Time to Re-Think "Full Disclosure" Mandates

The Financial Accounting Standards Board is proposing that, in the interests of “full disclosure,” companies should have to announce “the existence of studies in reputable scientific journals . .

. that indicate potential significant hazards related to the entity’s products or operations.” So, in addition to being sued by the plaintiffs bar, a company and its executives will be sued by the SEC--or maybe prosecuted by a U.S. Attorney--for not having discovered and publicized the existence of a borderline amount of metal or carcinogen in their goods. There is a phenomenon at work here and elsewhere that deserves a name: It is a step-by-step process that purports to aim at the market’s perfection but in fact aims at its destruction, and of course it is possible only because people accept mistaken ideas about what tends to perfection, for example, full disclosure. My own belief is that the market would be a far safer place if companies disclosed much, much less public information--but permitted insider trading.

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