The Transparency Policy Project

Archon Fung, Mary Graham, and David 

Weil are co-authors of Full Disclosure: 

The Perils and Promise of Transparency.

Archon Fung is associate professor of 

public policy at the Kennedy School 

of Government, Mary Graham is a 

Taubman Center research fellow, and 

David Weil is professor of fi nance and 

economics at Boston University’s School 

of Management and a Taubman Center 

visiting fellow. Together they direct the 

Taubman Center’s Transparency Project. 

Elena Fagotto is a Taubman Center senior 

research associate. 

A. Alfred Taubman Center for 

State and Local Government

The Taubman Center and its affi liated 

institutes and programs are the 

Kennedy School of Government’s focal 

point for activities that address urban 

policy, state and local governance, and 

intergovernmental relations. 

Taubman Center Policy Briefs are short 

overviews of new and notable research 

on these issues by scholars affi liated 

with the Center. 

© 2007 by the President and Fellows of 

Harvard College. The contents refl ect the 

views of the authors (who are responsible 

for the facts and accuracy of the material 

herein) and do not represent the offi cial 

views or policies of the Taubman Center 

for State and Local Government.

A. Alfred Taubman Center for State 

and Local Government

John F. Kennedy School of Government, 

79 JFK St., Cambridge, MA 02138

Telephone: (617) 495-2199 

Email: taubman@ksg.harvard.edu

www.ksg.harvard.edu/taubmancenter

TAUBMAN CENTER

POLICY BRIEFS

PB-2007-1 | May 2007

Transparency Policies: 

Two Possible Futures

By Archon Fung, Mary Graham, David Weil,and Elena Fagotto, Transparency Policy Project

Nutritional labeling, hospital safety 

rankings, restaurant hygiene grades, 

and workplace hazards disclosure 

provide a few examples of an 

important innovation in social policy 

that has often germinated in state 

and local experiments. Long a pillar 

of fi nancial policy, transparency 

requirements have recently taken 

a legitimate place beside standardsetting and fi nancial incentives as 

a means of promoting other public 

priorities – everything from improving 

the safety of restaurant food and 

workplaces to reducing deaths from 

cancer and heart disease. 

However, the story of transparency as 

public policy is often one of missed 

opportunity. If some of the information 

that the public needs remains hidden 

or distorted due to politics or poor 

planning, legislative requirements that 

place standardized information about 

risks and public service fl aws in the 

public domain can cause more harm 

than good. 

We are drowning in information. Yet 

millions of dollars of savings are lost 

and hundreds of thousands of needless 

deaths, injuries or illnesses occur 

each year when needed, knowable 

facts remain hidden from public view 

because of transparency policies that 

don’t work well. Without information 

needed for informed choices, people 

check into hospitals with bad safety 

records, drink tap water that is 

contaminated, mishandle workplace 

chemicals they don’t realize are 

dangerous, eat at restaurants with 

substandard hygiene standards in the 

kitchen, and travel to places where 

unreported and deadly infectious 

diseases threaten their health. 

One problem is that political 

dynamics can produce gerrymandered 

transparency such as nutritional 

labeling with exceptions carved out 

for fast-food stores and restaurants 

or toxic pollution reporting with 

exceptions carved out for requirements 

that exempt neighborhood businesses 

that release some of the most 

dangerous toxins. In the United States, 

a nation that rightly prides itself on 

openness, the politics of secrecy 

often prevail even in laws designed to 

provide the public with information 

about serious health and safety risks.

Failed transparency can also result 

from poor planning or execution such 

as drinking water quality reports that 

fail to provide comparable measures 

or lack of enforcement that leaves the 

accuracy of toxic pollution reports in 

doubt. 

When transparency fails, the 

consequences can be serious. 
TAUBMAN CENTER POLICY BRIEFS

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Companies, school systems, health 

care providers, and other organizations 

spend millions of dollars compiling and 

disseminating information that is useless, out 

of date, or unintelligible. Failed transparency 

also undermines trust in public and private 

institutions. City dwellers who learn to 

disregard government alerts may fail to 

heed accurate warnings about the next terrorist 

attack. Patients who are uncertain about the 

risk of medical errors may wait too long to 

check in to the hospital. More needless 

losses result.

But another future is possible. Transparency 

policies could be dramatically improved by 

shining light on the politics of disclosure 

policies, by better understanding of how users 

make decisions, and by leveraging advances 

in information technology to improve our 

most important public information systems. 

