The John M. Olin Center

Paper Abstract

Untitled Document

34. Laurence Tai, Transparency and Power in Rulemaking; formerly "Transparency in Industrial Regulation", 7/2010.

Abstract: This paper develops a model analyzing the impact of information transparency in administrative rulemaking. The key items of information are the regulated party's communication and the agent's signal based on that communication. Information disclosure not only allows the principal to observe the information, but it may also increase her power in the decision, measured by the probability that she can to select the final policy. A key result is that, even without mandating any disclosures, the principal can have the same knowledge as the agent does about what level of regulation would be optimal. Instead of increasing knowledge, transparency primarily benefits the principal when it increases her power through the disclosures. However, it may also discourage the regulated party or agent from generating information in the first place. There are empirical implications to determine the model's applicability and institutional design implications to the extent it is applicable.