Asymmetric Information and Public Policy

Paper Summary:

The paper reviews asymmetric information and discusses how the failure of Canadian policy makers to appreciate it as a symptom of market failure, made it all too easy for them to later overlook it as a fundamental cause of the decline of a major Canadian airline subsidized by Transport Canada. Beyond that, the paper also examines how this malaise affected Transport Canada's curious inability to find the information it needed in both security matters and when it came time to privatize some of its holdings.

From the Paper:

"The relationship between asymmetric information (which is essentially one party in free market transactions knowing more than the other party) and market failure has arguably been under-acknowledged by policy makers throughout the history of the modern bureaucratic state - at least in matters pertaining to the state's involvement in the dispensation of "merit goods" to a public that may, for a host of reasons, be unreceptive to whatever it is that the state considers "meritorious"."

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