Probabilistic Disclosures for Corporate and other Law

Saul Levmore


This Article explores the costs and benefts of one subset of continuous
and discontinuous rules. These expressions are shown to be distinct
from the familiar dichotomy expressed as standards versus rules,
but they share the diffculty of dividing the world of law in two. Still,
regulatory approaches that focus on discontinuities can often be made
more continuous, and vice versa. A speed limit is discontinuous in the
sense that one drives above or below (or within) the announced limit.
But it is often made more continuous—even with more discontinuities—
as when the stated limit is different for various kinds of vehicles. This
Article works around these definitional problems to show that law
often discourages useful disclosures by encouraging parties with
information to offer continuous information in order to avoid after-the-fact lawsuits when specific disclosures prove to have inaccuracies.
For example, it is common to hear or be warned that a medical
procedure poses the risk of death, when a better-informed doctor or
hospital could have given the precise percentages attached to various
outcomes. Similarly, a corporation is on safe ground when it follows
“generally accepted accounting principles,” when investors would
have learned more from information about good and bad outcomes
put in probabilistic terms. The Article works toward the suggestion
that law might create a safe harbor in which probabilistic disclosures
are protected when they are, or are certified to be, more useful than
the ready alternative of fairly general disclosures.

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