Information, Choices and Development
As a young man, not a day went by without some leaflet finding its way into my hand at the school gates. Often several of them. Today they are a rarity. To give voice to widespread hardships no manifestos are written, no general meetings called, no demonstrations organized. Less and less people turn to unions, grassroots associations or parties. That conveyor belt from the particular to the general no longer exists. Now it's all about being plastered on the front page. The Innse (metalworking firm) workers who climbed onto a crane to protest against the closure of their factory have taught us a lesson. Their voice was heard. But how many others? The media's attention is highly selective. Nowadays even temporarily laid-off workers who occupy factory roofs no longer make news. It takes an occupation of the former prison on Asinara, like that of the redundant Vinyls' (chemical factory) workers. What else will they invent after "The Island of the Laid-off workers"?
The world we live in is increasingly information-rich and attention-poor. That stuff between our ears is the scarcest resource. The new big fish are the bosses of attention, those who control the media, the programmes with the highest ratings. Nowadays they count much more than those who hold the physical capital, and are much more influential than the owners of factories, railways and shopping malls.
Much information is expensive to produce, but not to distribute and copy. There are high fixed costs in data collection and very low marginal costs for its transmission. Technological innovations like the internet have made information potentially accessible to billions of people at zero cost. However, in the same way that it is increasingly easy to disseminate, it is also increasingly easy to appropriate without acknowledging its source, the intellectual property. This can make the sale of information impossible and therefore the recovery, by those who originally paid for it, of the costs of production. It can even lead to the collapse or radical overhaul of entire markets, like that of the newspapers, which have high production costs.
The crisis of producers of information can make them especially vulnerable to conditioning by economic and political power. One source of finance that is increasingly vital for these producers who are unable to recoup costs from users is advertising. But advertising can also become an instrument of blackmail. These pressures and attempts at conditioning are often opaque and lacking in transparency, so that those who access information are unable to assess its nature and find it difficult to understand the extent to which it is biased. This raises worrying questions about the exercise of democratic control by citizens. Disinformation also presents significant economic costs. Without information, prices cease to perform their function and markets cannot operate.
One stark example of the costs of disinformation is the Great Recession of 2009. The collapse of entire financial market segments stemmed from increasingly marked information asymmetries, banks that no longer trusted each other because they knew that there were all those "toxic" securities in circulation, and that the banks which held them in abundance would have done anything not to reveal it. Even when banks were only very mildly "intoxicated" and therefore keen to communicate the healthy state of their balance sheets, they had no way of making credible the reassuring information they were transmitting to the markets.
Information, in fact, is valuable to the extent that it is credible. It is not enough for a person seeking employment who wants to convince a potential employer of their abilities to proclaim they are capable of doing a good job. They must find a way of making these qualities visible in order to convince their prospective employer that they are hiring the right person. If they have diplomas to display they will understandably use them to signal their abilities. Whoever has been clever enough to earn those diplomas, the reasoning goes, will do well in other jobs too.
But employers do not always want to be reassured about the abilities of their employees. Let me describe to you, almost to the letter, a deeply alarming not to mention dispiriting scene I witnessed a few days ago. A young researcher is hired by a public institution. The work is often routine and falls far short of what he aspires to, and his relations with his manager are formal. But every so often there is potential for dialogue, and on one of these occasions the manager offers him the following life lesson: "you are deluding yourself if you think your brilliant results from foreign universities are important for your career. Look, to get this position I had to put together a bulky file of opaque and questionable events that make me vulnerable to blackmail. This file guarantees my obedience to the person who appointed me – it's the passepartout for my professional career".
Criminal organizations are based precisely on exchanges of this kind, in which the upper echelons ensure the loyalty of the subalterns through blackmail made possible by the possession of compromising information that regards them. The information must remain confidential for the blackmail to work. Perhaps the real reason why broad swathes of the Italian ruling class cannot countenance wiretapping is that it makes public compromising information that must instead remain classified to cement hierarchical relations and maintain power dynamics that depend on mutual blackmail.
Of these and other issues we will speak at this fifth edition of the festival. We will try to provide the tools needed to select economic information based on its importance and reliability, to read the statistics that are so often discredited by politicians. This year, as in the past, our aim is to deserve the attention that you kindly give to this festival.
Scientific Coordinator of the Festival of Economics