The multi-tiered bureaucracy could hope to provide rational, uniform treatment throughout a large nation. Kenneth Culp Davis, as a later advocate for bureaucratic rules, emphasized their ability to restrain the discretion of unelected and powerful bureaucrats.(77)

However attractive these conceptions of bureaucracy used to be, they are less appealing today. Davis' call for more rulemaking has encountered the many critiques of command-and-control regulation, including the public choice suspicion that regulations often result from rent-seeking by interest groups.(78) Weber's idea of a hierarchical agency has given way to a belief in flatter institutional forms, recently espoused by David Osbome and Ted Gaebler in Reinventing Government:

Fifty years ago ... [t]here was plenty of time for information to flow up the chain of command and decisions to flow back down. But today information is virtually limitless, communication between remote locations is instantaneous, many public employees are well educated, and conditions change with blinding speed. There is no time to wait for information to go up the chain of command and decisions to come down.(79)

To promote timely response, Osborne and Gaebler would place more decision-making power in the hands of front-line government employees, who would be freed from internal agency limits on their actions.

A related implication is that agency limits on external actors are also less desirable over time. With advances in computers and the media, information is processed more swiftly, product cycles are shorter and a regulated entity in general can adapt more quickly to evade a command-and-control regulation.(80)

This swift adaptation by the regulated entity, however, is not matched by swiftness on the part of the regulators. Instead, the rising complexity of policy issues and interest group politics means that centralized promulgation of regulations usually takes longer than before.(81) Meanwhile, faster response by the regulated - to embarrassing information, threatened regulation, etc. -- is precisely what makes public feedback regulation effective. Public feedback regulation takes advantage of the hair-trigger reactions of publicity-sensitive organizations, (82) without imposing rigid requirements that quickly become outdated.(83)

With the widely distributed ability of the private sector to analyze information, government no longer has a monopoly, or even necessarily a comparative advantage, in the analysis of govemment-gathered information. The traditional model has been the Census or the Bureau of Labor Statistics, where government laboriously collected the data, and then had staff economists analyze the data in official government reports. Even for these functions, the private sector has created fierce competition for previously-governmental tasks. The Census, for instance, is replicated in significant part by private commercial databases.(84) Just as enforcement is decentralized through the citizen suit or public feedback regulation, so can government compilation of statistics be decentralized. Government's remaining comparative advantage is the ability to require entities by law to report information. Then, place it on the Internet,(85) and let those both inside and outside of government do the needed analysis.(86)

When government does require disclosure, the best form will often be the most familiar type, from seller to buyer. This Article contends, however, that an increasing share of useful disclosure will not primarily be that type, but will instead follow the indirect route of public feedback regulation. Here one might invoke the familiar metaphor of the "information superhighway." In previous periods disclosure went on a direct two-lane road from seller to buyer -- a narrow road that could easily be overloaded or blocked by various impediments.(87) Public feedback regulation requires information to flow a much longer distance: from the seller, to the government. to the various analysts and publicists, and then out to consumers or back to affect the seller. As information superhighways get built, together with smooth onand off-ramps, it becomes relatively more efficient to travel this longer path.


This Article has introduced the category of "public feedback regulation." It is "public" because information is made public, and the public at large plays a crucial role in analyzing and publicizing the information disclosed by the regulated entities. It is "feedback" in two ways -- public reaction to the disclosed information feeds back into later decisions by the regulated entity (Diagram 1); and, data from a public feedback regulation feed back into the process of deciding whether further government action is appropriate (Diagram 2). It is "regulation" in a more modest sense than traditional command-and-control regulation. Government adopts a manageable role that only government can play -- requiring the disclosure of information, in order to increase supply of a public good or reduce externalities.

The Article has explained how changes in computers, telecommunications, and the media are making public feedback regulation increasingly effective compared to the alternatives of command-and-control regulation or an unregulated market. In appropriate circumstances, public feedback regulation furthers efficiency and reinforces democratic values, by making relevant information available to the public. It can serve as a paradigm for governing in the era of cyberspace: information is not kept locked in government or corporate file drawers, but is instead downloaded for consideration by those affected by decisions.

