Information and Economic Analysis

Information or the lack of information lies at the heart of recent controversy in economics. Economists have long viewed the market as a means by which individuals exchange information regarding their preferences. An alleged lack of adequate product information among consumers continues to elicit appeals for further government involvement in the market. Also, poor information among workers about job and wage alternatives has been used by economists to explain not only why we have unemployment, but why it seems to vary inversely with the rate of price inflation. In addition, congressional tolerance of highly imperfect Federal Reserve System reactions to information about the state of the economy-as well as presidential influence and legerdemain over traditional fiscal and monetary policy—seems to explain the recent inability to retard inflation. Finally, inadequate informational interchange between individuals may be at the heart of many collective goods problems, ranging from urban decay and pollution to crime and alienation.