Intermediaries could help too. Private and 

public groups could further improve the 

performance of transparency systems by 

assisting consumers, workers, and citizens. 

They could act as their agents where 

appropriate in interpreting the data provided. 

They could also push for improvements in the 

quality of information in political arenas. In 

time, growing public awareness of the promise 

and pitfalls of such policies could create new 

vigilance and political dynamics that favor 

robust transparency. 

In today’s complex world, transparency 

policies could become a powerful tool 

for informing choices that in turn lead to 

improvements in products and practices. But 

this requires policy makers, information users, 

and disclosing companies to choose a different 

path for many established and future policies. 

Much depends on understanding the types of 

policy problems that legislated transparency 

can and cannot address and on understanding 

the design features that are critical for the 

success of such policies. 

When can transparency be eff ective social 

policy?

Our research suggests that transparency 

policies work best when six characteristics 

mark the underlying problem that policy 

makers aim to address:

• A bridgeable information gap 

contributes substantially to public 

risks or service failures. Clarity about 

the nature of the information gap, 

its relationship to the problem to be 

addressed, and how to fi ll the gap helps 

to increase the chances that transparency 

policies will succeed. No amount of 

information could prevent an asteroid 

collision with the earth, at least at today’s 

state of knowledge. But telling shoppers 

which muffi ns contain trans fats creates 

an opportunity to reduce deaths from 

heart disease and telling patients which 

hospitals feature large numbers of deaths 

and injuries from medical mistakes creates 

an opportunity to save lives. 

• The policy problem lends itself to 

measurement. Transparency is unlikely 

to work if people disagree about how 

to measure improvement. Parents, 

teachers, government offi cials, and 

students do not yet agree about 

appropriate metrics of public school 

performance (test scores versus more 

complex measures, for example). Lack 

of consensus about metrics impairs the 

credibility of transparency.

• Communication is practical. Some 

problems are simply too complex or 

multi-faceted for public communication 

The story of transparency as 

public policy is often one of 

missed opportunity.

Transparency Policies: Two Possible Futures
TAUBMAN CENTER POLICY BRIEFS

3

of risks or performance problems to be 

practical. Toxic pollution reporting still 

lacks a simple metric that incorporates 

toxicity levels and exposure, important 

factors for assessing risk. By contrast, 5-

star rollover ratings for new cars build in 

complex probabilities in a credible way. 

• Information users have the will, 

capacity, and cognitive tools to 

improve their choices. Information 

that consumers or citizens do not value 

or misvalue is not a good candidate for 

transparency. Cities could publicize 

locations of pedestrian injuries in 

jaywalking accidents but lifelong 

jaywalkers would probably ignore the 

data. Governments’ reports of infectious 

diseases or terrorist threats may produce 

over-reactions as individuals and 

organizations systematically exaggerate 

catastrophic risks. 

• Information disclosers can feasibly 

reduce risks or improve performance.

Transparency policies are unlikely 

to work when corporations or other 

disclosing organizations are unable to 

improve their practices. Car designers 

are often locked in to two to three year 

design cycles. Small businesses may lack 

the resources to reduce toxic pollution. 

• Variable results are acceptable. Finally, 

transparency policies are appropriate 

only when it is acceptable to reduce risks 

or improve services for some people but 

not others. Congress might have required 

labeling of lead levels in gas, giving gasstation managers and drivers a purchase 

choice. Instead, legislators imposed 

a national ban on leaded gasoline 

because they concluded that leaving 

some communities subject to more lead 

exposure than others was unacceptable, 

since lead can cause serious neurological 

damage in children.

10 Principles for Crafting Eff ective 

Transparency Policies

Even in circumstances where transparency 

policies are feasible, policies must be 

carefully crafted with a clear understanding 

of the needs and limitations of their many 

audiences. Once launched, they also require 

enforcement and frequent tune-ups. We suggest 

here ten principles for the design of effective 

transparency policies.

1. Provide information that is easy for 

citizens to use. The most important 

condition for transparency effectiveness is 

that new information becomes embedded 

in the decision routines of information 

users. Therefore, once transparency is 

chosen as a promising way to address a 

policy problem, designers must start by 

understanding how diverse groups of 

customers, employees, voters, or other 

intended users make decisions. Designers 

can then tailor transparency systems to 

provide new facts at the time, in the place, 

and in the format that are most convenient 

for most people. 

