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Thursday, December 08, 2005

Information, Health, the Environment, & Efficiencies

Joseph E. Stiglitz in The Concise Encyclopedia of Economics
Concerning the topic of “Information”…

“In the past two decades, an important strand of economic research, sometimes referred to as information economics, has explored the extent to which markets and other institutions process and convey information. Many of the problems of markets and other institutions result from costly information, and many of their features are responses to costly information. Many of the central theories and principles in economics are based on assumptions about perfect information. Among these, three stand out: efficiency, full employment of resources, and uniform prices.”

Taking from part of this explanation of information:

We have talked about efficiency and what it means and entails in this class, as well as others. Bringing back a past interest of mine – the health and wellbeing our populace and environment – what implications does “perfect information” have on efficiency?

What if consumers lack the needed information to make genuine purchasing decisions about various products; those that they consume for their health, as well as those they consume every day to make a living (i.e. what car to buy, what products to clean with, etc.)?

For example, when we buy food products, we are limited in the information we are given. Some ingredients can be called several different things – i.e. monosodium glutamate can be called “natural flavoring”. Products can be marked with labels like “South-Beach Diet Approved”, while the ingredients could have negative implications on one’s health. We are not told whether a product has been genetically modified. We are sometimes not told the country of origin of the product. Another example is when we buy household cleaners or other household products, we are very limited in the information we are given. Many times no ingredients are listed on the label. Take a look at some of the things you use to clean with, lawn care products, etc.

In both of these cases, it is up to the consumer to research the product if he or she is genuinely concerned about what they are consuming (but many people I believe are not concerned because they are trusting the government, i.e. USDA/FDA, to make sure products are safe for them).

Because the public is not given perfect information about the products that they consume, wouldn’t this eventually create inefficiencies? For example, if people do not know what they are consuming, and the ingredients in a product cause them to get very sick and perhaps even die, then wouldn’t this exert a toll on the health care system (what is left of it), the social well-being of the populace (if this is definable), or even industries (who may be sued later on for fraudulent activity)?

I may be way off here. But I really do believe that there could be implications to our economy when it comes to the information that consumers have about what they are purchasing and consuming.

Comments:
I think there is another question that your topic should consider. In what ways could we expect the use of government coercion with respect to information be expected to do better than relying on individual choices with respect to information?

"Government" may well be able to require information be made available. But, "government" is just a set of people who then have to figure out what to tell and what not to tell. Is there any reason to think these people know what is best for you, if you don't? Is there any reason to think these people can better figure out what needs to be known, from your perspective? Now, add to this, the real incentives ever present in politics, and I think we might wonder what would inhibit politics, rather than real concerns for well-being, from becoming the basis for determining what is the required information.

Oh, and even if government compels the provision of information, why would we think people would actually read the information provided, or have any reason to understand the information provided, or believe the information provided?
 
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