On Perfect Information

An argument I recently heard in favor of protectionism is that consumer’s don’t have perfect information, therefore it is the job of the government to pass tariffs against companies and trade partners who do things objectionable.

There are two main issues with this argument.  First, “objectionable” is a moral judgement.  What a rich, white person in the United States considers objectionable a poor, Asian in China might not.  Additionally, what Jon Murphy finds objectionable, John Smith might not.  To base national policy on one person’s morals is a gateway to tyranny.

The second issue with the argument is the note about perfect information.  “Perfect” doesn’t exist in this world.  Nothing is perfect.  No market is perfectly competitive.  Economic actors are not perfectly rational.  There are no good people or bad people.  We are merely people who do good and bad things.  And there is no such thing as perfect information.  What is necessary is not perfect information, but accurate information.  Prices, we know, convey such information.  When prices are distorted (whether through price controls, tariffs, what-have-you), the information provided is no longer accurate.  Decisions made off such information is now more likely to be harmful.  More harmful, indeed, then having imperfect information.  Chances are, any given economic actor will never have perfect information.  But what he will have is the knowledge and information of his particular time and space.

Besides, if any given economic actor doesn’t have perfect information, why assume some government entity would be in any better position?

12 thoughts on “On Perfect Information

  1. Do you have a link to this argument? I’d like to see it as I’ve never heard anyone argue for “perfect” information in the sense that you are talking about it.

    The argument is not about “perfect” information, it’s the “amount” of information. There is so much information to take in that it is impossible for the consumer to be fully informed about every product they consume. Nor can any consumer take a stand against immoralities in every market they enter. That is what is meant by “perfect” information.

    Thus, people argue that elected officials who reflect the morals and opinions of the populous are required to oversee or create organizations that monitor companies and markets and make sure that they play the game honestly.

    And don’t forget that governments are not the only economic players that can enforce price controls. Not that price is a reliable source of information on morality anyways, but that’s another discussion for another time.

    Whether or not you agree with my statements is irrelevant. It just seems to me that, again, you don’t understand your opponents’ arguments enough to create a proper counterpoint.

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      • To your first point: Agreed. And to elaborate: There comes a point where too much information becomes more of a hindrance than less information.

        But this is part of the protectionist argument: The people elect officials whose morals align with theirs in order to sort through the information for them.

        I think you agree with them more than you think. It’s just a matter of who controls the information.

        To repeat a point I made earlier: If dishonestly and immorality is allowed to continue unregulated it becomes the standard. And because we have so much to take in on a daily basis several of those — sometime severe — dishonesties get lost in the daily rituals.

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      • And to your point about price: I apologize. I misunderstood what you said. I took what you said in many of your previous post and interpreted this as a justification of price as a standard of morality.

        My mistake.

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    • Mr. Lee, you accuse Jon of not understanding his “opponents arguments”. Yet, you seem to misunderstand your own argument. You claim that nobody is arguing for “perfect” information, but a few lines later you contradict yourself when you decry that “it is impossible for consumers to be fully informed about every product they consume”, key word here being “fully” which in this context is virtually a synonym for perfect. Let me echo Jon; there is no such thing. Nobody can be “fully” informed about anything.

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    • You have no way to edit comments, Jon. I see that I misunderstood Mr. Lee’s comment. He is not saying what I though he was saying. I still think that he misunderstands your point. Markets are better at punishing the dishonest tnan governmen officials and institutions.

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      • Mr. Mosely. Thank you for your comment, and I understand where you are coming from. I also appreciate your attempt to correct your previous message. I thank you for your clarification.

        Now, to get back to our discussion: In my experience as a business man I’ve seen no evidence that markets are better at punishing the dishonest.

        It’s not really about who is better at it either. It’s about effective checks and balances. Dishonest people create dishonest markets just as dishonest people create dishonest governments. The hopes of a democratic society is that the morals of the voter would vote in honest politicians that counter act any dishonesties of the free market. That, frankly speaking, is not always the case. It is, however, a better alternative to letting markets run wild. But I am also willing to acknowledge the fact that the current US government (nor the one in my home land of Ireland) are very honest governments at the moment.

        In my experience: If dishonestly and immorality is allowed to continue unregulated it becomes the standard. And because we have so much to take in on a daily basis several of those — sometime severe — dishonesties get lost in the daily rituals.

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  2. One of the most important things I heard from Bob Lefevre (Orange County Freedom School) was . . . “Walter, don’t expect capitalism to be perfect; it’s just the best that man can do.” I think that can be applied to the concept of perfect information too. Like absolute truth, it just isn’t available. But you can conjecture on what is the best-you-can-get sort of information. One best-you-can-get is a cadre of brilliant minds. Another is —and it may be just be a matter of faith for us– what people express within a free market operation.
    That is, there may be a cadre of brilliant minds that may disapprove of how expensive Disneyland has become with respect to what society devotes to parks or libraries. I for one find Disneyland outrageously expensive and would probably agree with the cadre of brilliant minds. But since perfect isn’t available, the idea of striving for it, is kind of sophomoric; what counts is what a free people bids up the price of admission to Disneyland to be. To hell with perfect.

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