Information asymmetry can have significant implications for transparency and accountability. When one party has more information than another, it can lead to an imbalance of power and potentially unethical behavior. For instance, in the case of the Ku Klux Klan, they used information asymmetry to maintain an image of mystery and fear. However, when their secrets were revealed, it led to a decrease in their power and influence. Similarly, in business or politics, information asymmetry can hinder transparency and accountability, as those with more information can exploit their advantage at the expense of others.
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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.
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