Ownership of information and truthfulness was RE: Food labels and consumer information

From: Rafal Smigrodzki (rafal@smigrodzki.org)
Date: Tue Jun 24 2003 - 17:45:38 MDT

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    Alfio wrote:

     What i think is that,
    > without proper information, people often make the WRONG choice. And
    > what's worse, they often have no way to know that they did.

    ### The disagreement between Alfio and John Clark prompted me to make the
    following observation (or maybe just a restatement of the obvious):
    difficulty accessing truthful information about products in the free market
    is caused by the difficulty in making a profit on certain types of
    information.

    Let's consider a manufacturer who has information about his product, which
    if released to customers would put him at a disadvantage compared to other
    manufacturers (e.g. a loss of 1000$ in sales). This loss is an
    expression/summation of preferences of all the customers, therefore we can
    assume than for N customers, the average customer will be willing to spend
    somewhat less than 1000/N $ to know the truth about the product. If an
    independent provider of information could produce and sell the product info
    at a price 1000/N, such information would be provided. However, currently it
    is not easy to prevent the free rider problem regarding information. In
    practice, the purveyor of information would have to price his information
    well below 1000/N. At some point, especially with expensive types of
    consumer information, such as results of clinical drug trials, it would be
    impossible to produce information profitably.

    This is the problem with the free market approach to consumer information -
    the difficulty making a profit on a specific class of information - that
    which is both expensive to replicate and harmful to manufacturer if
    released. Information which is either cheap to replicate, or beneficial to
    manufacturer will be either provided by information makers (Consumer
    Reports, etc.) at a very low price, or gratuitously by the manufacturer.

    The statist solution to the problem is seemingly simple and effective -
    manufacturers are forced to provide the information they already have
    (nutrition labels), or if they do not have it, they are forced by law to
    produce it (e.g. pharmaceutical companies) in order to be allowed to sell
    products. However, this solution does have some problems: the feedback loops
    between players in the game, manufacturer, customer, politician, and
    bureaucrat, are very long, tenuous, so that information will be provided in
    an inefficient, unstable way. Also, the opportunity for some players to
    avoid consensus-building (as it happens every time a vote is not 100% for or
    against a proposition), leads to dangerous restrictions of freedom in the
    long run.

    The right (IMO) solution, use of transparency, trusted devices, and other
    technical measures to improve the marketability of customer-desired
    information, is frequently rejected by both libertarians and statists. The
    former are worried about the Big Brother, the latter are uncomfortable with
    too much freedom for both the manufacturer and the customer to choose who
    will be harmed and how. The point for me is of course the long-term
    maximization of material affluence of the average citizen (as a proxy
    quantitative measure of the ability to indulge wishes, i.e. freedom). Such
    an abstract measure of utility doesn't agree well with built-in emotional
    reactions to the threat of physical violence (motivates some libertarians),
    or a feeling of lack of control over the environment (drives the statist).
    Ah, well, maybe this idea's time will come eventually.

    For the time being I am for mandatory nutrition labels if and only if the
    information released has measurable survival-related value (e.g. content of
    substances proven to be poisonous, such as trans-fatty acids), otherwise
    voluntary labeling must do (as in the case of GMO, where the information
    does not have relevance to individual survival). When somebody hides from me
    information and thereby my life is endangered, in reciprocity I feel
    justified in threatening his own life, if this is the only way of saving
    mine.

    Rafal



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