What Is Asymmetric Information?

Asymmetric information means that each person in a transaction has different information. In socio-political, economic and other activities, some members have information that other members cannot, which results in information asymmetry. In market economic activities, various types of personnel have different understandings of relevant information; those who have sufficient information are often in a more favorable position, while those with poor information are in a more disadvantaged position. Asymmetric information may lead to Adverse Selection. In general, sellers have more information about the item being traded than buyers, but counter-examples may also exist. The former example can be found in the buying and selling of used cars, and sellers know more about the cars sold than buyers. Examples of the latter are medical insurance, where the buyer usually has more information.

Asymmetric information means that each person in a transaction has different information. In socio-political, economic and other activities, some members have information that other members cannot, which results in information asymmetry. In market economic activities, various types of personnel have different understandings of relevant information; those who have sufficient information are often in a more favorable position, while those with poor information are in a more disadvantaged position. Asymmetric information may lead to Adverse Selection. In general, sellers have more information about the item being traded than buyers, but counter-examples may also exist. The former example can be found in the buying and selling of used cars, and sellers know more about the cars sold than buyers. Examples of the latter are medical insurance, where the buyer usually has more information. ^[1]

The information asymmetry theory means that in market economic activities, various types of personnel have different understandings of relevant information; those who have sufficient information are often in a better position, while those who lack information are in a disadvantage. status. The information asymmetry theory was developed by three American economists, Joseph Stiglitz, George Akerlof, and Michael Spence. The theory holds that: in the market, the seller knows more about the various kinds of information about the goods than the buyer; the party with more information can benefit from the market by passing reliable information to the party with poor information; Will work hard to obtain information from the other party; market signals show to a certain extent that it can make up for the problem of information asymmetry; information asymmetry is a disadvantage of the market economy. To reduce the economic harm caused by information asymmetry, the government should be in the market system Play a powerful role. This theory provides explanations for many market phenomena such as the stock market ups and downs, employment and unemployment, credit rationing, commodity promotions, and market share of commodities, etc., and has become the core of modern information economics. It has been widely used from traditional agricultural markets to modern times. Financial markets and other fields.

Classification of economic knowledge

Hayek has divided knowledge into two categories in the article "Using Knowledge in Society": one is scientific knowledge, that is, organized knowledge is held by experts and can be obtained in theory and books; one is specific The knowledge of time and place is owned by those at the time and locally. Here, the knowledge that Hayek talks about is actually information, so we can also divide them into two categories in terms of economic information alone.

Different kinds of information have different positions and roles in the economic system. Economic theory, as information, is a regular summary of economic phenomena. It is a general trend or state. It is mostly used for abstract descriptions of macroeconomics and microeconomics. The knowledge of a specific time and place is unique information that can be used by everyone and is the source of information asymmetry. Decisions based on this information can only be made by each individual or actively participate in making such information. To be used.

However, in various types of economic management, the two types of information are often confused, sometimes using economic theory for specific time and place of knowledge, and sometimes using specific time and place of knowledge for economic theory, misconfiguration of society Resources even affect the efficiency of economic operations. This situation exists both in the state's management of the macroeconomic system and in the management of the enterprise's microeconomic system.

Hayek listed the significant role of knowledge at a specific time and place in the article: for example, a person who makes a living by air or semi-air cargo on an irregular cargo boat, or almost all his knowledge lies in knowing a real-time opportunity property Brokers, or arbitrageurs who profit from the difference in the prices of goods in different places, all play an important role in society with their special knowledge of ephemeral situations, unknown to others. And pointed out that in economic management, this important information is easily ignored by managers so as to cause losses or increase transaction costs. It is a dangerous tendency for managers to delay the use of statistics to implement policies while ignoring the often constant small changes in the economic system. Because the task of keeping costs from rising in any competitive industry requires persistent effort, this task alone requires a lot of energy. Although the total number of statistics shows greater stability than the movement of specific details, the relative stability of such statistics cannot be compensated by the "law of large numbers", which is the mutual compensation of random changes, as statisticians often want to do. Explanation.

