Friday, April 15, 2011

Information about Information

Xan writes a thought-provoking post on optimal demand for information. The post has many quotable passages, but here is just one highlight:
More generally, if someone knew everything, and they cared about you, and you knew (somehow) that you could trust them, then they could tell you exactly what was best for you to hear. You would get all the benefits of them finding the optimal solution for you, without being burdened by the information that was necessary in order to find it, information that might prevent you from attaining the goal.
To answer Xan's concluding question. The post is clearly clear. It is a must read. Here are some thoughts that I had after reading Xan's post.

The possibility that we will be exposed to "bad information" is why Shanna and I don't watch the local Chicago news. It is good information in the sense that it informs us, but we have decided that for most things that go reported in the local news, we are better off not knowing.

Xan's post reminded me of a lecture by Gary Becker on Huntington's disease. The driving question: Should I get tested if I know I am susceptible for a disease I can do nothing about, or am I better off not knowing? Without knowing your taste for information, the answer is not clear. It's great question and it was wonderful being reminded of this string of ideas.

For consumer products, credible third-party reviews might approximate the benevolent person Xan discusses. But, this "information about information" is imperfect, and that just kicks Xan's can down the road. There's no perfect substitute for gathering information through experience, but Xan makes an excellent point. Experience may give us information that makes us worse off.

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