We tend to think of transparency as a good thing: knowledge is power, the old adage goes. Public disclosures ranging from calorie counts to gas mileage ratings to restaurant cleanliness all seem to empower people to make better choices — and to provide the competitive pressure that forces businesses to strive to do better.
But is transparency always best? A team of researchers from the Boston University School of Management and the Harvard Kennedy School think that transparency needs to be studied, to figure out how and when it is most effective — and when it can backfire. For example, one study found that hospital report cards that reported patient outcomes provided an incentive for hospitals to avoid admitting the sickest patients. The end result? In the short term, report cards increased health care costs and resulted in worse health outcomes for the sickest patients.