Appendix 1: Current Examples of Public Feedback Regulation

1. Airline on-time arrival regulations. Discussed in text.

2. Airline baggage reputations. Similarly, airlines are required to report lost luggage.

3. Toxics Release Inventory. Discussed in text.

4. Home Mortizage Disclosure Act. Discussed in text.

5. Graduation rates of college athletes. Under a 1991 Act, colleges that give athletic scholarships are required to disclose a variety of information to applying students and the Department of Education, notably the graduation rate of student athletes and of all students. Separate reports are required for basketball, football, baseball, track, and aU other sports combined. The football and basketball graduation rates have been the subject of many media articles.

6. FCC rule on telephone outages. Since 1992, telephone conunon carriers must notify the Federal Communications Commission of any service outage affecting -at least 30,000 customers for 30 minutes or more. These notifications are avaflable to the public. Initial data suggests that outages have decreased significantly, probably because industry fears stricter additional regulation.

7. Car safety data. The Department of Transportation collects information from automakers about the rate-of accidents for each car model (FARS data). Although increasingly detailed information has been collected in recent years, DOT has not yet made the results easily available to the public.

8. Securities disclosure. Since 1933, public issuers of securities must disclose a wide variety of information to the Securities and Exchange Commission. Analysis here is primarfly performed by a special group of securities cxperts, rather than by the media or the other groups listed in Diagram 1. One reason for securities disclosure happening earlier than other public feedback regulation is the extraordinary profit available to successful securities analysts.

9. Corporate officer compensation. A more typical cxample of public feedback regulation in the securities area is required disclosure of top officers' compensation unusually high salaries may draw scrutiny Erom the public and shareholders, notably including activist groups such as CALPERS. This rule has been strengthened in recent years.

10. Corporate insider purchases and sales. The securities laws require disclosure by specified insiders of their purchases or sales of the firm's securities. This disclosure is required partly to assist in enforcement of insider trading laws, but also to have publicity deter undesirable behavior by insiders.

11. Campaign finance regulation. Candidates for federal office are required to disclose a variety of information about their contributors. One reason for the centrality of disclosure here is the existence of constitutional limits on many possible command-and-control regulations.

12. Disclosure of tar, nicotine, and carbon monoxide content of cigarettes. The Federal Trade Commission oversees testing of cigarette brands for their level of tar, nicotine, and carbon mono)dde. The results are disclosed directly to consumers, but FTC ratings have also been reported by the media and used in advertising by competitors. The FTC has recently discouraged use of the results in advertising, based in part on doubts that lower test results are correlated with safety.

Variations on Public Feedback Regglation: Uses of Publicity Where Disclosure is not from the Regulated Entity.

13. Community Reinvestment Act rating. Federal banking agencies rate insured banks and thrifts for compliance with the CRA's requirement of meeting local credit needs, especially for poorer neighborhoods. A low rating may result in criticism from community groups and embarrassing press coverage, as well as limited enforcement.

14. Deadbeat Parents. Although I do not know the details there are apparently new programs to publicize the names of parents who are delinquent on chfld support payments. Because there are often obstacles to legal enforcement against these parents, embarrassing publicity may be more effective.

Types of Public Feedback Regulation. The groupings here are my best estimate at this time. Experts on any given regime may differ.

1. Regulations aimed primarily at improving consumer market, by providing information that indirectly steers consumers to appropriate products: 1, 2, 6, 7, 8

2. Regulations aimed secondarily at improving consumer market, by providing information that indirectly steers consumers to appropriate products: 4, 5, 9, 10, 11, 12

3. Regulations not aimed primarily at consumer market, but rather at deterring socially undesirable behavior (i.e., deterring externalities): 3, 4, 5, 9, 11, 13, 14

4. Regulations aimed secondarily at deterring socially undesirable behavior. 6, 7, 10,

Appendix 2: Possible Future Uses of Public Feedback Regulation

Using public feedback regulation should depend on assessment of its costs and benerits in each situation. The suggestions here are simply intended as plausible instances where greater disclosure may correct for externalities or under-provision of public goods. I specifically do not endorse any of these suggestions at this time.

