The Ku Klux Klan used information asymmetry, such as passwords and secret handshakes, to maintain an image of mystery and fear. This was disrupted when a journalist infiltrated the group and revealed its secrets, turning the mystery into ridicule and causing a dramatic drop in KKK membership.
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Author Steven Levitt, working with journalist Stephen Dubner, shows how economic theories can be used to analyze social issues. Each of the six essays...
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A situation where one person or group has more information than another is a case of information asymmetry. The book explores this concept by looking at the Ku Klux Klan and at modern real estate agents. For over a century the KKK had been a powerful proponent of racist ideology. The group used information asymmetry such as passwords and secret handshakes to maintain an image of mystery and fear. In the 1940s a journalist called Stetson Kennedy infiltrated the group and revealed its secrets on a popular radio program. This helped to turn mystery into ridicule and KKK membership dropped dramatically.