Saturday, November 14, 2015

Integrating vs Disintegrating Information

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Debating “perfect information” is like debating “heaven”. If heaven exists… then…

It took you more than half a year to respond to my response. Why? I have absolutely no idea. I’m not omniscient. I only have a microscopic clue about your preferences and circumstances. All I know is that responding to my response was on your “to do” list… and it was very very very far down on your list. How many other activities were higher on your “to do” list? How many activities have you engaged in since I responded to your story? Can I argue that your priorities are wrong? Can I argue that responding to my response should have been at the top of your “to do” list? 

Some economists like to assume omniscience for the sake of their models. But omniscience is so far removed from reality that it’s not even funny. It’s sad that so many people think that “perfect information” is relevant to anything relevant. 

What markets do is they integrate the maximum amount of information. What not-markets do is the opposite… they disintegrate the maximum amount of information. 

The government is currently a not-market. It disintegrates the maximum amount of information. People don’t appreciate this because they can’t see the impossibly massive amount of information that’s being disintegrated. If I had overridden your own priorities and placed “responding to my response” at the top of your “to do” list then how many people would know what information was disintegrated? 

It’s a given that markets “fail”. They fail for lack of information. Which is why it’s so absurd to jump to the “government” conclusion… given that the government, as it’s currently structured, disintegrates information. 

With private goods people have the incentive to supply information about their preferences/circumstances. The same isn’t necessarily true of public goods. So it’s not unreasonable to coerce people to contribute to public goods… but it’s extremely counterproductive to override people’s public goods preferences/circumstances by preventing them from choosing for themselves which public goods their taxes are spent on. It’s as if people exist for public goods and not the other way around. 

When it comes to organs… are they a private or public good? Right now I’m free to give my kidney away… but I’m not free to sell my kidney. I’m not free to sell my kidney because society, as a whole, does not appreciate/understand the value of knowing/integrating my preferences/circumstances. So it’s kinda hard to say that any organ shortage is the result of market failure. 

Opting in vs opting out with regards to organ donation is failing to see the forest for the trees. With opting out as the default there might be a larger supply of organs… but we still haven’t integrated people’s preferences/circumstances concerning their organs. So we have a distorted sense of reality… and our decisions are going to be less than optimal as a result. 

On Facebook you can post that you gave your kidney away… and I suppose that you might receive quite a few thumbs up. What if people could also give you a quarters up? Or a dollars up? Would any of your friends and family voluntarily give you any money because you gave your kidney away? Would it be strange to receive a total of $100 or $200 or $500 dollars because you gave your kidney away? 

Incentives and information both matter. If we want people to behave in maximally beneficial ways then we have to accurately communicate how much we benefit from their behavior. 

Nobody’s omniscient. This is just as true for public goods as it is for private goods. 

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