Front Page Titles (by Subject) The Costs of Regulating Market Information - Literature of Liberty, July/September 1979, vol. 2, No. 3
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The Costs of Regulating Market Information - Leonard P. Liggio, Literature of Liberty, July/September 1979, vol. 2, No. 3 
Literature of Liberty: A Review of Contemporary Liberal Thought was published first by the Cato Institute (1978-1979) and later by the Institute for Humane Studies (1980-1982) under the editorial direction of Leonard P. Liggio.
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The Costs of Regulating Market Information
“An Appraisal of the Costs and Benefits of Government-Required Disclosure: SEC and FTC Requirements.” Law and Contemporary Problems 41 (Summer 1977): 30–62.
Expanded government-required disclosure of information by business is a legacy of the New Deal. More extensive mandatory disclosure gave the promise of less fraud on investors, better administration in the reporting corporations, more equitable and efficient capital markets, a more efficient allocation of resources, and greater governmental ability to manage the economy. While it is virtually an article of faith in many circles that government-required disclosure is a good thing, it could be that the costs of the SEC and FTC reporting requirements outweigh their benefits. Benston's investigations reveal not only that the cost of providing the required data is quite substantial, but also that the benefits to investors from the data are rather meager.
The Securities Act of 1933 and the Security Exchange Act of 1934 pioneered mandatory disclosure in the securities field. These and subsequent disclosure acts were intended to reduce fraud and inadvertent misrepresentation; reduce security price manipulation made possible through inadequate disclosure; enhance fairness to non-insiders; enhance public confidence in the securities market; increase the efficiency of making securities investments; and provide a greater flow and range of information to investors. Were mandated disclosures successful? “Little, if any, evidence supports the belief that these possible benefits have been achieved. Nor is there much, if any, evidence that is consistent with the claim that the Acts addressed a real problem. Furthermore, reason does not support the belief that the benefits claimed can be achieved or are indeed benefits.”
The FTC requires extensive reporting through its line-of-business report program. Under this program, certain businesses are required to collect and disclose detailed data on shipments, sales, advertising, profits, investments, and assets. The benefits claimed for the program range from improved anti-trust enforcement to enhancing labor's position in wage negotiations. Yet again, the promised benefits of disclosure turn out, upon investigation, to be little more than pious hopes. The FTC line-of-business categories for reporting do not represent a meaningful aggregation of data, and thus cannot realize the purported goals of FTC-required disclosure.
In light of this, why is government disclosure supported despite its cost and its failure to provide benefits? The answer, in part, lies in the public's apparent belief that government regulation of disclosure is beneficial and necessary. Another part of the answer is gained by asking who benefits from government mandated disclosure. The truth is that groups ranging from bureaucrats to financial analysts have a substantial interest in required disclosure. Nevertheless, if evidence can alter beliefs, there is hope for ending the counter-productive disclosure measures that are in large part a legacy of the New Deal.