Information confusion in centralized procurement activities. Centralized procurement based on redistribution is not as cost-effective as managers think, and sometimes wastes money. Here's a real example: a provincial branch of a bank made centralized purchases of accounting vouchers and various registers under its jurisdiction. First, the secondary branches reported the usage of vouchers and registers for one year. , And then tender for production, which will be distributed to the secondary branches by the printing house. According to statistics, a large amount of cost has been saved, so this form will be encouraged by managers to perform again. People gather together scattered transactions to complete one time, and they can obtain the advantages in transaction prices. This is the conclusion based on scientific knowledge, that is, the theory of economies of scale in economics. We cannot deny its correctness. But after careful investigation and analysis, the facts are not as real as statistics, and many things that happened at a specific time and place changed all this. First, there was a problem when reporting the type and quantity of use. How many types and quantities of vouchers and registers are needed each year. There is no historical data. You can only rely on subjective guesses. The key is not to pay for yourself. Indispensable principles are reported, and many certificates and registers that are not needed are also reported. Many that were originally used are reported in small quantities. There are now a large number of rarely used vouchers and registers in the warehouses of each row. The second is that there are problems in use. The printing factory's supply is not timely when the banks need it, which affects the development of the business. Some banks fail to provide business charging vouchers and do not send them a few times. Case. The third is that the printing factory failed to print as required, and printed the invoice of Sanlian into two copies. Each time the customer fills in the triplet, it will inevitably occupy the next two copies of the first and second copies. Can be used for half copies. In addition, many register books are designed to be very large. Originally, 30 lines could be printed on one page but 20 lines were printed, which wastes a lot of space. I think that the printing house understands the truth. With this estimate, the losses caused by the above circumstances cannot be compensated by the cost savings of centralized procurement. At the beginning of centralized procurement, it was not because the managers had confused the role of expert information and specific time and place information. Almost all transactions are completed with information at a specific time and place, so replacing the knowledge at a specific point in time with expert knowledge often makes mistakes. Economists have a very systematic knowledge of economics, but arbitrage trading in the stock market is not necessarily the best, because stock speculation is completed by information at a specific point in time.

The Spencer-Morris condition confuses different kinds of information. Michael Spencer studied the problem of signal transmission in the labor market, proposed the Spencer-Morris condition, linked human ability with academic qualifications, and concluded that academic qualifications can show a person's ability. He believes that a person with a higher ability can obtain a diploma at a lower cost, while a person with a lower ability can obtain a diploma at a higher cost.

The direct consequence of this theory is that the current units require high-educational personnel in the recruitment and form a blind pursuit of highly-educated talents. Under the encouragement of this system, people pursue higher education at any cost, which greatly stimulates the supply of education. , Various forms of educational institutions have sprung up. An educated person can create more social value than an uneducated person. The degree of education is directly proportional to the ability. This is a general law, and it is the same basic law as large-scale procurement can reduce unit costs. However, according to Hayek's classification of information, the information provided by education is scientific knowledge and summarized information. The ability in actual work is mainly reflected in the grasp and processing ability of specific time and place information. Confusion about the ability to grasp educational information and the ability to grasp information at a specific point in time may also cause problems in specific practice. For example, in reality, repetition and purchase can also enable people with different abilities to obtain the same academic qualifications. In addition, students have different levels of hard work at school, and there are many mixed students. The same bachelor degree, students from different schools The abilities are also different; the resulting academic-only tendency and the phenomenon of false education and fake diplomas. In most cases, the individual ability shown by education as an indicator of education level is the result of a system choice, not the result of free market choice.

Information distribution

In the modern economic system, information is already an important economic resource. Like capital and land, it becomes a necessary means of production and is included in the national economic account as an industry. In the previous economic system, the information industry accounted for a small proportion. Basically, it was provided by the state as a national public utility. Its cost was included in the national budget and its benefits were counted as the progress of social civilization. Therefore, it was not included in the ordinary nationals. Economic accounting. However, the role of information as a resource in the distribution of social wealth has been exerted, and throughout the history of human society.

