Moving Toward Comprehensibility in the Legal System

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We need to extend and expand an overdue conversation about clarity in the U.S. legal system.

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To begin, I want to thank the commentators on my book and the staff of The Regulatory Review. In this short response, I spotlight the main takeaways from the essays published in this series and then explore some of the new ideas they generate for future work.

The collective commentary from this series affirms in several important ways the conclusions in my recent book with Will Walker entitled Incomprehensible!.

First, the essays reinforce the initial motivation in writing the book—namely, to help jump-start a cross-specialty conversation about perverse incentives for incomprehensibility in legal systems. In this series, top experts in tax law, big data, disclosure mandates, and the political science of bureaucracy each engage with the book’s thesis. The conversation is officially underway.

Second, each of the commentators, in one way or another, reinforces the book’s core thesis. To ensure our legal programs are working correctly, it is not enough to study the substance of individual rules. We need to account for how these rules collectively affect participant behavior. In particular, for the subset of legal settings explored in our book, designated speakers are reluctant to clearly communicate key messages since doing so could lead to greater liability, lost profits, or high internal costs. But in these same programs, the target audiences face significant impediments to extracting the ‘true’ messages on their own.

These collective impediments to cooperative communication create “comprehension asymmetries” that must be rectified. Strategic, “rule-bending” actors should not be rewarded for deploying information games that pull the wool over the eyes of their resource-strapped audiences. Well-meaning speakers should not be tacitly encouraged to “create a record” of every conceivable argument and detail when it means that their target audiences could be overwhelmed with superfluous information, excessive detail, or garbled messages. Until reluctant speakers in these complex legal systems are highly motivated to ensure their target audiences can understand key messages, however, the hoped-for communications can and will fail.

Yet, too often, laws fail to impose strong incentives for effective communication. Prescriptive requirements like those demanding “Plain English,” “fishbowl transparency,” or simplified disclosures often fall short because they miss the key goal of insisting that speakers ensure their key messages are communicated effectively. If some speakers attempt to do an end run around these requirements, which can be both easy and profitable, the costs of resulting misunderstandings should not fall on the audience.

The essays in this series also sharpen how to think about reform going forward. Rachel Potter is absolutely right that rewarding agencies for drafting understandable rulemakings will not eliminate all of the “bending” of the rulemaking process by strategic agencies. Her path-breaking book is immensely valuable in providing a systemic view of this type of bad agency behavior and helping us think through it. Yet Potter seems to agree that adjusting the rulemaking process so as to eliminate perverse incentives for incomprehensibility is an important step in this larger project. I am eager to continue this conversation with her.

Martin Murillo raises excellent questions about the perverse interaction between administrative processes that tacitly ignore the need for comprehensibility in rulemaking and the wave of more complex computer models and related tools—like machine learning—that threaten to raise participants’ processing costs even higher. Murillo points out how these new technologies can exponentially increase the complexity of agency decisions while further insulating them from oversight and public accountability. His own outstanding work on transparency also exposes how requiring only the sharing of raw data and unprocessed information can be easily gamed by governments and private parties alike.

Stephanie McMahon maps out some of the fascinating communication challenges occurring in Internal Revenue Service (IRS) guidance. Central to such an exercise, however, is the first critical step of identifying whether there is an underlying “comprehension asymmetry.” For example, is the IRS motivated to confuse rather than illuminate taxpayers in providing tax guidance in some settings? Does the IRS bear the full costs of any communication errors embedded in its guidance? If not, then the resulting, less-than-perfect guidance issued by the IRS, even while decried by journalists as incomprehensible, still falls outside of the book’s thesis.

If tax analysts, however, can identify ways that the law tacitly rewards the IRS for incomprehensible guidance, then that is a problem within the book’s reach. In fact, according to McMahon and others, there may be some perverse legal incentives for the IRS to issue guidance that fails to communicate key messages. For example, Joshua D. Blank and Leigh Osofsky argue that forcing the IRS to write in “plain language” may sometimes cause the IRS to simplify guidance in ways that obscure important details that are fundamental to taxpayer understanding. In the book’s terms, this simplified guidance would also be “incomprehensible” since the audience cannot accurately process the information. And, if the IRS sometimes enjoys judicial deference for its simplifications, as McMahon suggests, then the agency may again focus on overly simplified guidance without worrying about whether the guidance is ultimately useful or even accurate. But this is only a start. McMahon’s essay offers a rich set of potential problems to explore going forward.

Omri Ben-Shahar focuses on the book’s application to disclosure mandates. He argues that many market transactions are naturally complex and some audiences will thus be unable to comprehend what they are getting into no matter what the private actors do to bridge the communications gap. Yet his argument assumes that this existing complexity is inherent in the transaction itself, even though work surveyed in the book makes a persuasive case that that this is not always, or perhaps often, the case.

Oren Bar-Gill, for example, documents how cell phone service plans are so complex and numerous that the marketplace offers consumers “more than 10 million different plans and add-on combinations.” Bar-Gill concludes that some of this complexity is not the result of market pressures but instead “represents a strategic response” by sophisticated cell phone companies.” Many others have documented ways that motivated sellers exploit consumers’ limited processing capacity, and how this strategic incomprehensibility sometimes becomes necessary for competitive survival. Flipping these incentives so that only the comprehensible sellers win seems a good start for a new approach.

Ben-Shahar’s misgivings about the book’s proposal for reform also seem to arise from his apparent misunderstanding of what that reform entails. He conflates the reform suggested, which places strong incentives on speakers for effective communication, with mandated “simplifications,” which insist on less complexity and less information. Yet, the two are not the same.

To be effective, communications may sometimes need to be quite detailed and tailored to different types of audiences. As we reiterate throughout the book, imposing strong incentives, even possible strict liability, on reluctant speakers to internalize communication errors seems the best and perhaps only way to truly overcome these inclinations of speakers to shift the costs of misunderstandings to consumers. A variety of approaches, such as Lauren Willissconsumer confusion audits,” can be used to locate and sanction communication errors. Private firms that are already skilled at developing well-crafted messages to support their marketing should be more than able to develop simple communications that avoid consumer misunderstandings. Indeed, precisely because they can be used by sellers to mislead their customers, we use nutrition labels, restaurant grading, and select Dodd-Frank requirements in the book as examples of communication failures and not success stories, as Ben-Shahar suggests.

In conclusion, it is an honor to have such distinguished scholars not only read our book but take the time to prepare helpful comments that sharpen the arguments and move the project forward. Thank you again! And thank you to Cary Coglianese and The Regulatory Review staff for putting this series together.

Wendy E. Wagner

Wendy E. Wagner is the Richard Dale Endowed Chair at the University of Texas School of Law.

This essay is part of a six-part series, entitled Creating Incentives for Regulatory Comprehensibility.