On Information Asymmetries

Parent A discovers that their child doesn’t know something very important that they’ll need to know as an adult. “Hey Kiddo, I get the sense you may not know what a square root is. Let’s sit down for a few minutes to see if that’s the case. If so, I’ll bring you up to speed fast.”

Parent B discovers the same thing, but handles it very differently. “You don’t know what a square root is? Oh my God, I learned that in the fifth grade, and you’re a sophomore in high school? I can’t believe you’re 15 years old and don’t know what a square root is. You should be ashamed of yourself.”

Boss A sees an employee is not doing their job. This boss pulls their employee aside and tries to find out if they’re aware of the specific expectations for their position. Boss A then tries to find out to what degree the employee is aware they’re not meeting expectations. Lastly, Boss A works together with the employee to craft a plan designed to improve performance, with clear goals and deadlines. 

Boss B discovers the same thing, but instead accuses the employee of loafing. When the employee expresses honest bewilderment, saying they thought they were doing their job well, Boss B becomes even more angry. “That just shows how stupid you are: you don’t even know you’re screwing up! Get it together or you’re fired!”

Spouse A is getting concerned over the household finances. Over dinner, Spouse A says to their spouse, “hey listen, I know this is an uncomfortable topic, but I really think you could be bringing more money into the home. Do you agree? And if so, what are your thoughts about what we can both do to make that happen?”

Spouse B is having similar concerns. Over dinner, and in front of their children, Spouse B asks their spouse to stop being lazy and get a job.

A has a boyfriend. A’s boyfriend has heard a rumor, and asks A if A is seeing someone else. A winces. “Yes,” A answers. A’s boyfriend is devastated, but not crushed, and is able to come back from this very common heartbreak by sharing it with others.

B has a boyfriend. B’s boyfriend has heard a rumor, and asks B if B is seeing someone else. B frowns. “That’s none of your business,” B says.

What’s going on here?

I recently came across the notion of information asymmetries while doing research for a project in political science. An information asymmetry is any situation where one person has more knowledge than someone else.

Given that no one is omniscient, information asymmetries are a fact of life. That is to say, we’re surrounded by people that have more knowledge than we do, and there’s always someone who knows something we don’t.

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Now when the information is trivial, irrelevant, or otherwise useless to us, it’s no big deal. But when it’s important for our purposes or goals, or critical for our growth or safety, the situation changes considerably.

You need that information. Someone else has it. If they know you need it, they are in a position to share it or withhold it. This creates a power imbalance in addition to an information asymmetry.

And it can get more complicated. Remember back in school when you thought you studied well for a test but ended up doing far worse than you imagined? You didn’t know what you didn’t know until you took the test.

So sometimes we know we’re missing information, sometimes we don’t. Sometimes we know we’re missing information but don’t know how important it is. Sometimes we know where to get it, sometimes we don’t. All of these constitute information asymmetries of their own, and they overlap to make the total asymmetry even bigger.

Either way, someone else almost always has the information you need. And far more often than not, that person is in a position to know if you need it, and in a position to provide it.

This is the situation between parents and children, bosses and employees, teachers and students, and politicians and their constituents, to name a few examples. It’s also the situation between societies, cultures, institutions, or other groups and their members. One partner to a very important relationship has information the other partner needs in order to grow, stay safe, or even in some cases to survive.

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The question then becomes: how are such information asymmetries handled?

Ideally, they’re handled in such a way as to dissolve them. That is, in the ideal condition, information is shared along a knowledge gradient so that the information gap disappears.

When this is done repeatedly, in an atmosphere of trust and respect, whatever portion of the power dynamic that depended on the asymmetry also disappears. This is the core informational feature of effective parenting and effective teaching.

This is how children grow to become effective parents, and students effective teachers. And while the power differential disappears, what’s often left in its wake is a feeling of respect and at times even love for the teacher.

One important feature of the ideal scenario is that information is viewed here as a positive-sum game. That is to say, the value of the information increases the more it’s given away. Here when information is shared, not only does everyone win, but people (and institutions) become individually richer than when they held the information alone.

In a positive-sum information asymmetry, someone with information is content, but never truly satisfied unless and until that information is shared with another. Very often in this scenario the information in question is viewed as far more important than the person temporarily carrying it. This makes the bearer of such information feel far more of a steward than an owner.

When the information is communicated in such a way that now two people have full access to, share, or otherwise command it, the interpersonal wealth of the situation grows, sometimes immeasurably. A relationship is created that is far richer than the information itself.

To borrow some terms from Pierre Bourdieu, this is how cultural capital turns to social capital.

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This is not always the case, however. On many occasions and in many relationships, knowledge is withheld so as to create, maintain, or even exacerbate information asymmetries. This is almost always done for the political or psychological benefit of those who hold the information.

Here information is a zero-sum game. It’s viewed as a precious commodity that is lost whenever it’s shared, and whose value increases the more it’s withheld. In the extreme, it can become fetishized, and its retention even eroticized.

In my experience, these situations most often revolve around issues of power, control, and self-esteem. Information is withheld in order to create, maintain, or expand a power relationship over another.

Sometimes this is done for the feeling of control it gives. Someone who’s used to feeling out of control in other areas of their life may feel much better knowing they can control someone else. Or they may just enjoy the rush that sometimes accompanies the feeling of being in control over another.

Other times, it’s a way of boosting self-esteem. There are individuals who learn to feel good about themselves primarily by way of making others feel bad about themselves. Shaming and blaming are probably the two most common strategies here.

Typically the people who need to do this the most are people who have been deprived of power, self-esteem, or control in their lives (especially in childhood), or had it wrested away from them suddenly by another.

In another blogpost I’ll describe these more toxic kinds of information asymmetries in greater detail, as well as suggest some strategies for handling them.

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