According to Hayek's classification of knowledge, knowledge is divided into scientific knowledge and knowledge at a specific time and place. Below I will analyze the distribution of these two types of knowledge. Scientific knowledge, as a social resource, has been in a state of monopolization and state allocation for a long time, and the efficiency of resource allocation is low. Education is a major tool for the distribution of scientific knowledge. The implementation of state rationing in education is manifested in information rationing tools such as schools monopolized and controlled by the state. If we examine the history of education in each country, it is not difficult to reach the above conclusions. The monopoly of scientific knowledge restricts the supply of scientific knowledge information, leaving most members of society without the opportunity to receive education. Education has become the patent of a few upper-class societies. The supply of information resources has been seriously inadequate relative to demand. To a certain degree hinders the civilization process of human society. The ignorance caused by the lack of scientific knowledge in history has made the cost of society too great. Now that China has liberalized private education, the contradiction between supply and demand of scientific knowledge has been alleviated to a certain extent. Information, like electricity and transportation, has an important foundational role in the development of the national economy. However, the state-led dissemination of information, that is, the inefficient allocation of information resources, has become a bottleneck in socio-economic development. Therefore, the socialization and marketization of information resource allocation will be an inevitable trend. This situation also exists for the distribution of information at specific times and places. The media can be regarded as a main tool for the configuration of information at specific times and places, such as broadcasting and telecommunications, newspapers, etc. Information is also operated by the government. The problem of low resource allocation efficiency is mainly manifested in the non-market operation of information allocation, the non-commercialization of information, and the failure to meet the demand for information by economic activities. Under the conditions of a market economy, economic activities require more and more information at specific times and places. The restrictions on the allocation of information resources are allowed, and private capital is allowed to operate the media, and the market-oriented information dissemination mechanism is established. The allocation of social information resources by economic rules will also be an inevitable trend.

The status of information distribution determines the status of information asymmetry and is one of the main sources of information asymmetry. Existing information asymmetry is mostly the result of system selection rather than the reason for system selection, so the solution to information asymmetry must first focus on the information distribution system. The information industry can be divided into education, scientific research, and cultural industries that configure scientific knowledge, and broadcasting, telecommunications, and media (including the Internet) industries that configure information at specific times and places. It can also be divided into the tool industry of information resource allocation and the content industry of information resources. Together they constitute an economic system for the allocation of information resources. The significance of information economics is to study how the efficiency of this system operation and how to improve efficiency can be optimal.

Economic System of Information Resource Allocation

Information resources, like other social wealth, are a scarce resource. The prior possession of information resources will also bring related wealth. When certain information resources are monopolized, the corresponding benefits will also be monopolized. The patent right is an exclusivity of information resources. The chip of Intel Corporation-the exclusivity of this technological resource makes it calmly occupy the top of the pyramid of the electronic computer industry. Its value accounts for nearly half of the entire computer industry chain. When a country's economy plays an important role in the world, its language will also become a scarce resource, such as English. Non-English speaking countries around the world will spend huge wealth every year to master this language. Advanced civilization itself is a resource of great value, and backward areas need to spend money to buy, such as Hollywood movies.

People now divide the economic system into three parts: logistics, capital flow and information flow. Economics still rarely systematically analyzes the interrelationships and effects of these three areas. This can also be regarded as a new classification method for social industries, and may become the mainstream of research on social industries in the future. The current industry classification is to divide industries into primary, secondary, and tertiary industries, and it has become the main means of researching the economic system and national economic accounting. The impact of applying the new industrial classification method on the economic system, the efficiency of the allocation of economic resources, and the impact on economic policies is well worth economic research.

Since the formation of information, information has been spread along certain ways. We call the tools and content of information dissemination and their methods the economic system of information resource allocation. This economic system can be divided into economic systems that configure scientific knowledge or system information (education, science, and culture are the main tools for disseminating scientific knowledge) and economic systems that configure information at specific times and places (radio and television) Media such as newspapers, magazines, and the Internet are the main tools for dissemination). Together, they constitute a relatively independent industry and constitute the economic system of information dissemination.