Economics Dictionary of Arguments

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Information, information theory: A character or a character combination contains information when it is clear to the recipient that this character or the character combination appears instead of another possible character or a possible character combination. The supply of possible characters determines to a part the probability of the occurrence of a character from this supply. In addition, the expected probability of the appearance of a character can be increased by already experienced experiences of regularities. The amount of information transmitted by a character depends on the improbability of the occurrence of the character.
Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments.

Author Concept Summary/Quotes Sources

Kenneth J. Arrow on Information - Dictionary of Arguments

Mause I 167f
Information Economics/Information/Asymmetry/Arrow: (1)(2)
Terminology: "principal" (seller, superior; holds more information) - "agent" (buyer, employee; holds less information).
Four possible constellations of information asymmetry:
1. Hidden action: the principal cannot fully observe the agent's actions after the contract is concluded. For example, an employee acquires a better level of information than the employer. ((s) See master-slave dialectic/Fukuyama).
Moral hazard (temptation): the employee can take advantage of this by reducing his work performance (shirking).
2. Hidden information: after conclusion of the contract, the principal is not in a position to adequately assess the work performance (quality) of the agent, as he himself lacks expertise. e.g. car repair, medical treatment errors. (3)
Mause I 168
3. Hidden characteristics: this is about the characteristics of the property to be sold.
This is an ex-ante information asymmetry. It is often found in used car markets (4) and insurance markets.
4. Hidden intention: asymmetric distribution of information before conclusion of contract: the principle has less information available in this case. Example: A trainee has the desire to switch to the competition right from the start.

1. K. J. Arrow, The economics of agency. In Principals and agents: The structure of business, Hrsg. John W. Pratt und Richard J. Zeckhauser, 37– 51. Boston 1985.
2.K. Spremann, Asymmetrische Information. Zeitschrift für Betriebswirtschaft 60 (5/ 6), 1990, S. 561– 586.
3 U. Dulleck, R. Kerschbamer, On doctors, mechanics, and computer specialists: The economics of credence goods. Journal of Economic Literature 44, (1) 2006, S. 5– 42.
4.G: A. Akerlof, The market for ‚Lemons‘: Quality uncertainty and the market mechanism. Quarterly Journal of Economics 84, (3), 1970, S. 488– 500.

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Benkler I 36
Information/Arrow/Benkler: As Kenneth Arrow put it in 1962, “precisely to the extent that [property] is effective, there is underutilization of the information.”(1)
Benkler: Because welfare economics defines a market as producing a good efficiently only when it is pricing the good at its marginal cost, a good like information (and culture and knowledge are, for purposes of economics, forms of information), which can never be sold both at a positive (greater than zero) price and at its marginal cost, is fundamentally a candidate for substantial nonmarket production.
I 37
From the perspective of a society’s overall welfare, the most efficient thing would be for those who possess information to give it away for free—or rather, for the cost of communicating it and no more.
Nonrivalry, moreover, is not the only quirky characteristic of information production as an economic phenomenon. The other crucial quirkiness is that information is both input and output of its own production process. In order to write today’s academic or news article, I need access to yesterday’s articles and reports.

1. Kenneth Arrow, “Economic Welfare and the Allocation of Resources for Invention,” in Rate and Direction of Inventive Activity: Economic and Social Factors, ed. Richard R. Nelson (Princeton, NJ: Princeton University Press, 1962), 616-617.

Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments
The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition.

EconArrow I
Kenneth J. Arrow
Social Choice and Individual Values: Third Edition New Haven 2012

Mause I
Karsten Mause
Christian Müller
Klaus Schubert,
Politik und Wirtschaft: Ein integratives Kompendium Wiesbaden 2018

Benkler I
Yochai Benkler
The Wealth of Networks: How Social Production Transforms Markets and Freedom New Haven 2007

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