1. Greenhouse emissions: The Environmental Protection Agency is currently studying whether information could be generated through a public feedback regulation as a step toward understanding and reducing emissions of greenhouse gases such as carbon dioidde.

2. Environmental equity: In order to generate more data on the impact of locally undesirable land uses on persons of different wealth and race, those siting such facilities could be required to disclose information about the demographics of the surrounding area.- Such disclosure could readily occur at the local, state, or national level.

3. Non-Point source water Pollution: Although a great deal of progress has been made in reducing emissions from "point" sources of water pollution (such as factories), much less progress has been made on "non-point" sources, notably including pesticide and fertilizer runoff from farms. Information the Government already collects under the Federal Insecticide, Rodenticide, and Fungicide Act may be appropriate for public disclosure, perhaps aggregated in order not to intrude on the proprietary business concerns of farmers and manufacturers.

4. Extend the TRI, especially to federal facilities: Various proposals have been made to extend the Toxics Release Inventory. One particularly effective use of greater publicity may be to require federal facilities, including military bases and Department of Energy facilities, to make the same disclosure as private facilities. Federal facilities have been identified as major polluters in many communities. Outside of the TRI, there may be other information about federal facilities that deserve greater disclosure.

5. Insurance redlining: In the wake of the HMDA data, attention has turned to similar concerns that insurance companies may be uneconomically denying coverage based on race or neighborhood. Proposals are pending before Congress to require disclosure of geographic and other data.

6. Car safety data: Safety data on car models, already compiled by the Department of Transportation, could be made more readily available to the public to ensure greater feedback.

7. Other consumer safety information: Where significant safety-related concerns are not the subject of significant competition, public feedback regulation could require dissemination of important safety information.

8. Disclosure of television program content. Proposals are now circulating in Congress to have warning labels placed on violent television shows. It may be possible instead to create ratings of television programs, with the results disclosed publicly. To reduce constitutional objections, such ratings might be done by a non-governmental entity.

9. Medical outcome results. The Clinton Administration health plan would require substantial reporting by health providers of the outcomes for specified medical procedures. This information could embarrass the worst achievers, and be used to help health alliances choose among providers.


1. "Command-and-control" regulations are those that "require or proscribe specific conduct by regulated firms. 11 Richard Stewart, "Regulation, Innovation, and Administrative Law: A Conceptual Framework," 69 Calif. L. Rev. 1256, 1264 (1981).

2. Cyberspace refers to the increasingly interconnected computer and telecommunications networks, such as Internet and the many networks connected to Internet. The term was coined in William Gibson's award-winning science fiction novel, Necromancer (1984), and has since entered general circulation. E.g., Charles Trueheart, "The Writing on the Cyberspace Chalkboard", Wash. Post, Dec. 30, 1993, at Cl (defining cyberspace as "the ether of computer networks").

3. Before the regulation was passed, the airline reservation systems were programmed to suggest to the customer the airline with the shortest flight time to the destination. The FAA regulation worked to correct this strong incentive to list a deceptively short flight time. Even if actual flight times were not improved by the regulation (and some apparently were), having a reliable arrival time helps the consumer plan connections accurately. In recognition of the more accurate flight times, the standard time permitted between connections has been reduced from xx minutes to yy minutes. [check this last fact]

4. [cite]

5. G.A.0., "Toxic Chemicals: EPAIs Toxic Release Inventory is Useful But Can Be Improved", Rep. to Congress (June 1991), at 28.

6. [cite to CRA, CDB, and other reforms; insurance disclosure proposal]

7. This second feedback effect has also been a prominent result of the TRI. Data from the Inventory have led to significant statutory changes in the Clean Air Act Amendments of 1990 and the Pollution Prevention Act of 1991, and have led to calls by environmentalist for a "Right-to-Know More" Act that would expand the scope of disclosure.

