In Defense of Ignorance: On the Significance of a Neglected Form of Incomplete Information

Many contemporary theorists have stressed the importance of imperfect information for rational choice. However, they have not generally distinguished between two quite different notions of imperfect information. This paper compares and contrasts the search and ignorance conceptions of imperfect information, noting differences in their implications for market activity, welfare economics, and for the accumulation of knowledge. The analysis suggests that conventional probabilistic characterization of imperfect information can not fully capture the effects of imperfect knowledge on rational decision making nor on market activity. Ignorance must also be taken account of.