2. Strengthen user groups. Transparency 

systems are likely to be more sustainable 

when advocacy groups, analysts, 

entrepreneurial politicians, or other 

representatives of user interests have 

incentives to maintain and improve them. 

Institutional investors, stock exchanges, 

stock analysts, and other organizations 

have formal roles in maintaining the 

corporate integrity of the fi nancial 

disclosure system, for example. Labor 

unions and other workplace-based 

organizations like health and safety 

committees have a role in interpreting 

and disseminating information on 

workplace risks. Transparency systems 

can also create watchdog roles for user 

groups. The Community Reinvestment 

Act, for example, provides incentives 

Transparency Policies: Two Possible Futures
TAUBMAN CENTER POLICY BRIEFS

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for community groups to monitor and 

improve banks’ mortgage lending 

disclosures. 

3. Help disclosers understand users’ 

changed choices. Transparency policies 

fail if companies are unable to discern 

customers’ changed choices and the 

reasons for those changes from the noise. 

Advances in information technology 

are rapidly improving company 

executives’ capacities to track customer, 

employer, investor, or voter responses. 

Requirements that chief executives certify 

the accuracy of reported data (included in 

Sarbanes-Oxley accounting reforms and 

toxic chemical reporting, for example) 

increase the likelihood that executives 

will track their impact. 

4. Design for discloser benefi ts. When 

some disclosers perceive benefi ts from 

improved transparency, systems are 

more likely to prove sustainable. Policy 

makers should therefore seek to generate 

information that amplifi es economic, 

political, and regulatory incentives in 

disclosers’ environments. Companies and 

other disclosing organizations may seek 

to improve disclosure for competitive 

reasons (for example, to raise entry 

barriers for other fi rms), to ward off more 

stringent federal regulation, to avoid the 

headaches that come with variable state 

disclosure requirements, or to reduce 

reputational risks. Thus, food companies 

aimed to avoid a patchwork of state 

actions and to gain profi ts from healthier 

products when they supported nutritional 

labeling requirements in 1990. 

5. Design metrics for accuracy and 

comparability. Corporate accounting 

standards, restaurant hygiene grades, 

and nutritional labeling succeed in 

part because they feature metrics that 

are reasonably well matched to policy 

objectives and allow users to easily 

compare products or services. Policies 

for disclosure of workplace hazards and 

drinking water contaminants, by contrast, 

use confusing metrics that skew incentives 

for behavior change and fail to provide 

comparable results.

6. Design for comprehension. Policies 

are more effective if they match 

information content and formats to users’ 

levels of attention and comprehension. 

If information users are likely to be 

rushed, simple distinctions, grades, stars, 

bar, or pie charts, or other relatively 

straightforward metrics – with back-up 

facts available – may work well. Web 

sites can provide quick answers while 

also allowing more interested users 

to delve further into the facts. Policy 

makers can draw on research insights 

concerning cognitive distortions to 

design transparency systems that build 

in probabilities, limit information search 

costs, and minimize the impact of other 

cognitive problems.

7. Incorporate analysis and feedback.

Transparency systems can grow rigid 

with age, resulting in a tyranny of 

outdated benchmarks. Generously funded 

requirements for periodic analysis, 

feedback, and policy revision can help 

keep such systems supple and promote 

adaptation to changing circumstances. For 

example, in recommending a disclosure 

system for medical errors, the Institute of 

Transparency Policies: Two Possible Futures

The success of transparency 

depends on understanding 

the types of problems that can 

and cannot be successfully 

addressed through information 

disclosure.
TAUBMAN CENTER POLICY BRIEFS

5

Medicine also recommended a new and 

well-funded federal Center for Patient 

Safety to initiate and coordinate research 

and to continuously assess the disclosure 

system and adjust it accordingly. 

8. Impose sanctions. Corporations and 

other organizations usually have many 

reasons to minimize or distort required 

disclosure. Organizations naturally resist 

revealing information about public risks 

they create or fl aws in services they 

provide, or seek to place that information 

in the most favorable light. Information 

can be costly to produce and even more 

costly in reputational damage. As a result, 

substantial fi nes or other penalties for 

non-reporting and misreporting are an 

essential element of successful systems. 

