Information as Public Good

And how legalizing fees for secret keeping can help solve it.

i.

Information is a public goods problem. It is not rivalrous, and not practically excludable. If anyone reports a fact, it will be disseminated by other sources. This means that the finders of facts do not get the full value of the facts they find, strongly implying that we do not invest enough time and effort into finding facts. How then, shall we correct this externality?

The first solution people reach for when faced with an externality is government. We should have the government compensate people for the information they create, under this model. The government cannot, obviously, know to the dollar and cent the value knowledge creates, but it does know enough to figure out which potential facts are the most obviously useful. It can do so through prizes given for completing a task, through grant programs or government funded research, or by giving a monopoly (a patent) to the creator. 

However, this system breaks down as the things to do become less obvious. What is to be done about facts that are useful, but not obvious? These are things which the newsmedia finds. They have a paywall, or show advertisements to get their revenue. However, these companies do not earn their profits for finding new facts. They earn it for entertainment - being the first to break something is something that we like as part of our entertainment. News companies do do investigative reporting, but only so as to raise the status of the outlet. Those companies which do original reporting are seen as more meaningful and serious, which is relevant both in attracting consumers, but also in attracting writers - people want to feel their work is meaningful, even if people are reading the story not so much for the bare factual information (which can be extracted and disseminated in a paragraph) but for the quality of story-telling in the writing.

ii.

Suppose you have a secret. Perhaps you are an accountant for a company that makes a stablecoin, and you discover that, contrary to what they claim, the coin is not matched 1 to 1 with dollar reserves. Or perhaps you are an employee at a restaurant with inadequate food safety standards. We the public would be very interested in knowing such things, but what reason do you have to tell anyone? They still give you a paycheck, and if you tell, you might lose that. 

Perhaps you would tell us this secret for money. The government can hardly figure out the value of the information, nor can they be expected to fairly and impartially reward leaking things powerful individuals want hidden. However, there exists a way for us to collectively reward it.

 When we learn about a company doing something we dislike, we are less inclined to buy from them. Companies wish to avoid this, and so would pay to keep the things we dislike a secret. The accountant should be able to anonymously tell his employers that he will leak the news to the press unless they pay him a stupefyingly large sum of money, and the waiter gets a fee for not telling the local tv station about the rats in the kitchen. By allowing people to get money for finding out about bad things, we incentivize fewer bad things. It can eradicate fraud as a business model altogether.

You may have put together that this is simply what blackmail is. I have avoided using the term up until now, because it is so saturated with connotations of malfeasance that most people reject it immediately. I assure you; it is beneficial. Indeed, in some contexts we use it already. We often promise that anyone who gives information leading to the capture of an individual gets a monetary reward. We offered 25 million dollars for Osama bin Laden. We did this in hopes that some of his compatriots might betray him. We might offer 20,000 dollars for a murderer, or a 1,000 for a thief. Then when we capture the perpetrator, we fine them. How is this substantially different from the consumption choices of individuals at large financing the informal bounties of blackmail?

We have already noted how blackmail disincentivizes bad actions. The other advantages of this is that it allows the degree of punishment to perfectly suit both how much we actually care about the wrongdoing in question, and the ability of the perpetrator to pay. A poor man might now be driven into dire financial distress by a traffic ticket, which costs the same for everyone. He is at no risk of blackmail however - for who would want to find the secrets of a person who cannot pay? Blackmailers would target only those who both want to keep things secret, and could pay, and would only ask for what was within the other’s means. 

Secondly, it allows punishment to move to precisely where we really want it to be. We still sentence people to substantial jail sentences for the possession of marijuana. Does anyone actually care? If people do, then smokers will pay to keep it secret, or choose not to do it. If we don’t care all that much, then it becomes effectively legal. We can greatly simplify our regulatory code - we will get what we actually care about, and nothing more. It also allows us to disincentivize things, such as cheating on your spouse, which we disapprove of, but have no legal sanction. 

  That is why I believe it is a good thing. I’ve no doubt that any comments will raise novel and intriguing objections, but I hoped to address two very common ones. The first is this: suppose you are a gay man during a time when homosexuality was anathema. Wouldn’t it be terrible for someone to reveal your secret?

I hope that, as a bisexual guy dating a guy, I am in an adequate position to answer this. If indeed 100% of people disapproved of homosexuality so much as to cut off all relations with me, that would be very bad for me. I would likely starve. However, requiring 100% of people to disapprove of it so strongly as to impoverish themselves by not associating with me is vastly better than 50% of people voting to imprison me. People will get homosexual behavior decreased to the extent they disapprove of it, and not a whit more. If it is very important to me, I will not be arrested. I will be free to continue. Moreover, actions are a better show of preferences than voting. It is very easy to vote to deny people rights, but very hard to choose not to accept their money and buy their goods. I think we would be less prone to moralistic condemnation of harmless things, in a world of blackmail.

The second objection (I hope I am not summarizing it in an unfriendly manner) is that it’s still a bad thing for people to betray others, even if they’re only betraying them doing bad things, and it’s bad for people to snoop around, even if they only get anything out of it if they detect bad things. The objection reminds me of the stigma around snitches. “Snitches get stitches”, as the saying goes. It is bizarre to me that anyone besides bullies might agree with it. Shouldn’t we want people to tell on the bully? Making it harder to penalize cheats, crooks and liars only benefits cheats, crooks and liars. Why do we want do we want the status quo of encouraging people to participate in fraud? It doesn’t make sense to me. Why have we let bad people bamboozle us into helping them?

But if you still don’t like it, that’s fine. The good thing is, if blackmail is legal, then the amount of blackmail will exactly what people want it to be. What keeps us, in a world where people despise blackmail, from blackmailing the blackmailers?

It’s just something to consider. :)