Do We Need Perfect Information?

Posted on August 15, 2009 by Markus Stocker, Recommended 0 | Recommend

Last year a friend suggested to me “Enron: The Smartest Guys in the Room” as a must see for what had been called my own personal documentary film festival. After having seen “The Corporation” almost a year ago, this was the second documentary for this festival. I still have at least three to go. This might be the longest festival ever. I suppose, to discuss the movie, I should have ended the festival earlier, so I’ll just write a few thoughts in this post.

First and foremost, it is an interesting documentary. If you haven’t seen it, I suggest you to take the time to do so. I suppose, it is yet another case for people skeptical about the free market, (too) big (to let fail) corporations, deregulation. Was Enron a child of the free market, a product of deregulation? Some of “The Smartest Guys in the Room” clearly were in favour of deregulation so I suppose the skeptic has a point. Indeed, some of the practices are staggering, the one in California beyond appalling. So, then, should we put the government back in charge to oversight things? Perhaps that isn’t a good idea either, after all didn’t the government has its hands in the dirty mess too? Is there any reason to believe the Obama administration would deal with this any better? Would the Swiss government?

I’m glad, once more, that during my last few college semesters the aggressive recruting and the gloss of a fat salary by the likes of Accenture & Co. didn’t caught my interest. My second thought is, would something like Enron happen if society had perfect information (Game Theory)?

Games where all players know all moves are said to have perfect information. Of course, it is difficult to think we could achieve perfect information in the realms of politics and the economy as we do for chess. (How great would perfect information in the realm of consumption or the environment be?) However, I argue that in a (perfect) market where the players have perfect knowledge something like Enron would likely not happen, at least not to this extent and damage. It would not survive the informed independent decisions of thousands of employees and customers in the millions. Though, perhaps the information was right there on the table in front of us, we just didn’t want to see and relied on what we believed. Having seen the documentary today, I’m certainly not in a position to argue I was informed.

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Category: Economics, Ethics, Politics, Thoughts
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