The value of (not) knowing
We pay for goods and services, but are we also prepared to pay to know something — or indeed to not know something?
The economy is mostly concerned with the trading of goods and services — that is what people and businesses buy and sell. But there is something else that is sometimes also bought and sold: information. In many cases, information (or knowledge, a term generally used for information with meaning) can be valuable because it can lead to material gain. It is a means to an end.
A hotel chain may well be willing to pay good money for a report on the hospitality industry, that interprets market data and sets out the trends in demand and supply. Sure, this payment compensates the work the company that conducted the research did and the glossy paper copy, but the value is entirely in the end result: the knowledge embedded in the report.
Not so new
The idea that information is a meaningful concept in economic thinking is not new. George Stigler, who would be awarded the Nobel prize in 1982, wrote a seminal article in 1961, “The Economics of Information”. It deplores the relative neglect ‘information’ had been suffering in his field at the time, and expands on two specific examples where information has demonstrable economic value: price search and advertising.
But especially we, consumers of things, are also consumers of information and accumulators of knowledge — for which we are often prepared to pay. Our ancestors used to buy (and a dwindling bunch of contemporaries still do buy) newspapers, clearly a source of information. And why do we acquire television sets and why do we pay for a cable or satellite subscription, if not for the information the screen transmits to us — in the shape of news, documentaries or entertainment, as even the latest intrigues in Eastenders, The Bold and the Beautiful or whatever is your preferred soap are information.
This kind of information is not really a means to an end. Its principal purpose seems to be the satisfaction of a certain curiosity — we like to know what is happening. And curiosity can take many shapes. Decision Technology, a British consulting firm, runs occasional surveys asking people whether they’d be prepared to pay £20 (€24, $26) for any of a range of possibilities (like having somebody else do one’s Christmas shopping — 38% of respondents would). One of the recent possibilities was also the ability to see the information the Government holds about a person of one’s choice, and 29% of respondents would be willing to give up £20 to access that information. Not huge, but still, nearly a third of us are apparently nosy Parkers.
Last week, an organization campaigning for equal pay for women in the UK called for an enforceable legal right for women to know what their male colleagues are earning. Ostensibly, the motive here is to avoid pay inequality through obfuscation, so in that sense it is a means to an end. However, there is probably also an element of curiosity at play: would you not even be a tiny bit interested to know how much some of your colleagues or superiors are getting paid, even if this would make no material difference at all to you? It would be interesting to survey employees and ask them how much they’d be willing to pay to find out a particular coworker’s salary.
In Norway, Finland and Sweden, personal income tax returns are publicly accessible, so the question how much one would be willing to pay to find out what not just a colleague, but also your neighbour, your brother-in-law, or the presenter of the evening news earns is not relevant. Only, in Sweden, you will be told who accesses your tax return — so you will know who is the nosy parker. Presumably this puts the brakes on wholesale sniffing around. Here too, it would be interesting to find out how much people would be prepared to pay, (a) to peruse someone tax return, (b) to know who has shown an interest in their tax return, (c) to consult tax data anonymously, or even (d) to keep their data secret.
When we’d rather not know
But things get really intriguing is when we, ourselves, prefer not to know certain information. Unlike time or money, where we generally consider having more is never worse than having less, sometimes there are things we do not want to know. This was demonstrated in an ingenious experiment by Jason Dana, a behavioural scientist currently at Yale university, and colleagues. As part of a larger study, participants played a modified dictator game, in which one player (the dictator) makes a choice that gives both themselves and the other player (the recipient) a particular payoff. In this version, the dictators could choose between two options A and B, with a payoff of respectively $6 and $5 for themselves. The payoff for the recipient was either $5 or $1, but initially which option gave which payoff was hidden. The dictators could then reveal that information before making their choice (so they’d know what the recipient got), or leave this information concealed.
The researchers found that 44% of the dictators chose not to know whether their choice would give the recipient $5 or $1. This phenomenon is known as wilful or deliberate ignorance. Why might this be? A likely explanation is that the dictators, if they chose the maximum payoff of $6 for themselves unaware what the recipient would get, avoided any responsibility for the recipient’s payoff, and any possible guilt for depriving the recipient of $4 for the sake of an extra $1 for themselves.
If you think this is a somewhat contrived situation, there are plenty of examples from more natural settings. David Hagmann, a behavioural scientist who was one of the speakers at a recent Cognitive Economics workshop, is the co-author (with colleagues Russell Golman and George Loewenstein) of a comprehensive paper on Information Avoidance, which explores the subject in great detail. It lists numerous methods by which people seek to avoid information (from simply not reading papers and not paying attention, to biased interpretation and motivated forgetting). It also discusses many different types of information avoidance. Some are hedonically driven (i.e. we seek to avoid information that can lead to unpleasant sensations, or that would eliminate pleasant sensations), like aversion to disappointment, risk, loss and regret or maintenance of optimism. Others are strategically driven (i.e. we seek to avoid information that might adversely affect future decisions), for example to circumvent temptation or maintain motivation.
One illustrative experiment the paper cites is by Ananda Ganguly and Joshua Tasoff, two economists at Claremont University. They offered participants the chance to have their blood tested for either one, or both, of the two variants of the Herpes Simplex virus, HSV-1 (associated with cold sores) and the more highly feared HSV-2 (associated with genital herpes). Participants had to answer a set of binary questions in which they chose between two options, one earning them $11, the other earning them $1. Two of these questions pitched ‘ earn $1 and have your blood discarded’ against ‘ earn $11 and have your blood tested’ for either one of the two variants of the virus. The researchers found that 5.2% of participants were willing to forgo $10 to avoid the HSV-1 test, but three times as many, 15.6%, would do the same to avoid a test for HSV-2. This suggests people were more averse to knowing whether they were infected with the more serious variant.
Perhaps even more striking is a study conducted by Emily Oster, then a professor Economics at the University of Chicago and colleagues. Huntington’s disease (HD) is a hereditary, degenerative neurological condition: having one parent who has the disorder means a 50% chance of developing the disease also. The at-risk group is very clearly defined, and the risk is significant. And yet, “the most basic fact about HD testing: it is uncommon,” the authors write. Barely 7% of people in this group have chosen to be tested. The others seemingly want to maintain their optimism that they will not develop the disease (the glass is half full), and continue to make decisions (including whether to have children) as if this is indeed the case.
Information is not just an input we use in making decisions. It can be an end in itself — an end we either want to pursue, or one which we seek to avoid. But because it is — literally — so hard to pin down, so hard to value, we are prone to be guided primarily by emotions in deciding whether we do, or don’t want to know something. This is something we had better know.
Originally published at http://koenfucius.wordpress.com on November 22, 2019.
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