Is Ignorance Bliss? Information Avoidance and Private Provision of Public Goods

Abstract

Policymakers interested in increasing private provision of public goods have been attempting to improve information availability, so as to enhance individuals’ ability to make socially responsible choices. Nevertheless, individuals are often observed to contribute to public goods without knowing much about the public-good generating process. This observation raises important questions about how to best use information as a policy tool. Using eco-labeling as a motivating example, this paper builds a theoretical model suggesting that (1) individuals may prefer to avoid information about how much their efforts contribute to a public good even if the information can be acquired costlessly; (2) policymakers unaware of such behavior may achieve a suboptimal outcome—in particular, forcing information on individuals may result in suboptimal public-good provision and decreased welfare; and (3) policymakers may need new mechanisms to elicit individuals’ information preferences.

Keywords: information avoidance, public-good provision, information disclosure, eco-labeling

JEL Classification: D03, D83, H41