Better Information Isn’t Always Beneficial
In today’s WSJ, David Wessels outlines some systemic social problems that can arise as information becomes widely available at lower costs.
I like the description of the problem in a quote by Kenneth Arrow: “socially useless but privately valuable” information, which can provide individual benefits, but at an overall cost to society at large.
This is the inverse of the dynamics driving “web 2.0″, which thrives on the sharing of “privately useless but socially valuable” information such as click streams, tagging, location awareness, presence awareness, etc.
Computer and communications technology is making more and better information available ever more quickly. This is a good thing — usually.
But there are some things we don’t want to do more efficiently. Doing them better adds neither to the U.S. national psyche nor to the gross domestic product. Figuring out which is which is a growing challenge to society as technology makes gathering and analyzing information easier and cheaper.
This issue predates computers. “The contrast between the private profitability and the social uselessness of foreknowledge may seem surprising,” the late economist Jack Hirshleifer wrote in 1971. But there are instances, he argued, where “the community as a whole obtains no benefit … from either the acquisition or the dissemination (by resale or otherwise) of private foreknowledge.”
Imagine a place with uncertain weather where food is plentiful in rainy spots, but not in others. Residents, in essence, buy insurance. The lucky feed the unlucky. No one starves. Then it becomes possible to buy accurate weather forecasts. One who buys the forecast knows whether he needs insurance or not; he profits. But the total amount of food available is unchanged. And if everyone buys the weather forecast, the insurance market becomes impossible. “There is a double social loss — the resources used unnecessarily in acquiring information and the destruction of a market for risk sharing,” Mr. Arrow said when he posed this example in 1973.
Update 09-23-2005 10:31 PDT: Discussion on this topic at Slashdot (noisy, but some interesting comments).
Tags: policy, search
