The judgment (of MIB) is that the population couldn't cope with knowing how the universe actually works, that it's filled with super-powered aliens capable of destroying the Earth at a whim.
As K says, the fear is that there would be mass hysteria. In the novelisation (based on the original screenplay) Kay lays it out for Jay.
Kay nodded at other people in the park. "That old man with the dog,
those two women pushing baby carriages, they don't know, either. See
it would wreck their worldview to know. Most people can't deal with
the naked truth."
"People are smart, they could handle it."
"Wrong. A person can be smart, but people are dumb. Clump people
together and spook them and what you get is a mob. And a mob is only
as smart as the stupidest person in it."
"Listen up, Sparky, there is always an alien battle cruiser or a
Korlian death ray or some intergalactic plague about to wipe out life
on this planet. We stop it. We've always stopped it, and I don't plan
on screwing up this time. The only thing that allows people here to
get on with their lives is that they don't know about it! How do you
think they would feel if they knew? There'd be a panic that would
trash half the planet and cause thousands, maybe millions of deaths!"
The film transcript contains similar exchanges...
KAY: Not as many as you'd think. Humans, for the most part, don't have
a clue. Don't want one, either. They're happy. They think they've got
a pretty good bead on things.
EDWARDS: Why the big secret? People are smart, they can handle it.
KAY: A person is smart. People are dumb. Everything they've ever
"known" has been proven to be wrong. A thousand years ago everybody
knew as a fact, that the earth was the center of the universe. Five
hundred years ago, they knew it was flat. Fifteen minutes ago, you
knew we humans were alone on it. Imagine what you'll know tomorrow.
KAY: There's always an Alien Battle Cruiser...or a Korlian Death Ray, or...an intergalactic plague about to wipe out life on this
planet, and the only thing that lets people get on with their hopeful
little lives is that they don't know about it.