An informational rationale for action over disclosure

The past two decades have seen a considerable increase in the amount of public information provided by policymakers. Are such disclosures desirable? Or is it instead preferable to use such information to condition a policy instrument, such a tax or an interest rate? This paper studies the relative merits of each means to use a policymaker’s information in a flexible class of economies that feature dispersed information, and payoff and learning externalities. I provide conditions for when the exclusive use of a policy instrument or disclosure is optimal. I then relate these to differences in the equilibrium and socially optimal use of information. I conclude with a series of applications that show how my results apply to common beauty-contest models, competitive economies, and a broad class of macroeconomic models, among others.