Ignorance is no excuse.

Here I’m referring to a public sector business case - i.e. a rationale for intervention in the economy based upon market failure. Not a business model. Information failure may indeed be a valid business model for adding value in the private sector. It’s all too common to see ignorance being used as a rationale for a public project - “if only more people knew about X then society/ the economy would be improved”. If there are gains to trade available through better knowlege, then there are (rational) incentives for private individuals to learn. If X is a public sector project then this is actually marketing - justifiable on strategic grounds but not on the basis on market failure. If X is an intrinsically or publicly desirable course of action (e.g. not smoking) then the relevant market failure is actually the merit good case which is based on people having accurate information but choosing to ignore it - here again, information provision is actually a type of marketing.

The business case for information-based interventions should actually be based upon a different type of market failure: assymetric information. This occurs when either the buyer or seller knows more about the trade than the other. This can take the form of hidden information (you don’t know the used-car salesman is selling you a lemon) or hidden action (your insurance company doesn’t know whether you lock your door/ set the alarm every time you go out). This imbalances leads to adverse selection (in the case of hidden information) or moral hazard (in the case of hidden action). Either way, the good quality products or services cannot be distinguished from the bad quality ones on the basis of price (the mechanism through which all markets operate).

Assymetric information is not simply solved by information provision. This market failure creates a business case for redressing the imbalance in information. It might include the creation of accreditation schemes or quality standards that, if credible, will buyers or sellers signal their quality or screen the quality of their trading partners.