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The Economics of News Stories

It’s vital we recognize the harm from informational blockage, lest we repeatedly find ourselves victimized by poor information.

When a big story breaks, like the killing of a major figurehead of a terror corporation, it follows the typical market model.  More stories (firms) enter the market (news stream) given the demand and resources, until the market is saturated (people get tired of it) or a more viable alternative (new story) comes along.

Just as a new product generates a lot of interest (a fad) for awhile, a new meme spreads rapidly until it reaches a point where it hits dead walls (places it either can’t spread due to lack of saliency or where it has already spread) or runs out of steam (the spreaders give up on it).

All systems are informational systems.  The fact that information spread is vital to every aspect of human life still has not quite been recognized by most policy makers.  Secrecy is the equivalent of clogged arteries to an economy; we get heart attacks, where lack of fluidity in the market causes various sectors (organs) to seize and cell death begins to occur (firm closures, downsizing, layoffs).

Worse than simple secrecy is the one-way mirror.  Asymmetric informational flows are poisonous because of the ability for only some firms to recognize trends.  When a piece of information is only available to limited numbers, it can never reach its full potential.  That is why Open Source works: spread the information of how a piece of software is programmed and the result is better software because more eyes swept over it and had the opportunity to refine it.

All of our current problems, from health care to warfare to budget to terror scares, are the result of poor informational flow.  Many of these problems are caused by man-made dams in the information flows, where a single company or an industry seeks competitive advantage or to simply perpetuate their cash flows through the ignorance of others.

It’s vital we recognize the harm from informational blockage, lest we repeatedly find ourselves victimized by poor information.

When Non-informational Regulation Matters

A look at the times where non-informational regulation may be important.

In an earlier post I claimed that informational regulations were sufficient.  There are at least two examples of where they fail in the current system, however:

  1. Low-competition fields
  2. After-the-fact changes

If you can’t switch vendors, then the information won’t help you very much.  It might spur a cooperative or new alternative to be created, but if the government is failing to prevent monopolies from existing, then that may be difficult to initiate.

Changes to existing behaviors may also preclude information being sufficient, as well.  For example, if you already bought a good and it is then revealed that there is a defect, you would be stuck with the good.  Your recourse might be to file suit, but if you are left in a bad way until the resolution of such a suit, it would be very harmful.  An injunction might bring relief.

The question still remains, if one assumes an immaculate judicial system and that the government does actively work to keep barriers of entry low (eg, it doesn’t act in collusion with service providers to raise such barriers), would these problems go away?  I believe they would, but will continue to examine the original claim and tune the full description and argument.

Are there other circumstances that I’ve overlooked (I believe there’s at least one that slips my mind at the moment)?

The Insanity of Simplicity

An brief examination of the paradox of regulations and why the insanity of simplicity wins.

My claim is that we would be better off having regulations that do exactly two things:

  1. Require some specific disclosures related to whatever we currently prescribe, rather than prescribing the behaviors themselves.
  2. Have teeth to revoke charters or otherwise blow away any company that fails to meet the disclosures in a timely and truthful manner.

I’ll be writing more about this in the future, but for now I’ll just say that I’d be very happy/curious to hear arguments against my claim or examples that show it’s wrong.  Note that I mean that instead of a law saying, “you cannot sell baby cribs made out of gremlins,” it would say, “you have to tell people exactly what your cribs are made out of.”

Obviously, I’m going with the idea, “if people know the cribs are made out of gremlins, they won’t buy them, and the crib maker will start using marshmallows instead.”  Does this bear out?  More later.