The World and I

In this day where we worry when the internet is a bit slow (or not working at all as is currently the case with my internet), our phone is not charged and so not only can we not be reached but we cannot reach anyone and other numerous means of communications that we have come to take for granted, it seems that we are heading towards one of the assumptions that much of economic theory is based on: perfect information. One only has to read Tom Friedman’s renowned analysis of what he terms as a “flat world.”

So why am I writing a blog based on asymmetric information if I have just claimed that it is not much of an issue anymore? The reason is that where information plays a crucial role it is still is very much asymmetric. In particular I am talking about my experiences in Malawi last year where I was working with very poor and more importantly extremely marginalised, which rely on selling their farming produce. However, they lack the information to make the correct economic descisions, i.e. what the going market price for their produce is. This information is vital for them, since they are reliant on menial incomes anyway. 

With a dry and a rainy season in Malawi, there are stark differences in prices when supply is high and when it is low. But who is to tell a marginalised village that the prices for rice, for example, have risen and therefore they can ask for more money? Furthermore, often with negligible education levels it is unfortunately very easy to convince them of otherwise.

Thus what happens in Malawi is that traders make their way to these villages, buy the produce for very low prices and then resell them in markets in towns and cities for the much higher market prices. Effectively, they are using their informational advantage over the villagers.

Of course it is helpful for development projects to provide marginalised villages with grains and seeds to help them grow their own food. However, without the necessary skills and thus access to information to sell their produce, providing them with a steady flow of income, these projects are not sustainable.

So whilst often we use our mobile phones to send a simple text message such as “Hi, How are you?” a mobile phone in Malawi can be used to text the central information centre (which does exist) to say “Hi, what are the rice prices today?”