We live in the information age, or more accurately referred to as the age of “information overload.” Anyone who has a Twitter account knows what I’m talking about. You may feel like you’re drowning in a flood of Facebook statuses, emails and YouTube videos. With information coming at us every which way, how can we process it all? How do we even know it’s true?
Neoclassical economics assumes people act on the basis of perfect information. With all the information that’s out there, this might seem like a good assumption. Dr. Robert Nelson, a professor of environmental policy at the School of Public Policy at the University of Maryland, does not agree with this theory. In his critique of neoclassical economics at Acton University, he said,
Perfect ignorance is a better starting assumption than perfect information.
Rather than perfect information, perhaps we only need “good enough” information. Economist Vernon Smith claims markets converge toward equilibrium by trial and error. Experiments outlined in his book Rationality in Economics show equilibrium can be reached with a limited amount of information. Similarly, Austrian economist Friedrich Hayek argues that prices are sufficient in signaling value and enabling efficient economic decision making.
An experiment conducted by Paul Andreassen in the late 1980s tested two groups of MIT business students to see how information affects stock investments. One group could only see changes in prices while the second group was allowed to read The Wall Street Journal, watch CNBC and consult experts on market trends. Unexpectedly, the group with less information earned twice as much as the well informed group. His analysis suggests the high-informed group was distracted by the rumors and insider gossip from the extra information. The excess information encouraged them to engage in much more buying and selling than the low-informed group because they were confident their knowledge allowed them to operate more efficiently in the market. In this case, price signals and the invisible hand of the market proved more efficient than an overload of information.
In a world that seems to have all the technology and science to answer life’s greatest questions, we realize it is still imperfect and demand more. For example, many believe that overwhelming forensic evidence was enough to convict Casey Anthony of the murder of her daughter Caylee, but the verdict proved otherwise. The jury demanded more than just DNA; they wanted the exact time of death and a stronger motive.
Information is a necessary prerequisite for belief, but we must be careful not to fall into the trap of doubting Thomas (though we have all been there). Always demanding personal evidence and more proof in order to believe something will only lead to skepticism. A skeptic says he will only believe it if he sees it, but rarely do we ever experience information from a primary source. Should we believe the facts we read in our textbooks? Should we believe what the experts say on the news? Belief always takes a step of faith.
In his encyclical letter Fides et Ratio, Pope John Paul II asks,
Who, for instance, could assess critically the countless scientific findings upon which modern life is based? Who could personally examine the flow of information which comes day after day from all parts of the world and which is generally accepted as true? Who in the end could forge anew the paths of experience and thought which have yielded the treasures of human wisdom and religion? This means that the human being—the one who seeks the truth—is also the one who lives by belief.
In the age of technology and information overload, we should be humbled in our human limitations. Because information is imperfect, it takes a little faith in the invisible hand to reach equilibrium in the free market. But we should not center our faith in free markets because markets are imperfect and will fail as everything else in the world. Information, which is necessarily imperfect, and faith is required in the human pursuit of truth. Whoever knew markets could teach us so much about faith?