Information and the Market Economy
Information and the Market Economy
The Soviet Union tried to manage the information needed to run a centrally-planned economy. Their efforts failed in large measure due to information shortcomings. Capitalism is a much better information processor, relying on the ‘invisible hand” to recognize and respond to market signals. But capitalism can have information failures too, as evidenced by Enron, the subprime mortgage crisis, and the work of information economists.
Keywords: Information economics, Collapse of the Soviet Union, Subprime mortgage crisis, Invisible hand, Garbage in, garbage out (GIGO)
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