Musing about perfect markets, perfect information and rational behaviour

I read Economics at university. Many years ago. And my father used to keep telling me that the most dangerous phrase he’d ever heard an economist use was “Let us assume that…”.

So when I studied perfect markets and perfect information and rational behaviour, I understood the assumptions and understood that the assumptions were wrong. But it didn’t matter, or so I thought, since all we were doing was building theoretical models.

When it came to “perfect information”, I was naive enough to believe that the only constraints to perfect information existed in the technologies used to transport that information. It was only as I began to understand how organisations worked that I realised just how naive I was.

But there were parts of me that still believed, And so as Moore and Metcalfe and Gilder marched on, and the web became reality, I could see a way of using social software to inch towards perfect markets in some very specific niches.

Two niches in particular.

I wanted to be able to build a list of requirements using a wiki, and I wanted to be able to go through the search, price discovery, and fulfilment stages of purchasing something that meets those requirements via a blog.

Which brings me to this story in the Telegraph blog, pointed to me via Ross and Alexis. Thanks, guys.

When we look at the problems of requirements capture and their consequent impact on project costs and delivery, we need to look at ways to improve this process. We understand about time-boxing and time-placing, we understand about scope creep and requirements creep, we understand about extreme programming, pair programming, fast iteration. So why can’t we see that we can capture, share, iterate and evolve requirements much more effectively using wikis? I’m confused.

There ought to be a law that says “Information tends to go corrupt when hidden, and tends to corrupt those who participate in the process of hiding the information.”

We waste so much in the procurement process for the same reasons. We don’t use the tools we have to discover what’s out there. We don’t make the process a participative one. We make it worse by allowing the tenderers better access to the requirements than anyone else. I’m confused.

As with wikipedia and with the celebrity blogs, there will always be vandals, some in the interests of art, some in the interests of “freedom”, some for the heck of it.

But you don’t shut down record stores because Banksy makes a statement about Paris Hilton.

You don’t shut down museums because Marcel Duchamp puts a moustache on a copy of La Gioconda.

So why do we do this? Why do we have so much fear of perfect information? So much so we blame the tools, the people, everything.

8 thoughts on “Musing about perfect markets, perfect information and rational behaviour”

  1. So why do we do this? Why do we have so much fear of perfect information?

    because even ‘perfect information’ can never be perfect for everyone. sometimes it’s better to create not so perfect information that will appeal to a broader audience and across multiple cultures.
    bobby

  2. Are we scared of perfect information? I’m not convinced. I think the fear is justifiably of something that is imperfect information being ascribed the powerful moniker of perfect information. That seems rational to me.

    As for the DEFRA experiment – I find it ridiculous. Some civil servant having an obsession with some internal directive about being digital I imagine. Like so many public sector initiatives, it was all theory and gave no thought as to how it could be misused/abused. Moreover, it was categorically undemocratic because not everyone has access to this technology or the ability to use it.

    I don’t think those objections make me afraid of perfect information, but maybe they do.

  3. power will succumb to profit motive though.

    as more information becomes increasingly interlinked, it becomes of exponential value to provide information in return for the gains from access to the whole.

    data interactivity has not yet reached that simplicity threshold.

Let me know what you think

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