- The Washington Times - Sunday, October 21, 2001

In awarding three U.S. economists the Nobel Prize in economics, the Royal Swedish Academy has shined the spotlight on a theory that is remarkably timely to our post-Sept. 11 world. The research of the three prize winners focused on the impact of imperfect or asymmetrical information on diverse markets, a theoretical lesson that can be helpful during America's war on terrorism.
George A. Akerlof of the University of California at Berkeley, A. Michael Spence of the Stanford University School of Business and Joseph E. Stiglitz, formerly the World Bank's chief economist, integrated psychology, sociology and economic elements into their study of the impact of asymmetrical information. The basics of the theory were laid out in a 1970 paper by Mr. Akerlof, "The Market for Lemons," which held that if buyers cannot choose between second-hand cars by inspecting them, kicking their tires and test-driving them, then the market will reflect the average quality of the cars on the market. Once that occurs, then the sellers whose cars are worth more than the average will take them off the market. As a result, the cars for sale become increasingly shabby (which drives prices down even further), until only the worst cars are left or the market collapses. Although these findings may seem commonsensical, the research was innovative at its time and debunked some widely accepted textbook theories.
So how can this thinking be applied to the government? Well, the same elements of public perception and psychology would be applicable if the government is seen by the public as actively repressing information. The public will reassess the value it attaches to all information that is released, and distrust will increase as the level of repression increases until the public's trust in the government could ultimately break down.
This is no less important during times of war, when the temptation to gag anti-American propaganda instead of revealing and debunking it is great. Consider the White House request to media outlets to desist from airing statements by Osama bin Laden. "The White House asked television networks … to use caution in carrying unedited videos of Osama bin Laden because they were unfiltered propaganda and may send coded instruction to his operatives," said White House spokesman Ari Fleischer. The Bush administration later extended this request to the written press as well. While the national security priority Mr. Fleischer cited is indeed legitimate, concern over bin Laden propaganda in the United States makes the White House appear excessively defensive.
Indeed, revealing national secrets is one thing. But exposing the faces and voices of America's enemies is in everyone's best interests.


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