Death to Information Asymmetry

An information asymmetry is an economic term referring to a situation in which one party has access to information that another party does not, resulting in some sort of economic advantage to the one who “knows.” Information asymmetry has always been a component of business, and it’s present in all market types; the less consumers know, the more leverage a seller has. The Internet is destroying information asymmetries on multiple fronts.

As mentioned in the previous post, DIY and personal money management sites empower the self with information. At best, these sites teach you how to be thrifty. They show you how to get something done without having to pay a repair shop or consultant. Also destroying information asymmetries are sites like or that offer expert advice. Ebay, Craigslist, Amazon, and Google aren’t DIY sites, but they cut out the search costs in any transaction, and they remove the cost of not knowing you could’ve paid less for something.

My hypothesis is this: as the Internet evolves, the equilibrium price of information continues to approach zero. Finding out how to do things and where to find things are becoming free. Buyers and sellers can find each other easily. This epitomizes the intended spirit of the free-market. It’s as though Adam Smith’s invisible hand has at last been set free to engage individuals in the most mutually beneficial transactions possible.