Volume 14, Number 2; Summer 2011
The notion that so-called asymmetric information is a source of market failure is deeply flawed. Asymmetric information is essentially a synonym for “the division of knowledge (and labor) in society,” which is the whole basis for trade and exchange and the success of markets. The real asymmetric information problem, moreover, is with government, since all taxpayers are rationally ignorant of almost everything government does. Asymmetric information is therefore a source of government failure, not market failure.
