draft: Thaler & Sunstein WSJ Op-Ed, "Disclosure Is the Best Kind Of Credit Regulation"

OPINION | AUGUST 13, 2008

Disclosure Is the Best Kind Of Credit Regulation

By RICHARD H. THALER and CASS R. SUNSTEIN

http://online.wsj.com/article/SB121858695060335079.html

This appeared in the WSJ Op-Ed section three months ago (mid Aug). The authors are Richard Thaler and Cass

Sunstein.  Both are very highly regarded academic researchers, and both have ties to Barack Obama's economic thinking and policy.  

Thaler, an econ prof at the Univ of Chicago, is one of the founders of the field of behavioral economics, and is sometimes mentioned as a possible Nobel Prize winner (http://en.wikipedia.org/wiki/Richard_Thaler).  Sunstein was for many years a law prof at the UofC--and hence a colleague (in fact a mentor to) Obama during Barack's tenure as a lecturer in the UofC law school.  Thaler and Sunstein recently published a semi-popular exposition of their work ("Nudge: Improving Decisions about Health, Wealth, and Happiness").  Unfort for the UofC, Sunstein recently moved to Harvard (http://en.wikipedia.org/wiki/Cass_R._Sunstein).  

Both Thaler and Sunstein have advised and influenced Obama on economics, thanks to Obama's time at the UofC, and even more so since Obama's primary economics advisor is Austan Goolsbee--an econ prof at the UofC who works with both Thaler and Sustein. (http://en.wikipedia.org/wiki/Austan_Goolsbee)

An excerpt from the op-ed:

The Federal Reserve Board recently issued proposed amendments to
Regulation Z, which governs Truth in Lending. According to the Fed,
the amendments "are intended to improve the effectiveness of the
disclosures consumers receive in connection with credit card accounts
and other revolving credit plans by ensuring that information is
provided in a timely manner and in a form that is readily
understandable."

The Fed's interest in this problem should be applauded, especially in
light of the consumer credit crisis. Improved transparency, rather
than draconian regulation, is the best response to the current
situation. However, the Fed can substantially improve its proposal by
requiring credit issuers to disclose relevant information
electronically in a standardized, machine-readable format. In one
simple stroke, new disclosure requirements would dramatically improve
the current situation.

More on this to come..