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A knowledge curse: how knowledge can reduce human welfare
Kaushik Basu1, Jörgen Weibull2
1Department of Economics, Cornell University, Uris Hall 422, Ithaca, NY 14853, USA.
Abstract:
Greater knowledge is always an advantage for a rational individual. However, this article shows that for a group of rational individuals greater knowledge can backfire, leading to a worse outcome for all. Surprisingly, this can happen even when new knowledge does not mean the discovery of a new action but simply provides a deeper understanding of the interaction at stake. More specifically, enhanced knowledge about the current state of nature may hinder cooperation among purely self-interested individuals. The paper describes this paradoxical possibility-a 'knowledge curse'-and analyses the evolutionary process that occurs if, initially, only a few people have access to the greater knowledge. It concludes with a tentative comment on ways to avert this potential knowledge backlash.
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