8. Such citizen suits to require disclosure have been upheld for the TRI. [cite]

9. Carol M. Rose, "Rethinking Environmental Controls: Management Strategies for Common Resources," 1991 Duke L.J. 1, 38. Rose makes her statement after an examination of the shortcomings of various legally enforceable regimes.

10. Bruce Ackerman & Richard B. Stewart, "Reforming Environmental law: The Democratic Case for Market Incentives," 13 Colum. J. Envtl. L. 171 (1988).

11. Ackerman & Stewart, supra note __, at __.

12. Much media reporting about the TRI is in the form of "worst 1011 lists, nationally [cite Mother Jones] or by state (cites]. Media reporting about HMDA has similarly highlighted the banks with the biggest discrepancies in lending by race.

13. For one explanation of the rising marginal cost of compliance, see Robert V. Percival, et al., Environmental Regulation: Law, Science, and Policy 147-148 (1992).

14. To see the difference in marginal costs of compliance, compare public feedback regulation to a uniform requirement that each polluter reduce emissions by x%. Under that uniform requirement, the facilities near the technically feasible limit would be on a very expensive part of their cost curves, while the worst transgressors would be on less expensive parts.

15. [cite]

16. Ackerman & Stewart, supra note -, at 173-74.

17. For the widespread industry use of TQM, see [American Lawyer article, 1993]; see also [TQM book] (importance of being ahead of the curve, e.g. on new control and information technologies).

18. Ackerman & Stewart, supra note __, at 175

19. Id.

20. Id.

21. [Sunstein quote on engineering]

22. For instance, Alice Munnell, who at the time she lead-authored the key HMDA study was an economist at the Boston Federal Reserve Bank, was recently promoted to [give current job title].

23. [cites]

24. For instance, the Washington Post ran a front-page series on lending practices in the Washington, D.C. area, based predominantly on HMDA data. [cite]

25. [cite to increased number of specialized media, notably including on regulatory topics]

26. [cite to articles on "each node of the Internet as a media outlet"; describe the Negroponte switch]

27. The difficulties may similarly arise in defining the appropriate penalty. For instance, consider the public feedback regulation requiring colleges to disclose what percentage of their football and basketball players graduate within five years. one might easily define a violation as failure of a college to graduate a certain percent of such students. But what should be the penalty? The alternative to a complicated enforcement procedure, with pre-specified penalties, is the public pressure brought on colleges by disclosure of embarrassingly-low graduation figures.

28. The history of enforcement of Title VII suggests the complexities of finding an enforceable middle ground between racial quotas and no enforcement. See, e.g., (cite to a history of Title VII]. It would likely be quite expensive to extend the complicated shifting of presumptions in a Title VII suit to loanby-loan review for lending discrimination. Moreover, the denial of loans is most analogous to failure-to-hire suits under Title VII, which have been.much more difficult to bring successfully than wrongful discharge suits.. See John J. Donohue III & Peter Siegelman, "The Changing Nature of Employment Discrimination Litigation," 43 Stan. L. Rev. 983 (1991).

29. It appears that the bulk of the difference in lending among races occurs in the category of applicants who could plausibly either be extended or denied credit. The effects of discrimination occur when whites get loans on a disproportionate share of the "close calls." [cite to Lindsey); see also Peter P. Swire, "Safe Harbors and a Proposal to Reform the Community Reinvestment Act", _ Va. L. Rev. _ (1993) (arguing that use of Community Reinvestment Act, which also has public disclosure of banks' ratings, is a desirable supplement to enforcement of equal credit laws).

