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Is there any reading I can do of what information asymmetry can do to free markets?

More Anonymous
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  • Can you please clarify what exactly you mean by 'does'? You can read loads about information asymmetry on this se, we even have a tag for it, there is some literature recommendation in the comments under this question, there is a self contained answer to this question, etc. – Giskard Nov 03 '23 at 04:51
  • Sorry I'm not an economist but in this sense: https://philosophy.stackexchange.com/questions/104402/on-the-nature-of-goods – More Anonymous Nov 03 '23 at 04:52
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    Well, imo that question is unclear (where does currency come in?), but I don't have voting priviliges on [Philosophy.se]. Seems like looking up the term 'rival good' might be beneficial for you. Also, in economics it is accepted that free markets do not generally result in efficient allocation of public goods (which are non-rival goods). – Giskard Nov 03 '23 at 04:55
  • The question in the title is simply too broad, there are different situations, however the literature reference request in body would be fine but then I would advise to change title to reflect that you are looking for references to learn about information asymmetry – 1muflon1 Nov 03 '23 at 08:27
  • Hi @MoreAnonymous. There is some circularity in the question if you ask me. If a market is characterised by information asymmetry (IA), it fails neoclassical requirements of being "free." However, that may be purely semantic. So, to get to your real point on what IA does to a market, it basically stops the price mechanism operating as it should. Therefore, in markets characterised by IA, you can get shortages, poor equilibrium outcomes etc, that wouldn't otherwise be present. This talk is worth a listen: https://www.youtube.com/watch?v=YfRdKQX5nLA&t=1975s – EB3112 Nov 03 '23 at 11:52
  • Didn't some dude win a Nobel prize for this? – More Anonymous Nov 03 '23 at 12:22
  • @EB3112 you are confusing 'free market' with 'perfect market'. Free market can be subject to asymmetric information. Free market means market free of price and quantity regulation/control i.e. market where supply and demand determine price and quantity. Such market can very well have imperfect information and still be free market. It is not perfect market. – 1muflon1 Nov 03 '23 at 15:20
  • Which market are we in? Like the globe? – More Anonymous Nov 03 '23 at 15:21
  • Brb (will delete this message) – More Anonymous Nov 03 '23 at 15:22
  • @MoreAnonymous what are you talking about? Globe isn't in any market. Market is place where supply and demand meets. There can be international food market, but there is no globe market unless you talk about market for literal globe orbs or something like that. We (people) enter various different markets. When you look for job you enter labor market, when you buy food you enter (local not international) food market etc. Different markets can have different characteristics. A market can be perfect or imperfect, free or centrally planned market etc you have to examine each market separately – 1muflon1 Nov 03 '23 at 15:23
  • But they all interact ... So what's the time evolution? – More Anonymous Nov 03 '23 at 15:26
  • @MoreAnonymous what do you mean by time evolution? A) Not all markets necessarily interact. Centrally planed markets in economies under autarky like in North Korea don't really interact with other markets. B) There is interaction between most markets but imperfect market for local food can interact with perfect international food market, or centrally planed market in some open economy can interact with free market (e.g. there can be interaction between centrally planed healthcare insurance market in UK and US mostly free/mixed insurance market, etc. – 1muflon1 Nov 03 '23 at 15:28
  • I'm referring to the global financial market. Sure North Korea is an exception, and I'm sure there are more. But the ones the IMF ones – More Anonymous Nov 03 '23 at 15:31
  • @MoreAnonymous news talk about various markets. Also you need to be specific, because for example, financial markets for money are centrally planned, whereas financial capital markets are mostly free (at least in the west less so elsewhere). There isn't really one single global financial market. – 1muflon1 Nov 03 '23 at 15:34
  • Your right I will need to read more about it. But I think I can ask as a concerned citizen? – More Anonymous Nov 03 '23 at 15:34
  • @MoreAnonymous well what do you mean? You can ask your friends or other people of course, on this site we ask that you do at least some minimum background research to make your question clear, question "which market globe is in?" would be closed for needing details and clarity most likely. Its also impossible to give precise high quality answer to very vague questions like that. – 1muflon1 Nov 03 '23 at 15:36
  • Fair point. I can this helps for context: https://economics.stackexchange.com/questions/56878/economic-predictions-and-the-general-intelligence-systems-research – More Anonymous Nov 03 '23 at 16:01
  • Hi @1muflon1. No confusion on my part. I wilfully distinguish between: (1) the neo-classical market, free-from frictions and so-called imperfections, and (2) the political fetish of a free market, absent of regulations. I adopt the former as a definition of a free market in the context of this discussion, because it is analytically more useful. Therefore, it is much more useful w.r.t to literature/references, as expected by the OP such as Akerlof, Stiglitiz, Finkelstein, etc etc. – EB3112 Nov 06 '23 at 10:05
  • @EB3112 can you recommend me their books? – More Anonymous Nov 06 '23 at 10:31
  • Hi @MoreAnonymous. I would start with the video link I attached above or perhaps the Nobel Prize lectures of people like Akerlof, Stiglitz etc. It is the same type of material you'll find in graduate textbooks, but presented for a more public audience. Stiglitz: https://www.nobelprize.org/uploads/2018/06/stiglitz-lecture.pdf. Akerlof:https://www.nobelprize.org/uploads/2018/06/akerlof-lecture.pdf. Finkelstein talk: youtube.com/watch?v=YfRdKQX5nLA&t=1975s. Also, the below reference by @@WilliamT is a perfectly good place to start. – EB3112 Nov 06 '23 at 11:52

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The Economics of Asymmetric Information by Brian Hiller provides overview of main economic problems in relation to asymmetric information.

WilliamT
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