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Markets Rely on Accurate and Honest Information — But Governments Want the Opposite

Markets Rely on Accurate and Honest Information — But Governments Want the Opposite

Have you ever worked with people you couldn’t trust to tell you the truth? It isn’t pretty. Without the ability to rely on what you’ve been told (or that you’ve been told everything relevant), effective cooperation at almost every margin of choice is reduced, because its foundation has been undermined. A new episode of To Tell the Truthmust precede every decision.

That problem of effective cooperation is exponentially increased when we expand our horizons to the many margins of choice at which people in society, the vast majority of which do not even know each other, interact. In a modern economy, all of us are dependent on multitudes of strangers not just for our prospering, but our survival.

The reason people don’t always communicate truthfully is that our reason serves our self-interest. Sometimes we perceive a strategic advantage at other people’s expense from intentionally deceiving them. Our words are also often ex post rationalizations to ourselves and others of why whatever we chose or did was a good idea. But that often makes what people say a frail reed to rely upon. And when political power is involved, the incentives for such deception and self-delusion are put on steroids, because the payoffs are far greater when backed by government’s coercive power.

As a consequence, accurate information about the issues most important to our ability to co-operate with others is often among the scarcest and most valuable of goods. Making it worse, the unknowably vast amount of potentially useful information—the infinite permutations of who, what, when, where, why and how–exceeds any individual or group’s ability to comprehend and integrate it. But voluntary market arrangements based on private property rights provide a powerful mechanism of cutting that problem down to manageable size.

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