30. The Equal Credit opportunity Act of 1975 simply prohibits "discrimination" in lending, without defining the term further. Intentional discrimination would certainly be prohibited, but that is almost never possible to prove. one striking suggestion of the impact of public feedback regulation is the fact that the Justice Department did not bring its first ECOA action for a "pattern or practice" of discrimination until the year after HMDA data were first made public. See Justice Settles Discrimination Suit Against Atlanta Home Mortgage Lender, 59 Banking Rep. (BNA) 405 (Sept. 21, 1992). The Justice Department announced in 1993 that it intended to enforce the ECOA much more often, and was detailing xx lawyers to the area. [cite]

31. [cite to Sunstein republicanism articles]

32. Cass R. Sunstein, "Informing America: Risk, Disclosure, and the First Amendment," 20 Fla. St. U. L. Rev. 653, 657 (1993).

33. Sunstein, supra note _, at 657-58.

34. For instance, the initial TRI survey showed toxic emissions at much higher levels than expected. (cite Percival] Later legislation, such as stricter regulation of air emissions of toxics, was based on these reports from industry itself, rather than on less reliable, anecdotal evidence of high emissions. Similarly, rather than the debate being based on anecdotes, the HMDA study by the Boston Fed provided a solid empirical basis for reform

35. For instance, TRI data has often been used to list the worst polluters in each state, allowing the state political process to assess whether a regulatory or other response is desirable. Similar information would not ordinarily be generated in the course of a federal agency rulemaking.

36. See Howard Beales, et al., "The Efficient Regulation of Consumer Information," 24 J. L. & Econ. 491 (1981).

37. Greater "efficiency" here means approaching the outcome that would result if all relevant information was available to interest groups at zero cost.

38. A separate question is how an industry that has achieved some degree of "capture" would allow the public feedback regulation to be enacted. One answer is that the industry may have more influence in the regulatory agency than in Congress. When HMDA disclosure was enacted, for instance, the key actors in Congress were clearly more concerned about lending discrimination than were the bank regulatory agencies.

39. [cite to basic source on when criminal sanctions are appropriate -- insolvency of criminal, low risk of high-cost event, etc.]

40. Put another way, the inefficiencies of command-andcontrol regulation generally climb steeply as the regulation pushes the limits of technological and economic feasibility. See (Percival, marginal cost graph). The combined approach suggested here would use command-and-control for the clearly-feasible part of compliance, and public feedback regulation for the higher-cost part of compliance

41. A "pattern or practice of discrimination" is punishable under the Equal Credit Opportunity Act of 1974, but the first such enforcement action was not brought until 1992. See Peter P. Swire, "Safe Harbors and a Proposal to Improve the Community Reinvestment Act," 79 Va. L. Rev. 349, 368-69 (1993). For the TRI, facilities are required to list emissions that may be punishable under other environmental statutes, such as the Clean Water Act.

42. [cite Elliott Kentucky article]

43. E.g., [cite typical environmental statute]. Citizen suit statutes often also permit parties to sue the government, typically for an agency's failure to carry out a non-discretionary duty. E.g. [cite same statute]. Although such suits against the government have been useful in prompting agencies to meet statutory deadlines, they are not very relevant to the analysis of public feedback regulation, which focuses on the behavio of parties other than the enforcing agency. See, e.g. [cite to a deadline suit].

44. [cites to optimal enforcement literature]

45. See supra TAN __ (disadvantages of command-and-control approach).

46. E.g., Lujan v. National Wildlife Federation, 110 S.Ct. 3177 (1990) (restrictive definitions of "agency action" and "zone of interests" used to deny standing to challenge of agency program).

47. Lujan v. Defenders of Wildlife, 112 S.Ct. 2130 (1992) (requiring citizen showing of "injury in fact" and "redressability" in order to assure a "case or controversy") .

48. Id., at _ (over-broad citizen suit standing would "permit Congress to transfer from the President to the courts the Chief Executive's most important constitutional duty, to 'take Care that the Laws be faithfully executed-' Art. II, § 3.").

49. See Cass R. Sunstein, "Informing America: Risk, Disclosure, and the First Amendment," 20 Fla. St. U. L. Rev. 653, 655-58 (1993).

50. [cite Sunstein, Beale et al. etc,.]