9. Strengthen enforcement. Sanctions are 

not enough, however. Legal penalties 

must be accompanied by rigorous 

enforcement to raise the costs of not 

disclosing or disclosing inaccurately. The 

fact that there is thus far no systematic 

mechanism for auditing toxic pollution 

data provided by companies means that 

no one knows for sure how accurate or 

complete that data is. Some systems 

include provisions for institutional 

watchdogs. The confessed crimes of 

lobbyist Jack Abramoff in 2006 led to 

proposals in Congress for the creation 

of an audit board for campaign fi nance 

disclosures, for example. And some 

create watchdogs to watch the watchdogs. 

Recent accounting reforms created a 

public oversight board to monitor the 

practices of accounting fi rms. 

10. Leverage other regulatory systems.

When transparency by itself is insuffi cient 

to generate effective outcomes, 

transparency can be designed to work in 

tandem with other government policies. 

Los Angeles County’s restaurant hygiene 

Transparency Policies: Two Possible Futures

grading would not work without a 

health inspection system that provides 

the basis for letter grades. Mortgage 

lending reporting generates information 

that allows community organizations 

to identify discrimination practices 

by local banks, while the Community 

Reinvestment Act powerfully embeds 

that information into the strategies of 

users and disclosers. As noted above, 

this suggests that transparency should 

be considered a complement and not a 

replacement for other forms of public 

intervention. 

The Road Ahead

The future of public transparency remains 

uncertain. Political controversies about specifi c 

transparency policies fi ll the news. Some 

recent developments suggest that a constructive 

learning process is underway. But resistance 

to change in other critical systems suggests 

continuing failure. 

Spirited debate continues over how to improve 

corporate fi nancial disclosure in the wake of 

accounting scandals, including battles over the 

reporting of stock options, special entities, and 

executive pay, and their impact. The European 

Union has required its 25 member nations 

to adopt a single set of corporate fi nancial 

reporting standards even as doubts persist about 

whether those nations have the capacity to 

implement the edict. 

Food labeling issues remain contentious. 

Democrats in the U.S. Congress led a long 

Even though transparency 

policies use the power of private 

choices to achieve public 

objectives, they still require 

vigorous enforcement and real 

sanctions to be eff ective.
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At their best, public transparency represents a 

promising form of information-age governance. 

However, the benefi ts of transparency are 

not automatic. Transparency is likely to work 

best when it is part of a disciplined process 

that sets priorities, assesses probable impacts 

of alternative or complementary government 

measures, and minimizes unintended 

consequences by generating feedback, analysis, 

and system improvement over time. 

Whether the broad innovation of legislated 

transparency increases trust in public and 

private institutions or erodes that trust will 

depend on both greater understanding of how 

transparency really works and the political will 

to translate that understanding into action.

RELATED PUBLICATIONS

“Full Disclosure: The Promise and Perils of 

Transparency,” 

By Archon Fung, Mary Graham, and David Weil, 

(Cambridge, UK: Cambridge University Press, 

2007) 

and ultimately successful fi ght to clarify 

labeling of allergens like peanuts and shellfi sh 

on packaged foods after reports of several 

consumer deaths. A 20-year struggle to include 

harmful trans fats on nutritional labels ended 

with a new disclosure rule effective in 2007. 

In 2005, federal regulators concluded an 

acrimonious debate about how to more 

accurately report auto fuel economy with a new 

system that was expected to reduce previous 

ratings by as much as 20 percent. 

On the other side of the ledger, a hard-tounderstand color-coded terrorist threat 

warning system is generally ignored by the 

American public. 

Even as national concern grew about the 

public health risks from obesity, Congress has 

buried proposals to require fast-food stores and 

restaurants to report on calories and nutrients. 

In 2006, the Bush administration proposed 

back-tracking on toxic chemical disclosure by 

reducing the scope and frequency of reporting 

for some fi rms. 

Inadequate and late reporting contributed to 

more than 700 deaths from the SARS epidemic 

and pointed to the failure of the international 

infectious disease surveillance system. 

The system of chemical hazard reporting in 

the workplace continues to provide highly 

detailed, technical, and therefore largely 

incomprehensible data about health risks to 

the millions of workers the system is designed 

to protect.

As a nation, we continue to test the proposition 

that government can legislate transparency 

to reduce risks and improve public services. 

Effective transparency is far from assured 

in our public policies and institutions. 

Transparency systems always begin as 

imperfect compromises and must improve to 

keep pace with changing markets, advancing 

science and technology, and new political 

priorities. 

Transparency Policies: Two Possible Futures

Transparency systems 

always begin as imperfect 

compromises and must be 

adapted to keep pace with 

changing markets, technology, 

and political priorities.