Download Information and Political Processes

Information
and Political Processes
Joseph E. Stiglitz
September 3, 2004
American Political Science Association
Chicago, 2004
Overview – Information
and Political Processes
Lessons from Information and
Economic Analysis
 The Uses of Secrecy
 The Uses of Privacy
 The Citizen’s Right to Know
 Information and Policy
 Concluding Remarks

I. Lessons from Information
and Economic Analysis (1/2)
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Models with perfect information provided
poor guidance for economies with
imperfect information
Every one of central theorems of
economics was overturned
Brought new understanding to economic
phenomena that were hard to understand
otherwise
I. Lessons from Information
and Economic Analysis (2/2)

Focus on:
need for delegation
 nature of agency relationships, i.e. the
challenges of designing incentives and
control systems, as well as screening
 incentives for secrecy, disclosure
 impact of information on economic
relationships

The Uses of Secrecy

(1/4)
Economics: incentives not only to discover and
reveal information, but also to hide information

To hide failures, incompetence:
limiting ability to screen

Economics: incentives to limit competition, e.g.
in market for take-overs (Edlin and Stiglitz)

Politics: incentives to limit contestability of
ideas:
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“Trust us,” we have information, we can’t reveal it
Moynihan — Secrecy shaped the Cold War
WMD
The Uses of Secrecy

(2/4)
Agency problems: Principle controls agent not only
through incentive structures on output, but also through
inputs, and through constraints on processes, on activities
of the agent, etc:
 disclosure can limit extent of conflict of interests
(ensuring compatible incentives, heightened
safeguards)
• Politics: disclosure of membership in Task Forces
• Controversy over Health Care Task Force, Cheney Energy
Task Force

Processes as control devices
• Open proceedings ensure that they are complied with
• Secrecy gives opportunity to hide failure
The Uses of Secrecy

(3/4)
Agency problems (ctd.):

Need to go beyond disclosure:
to restrict potential and actual conflicts of interest
• Accounting
• Politics: revolving doors
• Not without cost:
 Some may not take up a job because it raises costs of
government service
 Some may not take up a job because it reduces benefits of
government service
 Clinton tightening, then loosening standards worst of both
worlds:
ex ante discouraging some to join, then ex post, giving them
freedom
• Controversy over IMF revolving doors
The Uses of Secrecy

(4/4)
Rent-seeking: artificially created secrecy, like any other
artificially created scarcity, gives rise to rents
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Information has value
In some societies, information is directly sold
In America, it is “exchanged”
In media: “leak” in exchange for “good coverage”
• Consequence may even be worse
 Distorted information
 Cover-up
 Distorted policy decisions
• Nash equilibrium — hard for media to resist
The Uses of Privacy

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Lack of information restricts government’s ability
to do certain things
Effective instrument for enforcing constraints on
government, given limitations on other
constraints


Cannot impose progressive taxation if the government
does not know total income
Right to privacy sometimes thought of as a right
in its own, but is also important instrument in
restricting government’s intrusion
The Citizen’s Right to Know

Follows from view of government as working
for individuals
Like employer’s right to know what employee is doing,
at least on company time
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Long history — 200 years in Sweden
in U.S.: Freedom of Information Act
Not without cost: shapes record-keeping, even
discussion
Limited exceptions:

But even in national security, cost was high:
Moynihan claims increased length and cost of Cold War
Information and Policy

Policy shaped around beliefs, beliefs are affected by
information
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(1/3)
Keeping statistics on inequality, poverty
Reclassifying McDonald’s as a manufacturing job
Consequences of going to chain-weighted GDP, new
unemployment measures
Beyond question of freedom of information act —
presenting information in way that it can be understood
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Participatory budgeting
Gender budgeting
Green GDP
GDP vs. GNP
Measuring liabilities, not assets
Use of accounting frameworks to force privatizations,
discourage land reform
Information and Policy
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But fear of information provides impediment of
change
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(2/3)
Making size of subsidies more apparent (e.g. in
electricity) may make them untenable—partial
explanation of persistence of seemingly Pareto
inefficient policy
And fear of information that might force change
provides drive for secrecy

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IMF response to open discussion of consequences
of its policy in East Asia crisis
Belief on other side that “if only there were an open
discussion, policy would have to change” provides
impetus for demand for discussion
Information and Policy
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Lobbying is often viewed as the provision of information
about consequences of policy, often more accurately
provision of arguments to be used in deliberative process
and information about who feels strongly about issue and
how much they will pay
Disclosure of information about lobbying and campaign
contributions is an example of disclosure of information of
information about potential conflicts of interest, does have
some effect
Dangers of media concentration — restricts flow of
information and therefore shapes political processes
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(3/3)
Russia, Italy, …
Power of independent press can be important —
Sen and impact on famines
Concluding Remarks (1/3)
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Democracy goes beyond electoral democracy to
deliberative and participatory democracy
The issues I have talked about are of intensive academic
importance, in thinking about how we shape our
democratic institutions and processes to ensure that they
reflect better the broader will of the citizens.
Today: areas of intense concern as we enter into a
momentous election years:
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National interests require balancing concerns over
secrecy/openness/privacy
Presumption should be citizens’ right to know,
citizens’ right to privacy
Limited exceptions
It is in times of crisis that our values are most threatened,
and most tested
Concluding Remarks (2/3)
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This Administration
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has seemingly failed even to understand
what is at issue
In doing so it has undermined our democracy
It has enshrouded itself in secrecy, as in energy policy,
when there is no benefit except to the special interests
whose interests it seeks to protect
It has violated principles of citizen privacy, to facilitate
the intrusion of the state into the private affairs of
individuals
It has condoned a concentration of media that would
undermine the ability of citizens to obtain a diversity of
views
It has used secrecy to abuse the fundamental civil
rights of individuals
Concluding Remarks (3/3)
We need to remember that when the rights of
any person are abused, the rights of all of
us are abused.
It is only through social solidarity that we can
maintain our basic civil and human rights.