51. My research thus far has identified only two very brief discussions of the category I am calling public feedback regulation. David Osborne & Ted Gaebler, Reinventing Government: How the Entrepreneurial Spirit is Transforming the Public Sector 293-94 (1992); Howard Beales, et al., "The Efficient Regulation of Consumer Regulation," 24 J. L. & Econ. 491, 512(?) (1981). Both discussions are consistent with the analysis here.

52. [cite to regs]

53. See Howard Beales, et al., "The Efficient Regulation of Consumer Information," 24 J. L. & Econ. 491, 501-09 (1981).

54. 54 Id. at 503; see also Steven Salop, "Information and Monopolistic Competition," 66 Am. Econ. Rev. 240 (1976).

55. Many schemes have both a direct disclosure and a public feedback component. For instance, smokers may directly compare government-certified tar and nicotine figures printed on cigarette packs; or, they may be informed about comparisons indirectly, from competitors or the media.

56. [cite to dispute between EPA and OMB on costs of TRI disclosure]

57. See, e.g. [cite Dwyer on "Symbolic Legislation").

58. For instance, the spreadsheet program Lotus 1-2-3 was not marketed until 198x (84?), and modem sales rose from xx in 1980 to xxx in 1992.

59. The most expensive part of the process will often be entering the data into the computer system.

60. Small businesses may deserve different regulatory treatment, in part because they may not have in place the required information technology and computer-literate personnel. Other reasons supporting a small-business exception are that their reports may not be statistically significant, and they will not usually be among the "worst" violators who receive the greatest scrutiny under public feedback regulation.

61. see Appendix I (public feedback regulation targeted at heavily-regulated industries).

62. Legislation has typically assigned greater priority to the protection of individual privacy, rather than proprietary business information. The Privacy Act of 1974, for instance, places a series of limits on the dissemination of information collected by the government, but applies only to individuals and not to corporations. [cite] Almost all current and contemplated examples of public feedback regulation apply to corporations and other organizations, but not to individuals. Greater attention to privacy issues is likely warranted in rules applying to individuals.

63. Richard A. Posner, The Right of Privacy, 12 Ga. L. Rev. 393, 399 (1978).

64. Anthony T. Kronman, "Mistake, Disclosure, Information, and the Law of Contracts", 7 J. L. S. 1 (1978); Richard A. Posner, The Right of Privacy, 12 Ga. L. Rev. 393 (1978).

65. Under the Freedom of Information Act (FOIA), agencies are not required to disclose "trade secrets and commercial and financial information obtained from a person and privileged or confidential." 5 U.S.C. § 552(b)(4). See, e.g., Braintree Electric Light Dept. v. Dept. of Energy, 494 F. Supp. 287 (D.D.C. 1980) (applying (b)(4) exemption to business information that was costly to generate); see generally James T. O'Reilly, I Federal Information Disclosure ch. 14 (1990) (analyzing law applying to (b)(4) exemption). FOIA may require public feedback regulation of proprietary business information either to be mandated by statute or adopted by an agency pursuant to an existing valid authority to disclose confidential data. Chrysler Corp. v. Brown, 99 S.Ct. 1705, 1724-26 (1979).

66. For instance, the homeowner insurance industry has complained that proposed anti-redlining legislation would reveal proprietary marketing information, by showing competitors the geographic distribution of their sales. Aggregating information to include sales by the entire industry would meet the publicpolicy goal of finding out whether redlining is occurring industry-wide, although it would not allow pressure by the media and activist groups on particular companies with the worst record.

67. [cite to act]

68. Any benefits of these reporting requirements seem likely to arise from the company's own process of creating a pollution prevention plan. In the course of drafting the plan, the company may learn of pollution prevention opportunities, and personnel within the company may become advocates for seizing those opportunities. Similar to environmental impact statements, the plans may thus have their greatest effect within the organization that must draft the plan. [cite to EIS source.] A better signal may come from a related aspect of the Pollution Prevention Act, which requires companies to include estimates of the amount of source reduction the company expects to achieve within two years. Failure to meet those numerical goals may be a stronger source of public feedback.

