The readings for this week were very interesting, so were the class discussions. I especially spent time mulling over what Dyson and Webster had to say. I think I am more confused after reading the articles. Or to put it positively, the articles have forced me to think in various directions. Here are some scattered themes going on in my mind.
Market for Lemons
I was quite fascinated by Akerlof’s theory of ‘Market for lemons’. The asymmetry of information causing the market to revise average quality of goods and prices downward.
Now with the explosion of possibilities of getting information in time, with less and less effort one would think that the problem would be cured. But it seems in many examples we have a lot of choice and a lot of information about what choices we have but less and less information to judge the quality of goods/services we purchase.
How did we manage to cure the information asymmetry before? We knew our neighborhood vendor, we knew from our earlier experience the level of quality he provided. We knew brand names that had consistent quality attached to them, based on which we could judge the quality. The regulatory boards of various governments put a stamp saying what the packaging says is what is really inside. If we are thinking about a new free world like Dyson envisions, with decentralized control, end of mass culture, and endless and diverse choice, it increases the information asymmetry as we loose a lot of pegs from where we drew our information.
Are we inventing newer ways of getting information to suit the newfound freedom? Or without information, wanting to take lesser risk pushing the better goods out of the market?
What about ‘information’ as a good? As information is bombarded from everywhere, do we have the information to judge the quality of information we are getting? It is fascinating to think about the consequences of the market for information as a lemons market.
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