Information asymmetry, access and development

In On Cell Phones and Indian Fishing, Greg Mankiw points to an article in The Washington Post:

“The two crucial changes that have happened in my lifetime,” said Jayan Kadavunkassery, 37, an Andavan crewman in a pink button-down shirt and a lungi, “are the inboard motor and the mobile phone.”

Rajan said that before he got his first cellphone a few years ago, he used to arrive at port with a load of fish and hope for the best. The wholesaler on the dock knew that Rajan’s un-iced catch wouldn’t last long in the fiery Indian sun. So, Rajan said, he was forced to take whatever price was offered — without having any idea whether dealers in the next port were offering twice as much. Now he calls several ports while he’s still at sea to find the best prices, playing the dealers against one another to drive up the price.

I don’t know about inboard motors, but the easy access to mobile telephony is quite a change in India. Today, cellphone connections can be had in a matter of minutes, and why stop at the cellphones, a fixed line can be had in a few hours, or a day at the most. A far cry from the situation just a few years ago when it was common to be on a wait list for a telephone connection. My parents endured a 12 years wait circa 1990 for the monopoly operator to bless them with a phone connection. Now, India is going through a phase of growth in the telecommunications sector and the overall teledensity is up and increasing. With an addition of an average 6million connections every month, the Indian telecom industry is going through a boom which is, important to consider, happening outside the planning process almost beyond the controlled license raj of yore. What remains is further penetration in the rural areas, and increased coverage outside of circle A and B cities. For continued growth, specially in rural geographies, wider adoption of GSM is the most logical choice considering the wide availability and downward trends in prices of GSM handsets.

Coming back to the main point of the above post, access to relevant information is empowering growth and development by helping the prime agents in making decisions. A paper by Robert Jensen considers the effect of information assymetry on welfare, in line with the growing field of information economics. The paper is not available online as of now, Greg Mankiw has posted some of the abstract, the starting line from which reads:

When information is limited or costly, agents are unable to engage in optimal arbitrage. Excess price dispersion across markets can arise and goods may not be allocated efficiently; in this setting, information technologies may improve market performance and increase welfare.

That explains it succinctly.Another success story as a proof of increase in welfare and development driven by access to technology and information is provided by the eChoupal project of ITC. The project was a winner in the Economic Development category of the Stockholm Challenge 2006 and the Development Gateway award in 2005. The important difference being that for the eChoupal network deployment, the main driver is a need to get access to the producers. The fishermen on the other hand, the producers themselves, are riding the wave of wider deployment of mature technologies which benefit from a continual reduction in the barriers of adoption.