69. The least likely part to be automated is probably the initial entry of data into a computer system. For some toxins, for instance, it may be costly to do a chemical sample for each TRI report. By contrast, because so much information is already computerized for a mortgage applicant, adding the race of the applicant is likely very low-cost, merely one more field in a database.

70. See Appendices I and II (listing environmental examples); see also [cite to central role of uncertainty in environmental law].

71. See supra TAN __.

72. [cite Calabresi]

73. This now-familiar point is made by [cite 1 or 2 examples].

74. 74 A similar advantage for the unregulated market may exist where the purchase depends largely on a seller's disclosure of the desirable qualities of their own products, rather than on a comparison to undisclosed aspects of a competitor's products. For instance, Domino's Pizza now-abandoned guarantee of 30-minute delivery relied on disclosure only by Domino's, and not on disclosure of average delivery time by competitors. Regulatory attention might thus be focused on situations where important information relevant to comparison shopping is not disclosed, such as when there is little competition on safety for a physically risky product.

75. [cites to information processing limits on direct disclosure]

76. [cite source on impact of printing press -- the Reformation, etc.]

77. Kenneth Culp Davis, Discretionary Justice 219 (1969).

78. Public feedback regulation addresses Davis' concern about discretionary power by publicizing information relevant to government action. Greater publicity, rather than detailed rules, can curb abuses of official power.

79. David Osborne & Ted Gaebler, Reinventing Government: How the Entrepreneurial Spirit is Transforming the Public Sector 250 (1992)

80. This phenomena has been often noted in the regulation of financial services, where stable separation into securities firms, commercial banks, thrifts, insurance companies, etc. has given way to rapid and continuing interpenetration of each industry's traditional markets. Regulators have been hard put to keep up with the rapid changes in the markets. See, e.g., Peter P. Swire, "Good Old Days Disappear in Banking Regulation, 11 Va. L. Rept., Summer 1991, at 21.

81. [cite Schuck article on complexity]

82. [The next draft may explore in more detail reasons why private corporations are increasingly sensitive to publicity. One reason is that a surge of negative publicity can swamp a company's long-run -efforts to create a good image for its products. For instance, consider how quickly Tylenol switched to tamper-proof bottles after media reports of product tampering. Existing government regulation may also encourage a company to avoid a bad image. MacDonalds has recently abandoned foam clamshells, switched its bags to recycled paper, and taken other environmentally conscious actions, in part perhaps due to the need to win local zoning fights despite potential opposition from anti-development, environmentally-aware local groups. My thanks to Saul Levmore for analysis of the MacDonalds example.]

83. Public feedback thus avoids an important disadvantage of command-and-control, which is the steady accretion of binding rules over time. As Guido Calabresi has discussed, it is far easier to pass a law than to repeal one. Guido Calabresi, Common Law Courts in the Age of Statutes (198x). Shifting toward disclosure regulation reduces the costs of complying with out-ofdate rules, especially where companies have learned to make the disclosure at very low annual cost, with automatic procedures.

84. see, e.g., Jim Bessen, "Riding the Marketing Information Wave," Harv. Bus. Rev. Sept.-Oct. 1993, at 150 (describing enormous range of privately-generated information about consumers).

85. As recommended in the National Performance Review, headed by Vice-President Gore, many government agencies are beginning to put a larger share of their data and reports onto the Internet. E.g. [cite to media stories about free copies of Clinton Health Plan immediately available on Internet, compared to costly GPO copies that sold out].

86. This government disclosure may need to be limited by the Privacy Act, privacy-related provisions of the Freedom of Information Act, and concerns that the quality of disclosure to government would suffer if the information were more broadly disseminated.

87. E.g. [cite to Sunstein or elsewhere on cognitive overload and other limitations of direct disclosure].


Discussion:   The regulated entity discloses information as required by the public feedback regulation.  The information is assembled by the government data is disclosed to the public, which analyzes and publicizes information about the regulated entity.  In response to this publicity, the regulated entity may change its behavior.