For misinformation to work, it has to be treated as factual.

This is the central conceit of a recent Bryan Caplan¹ post, “Misinformation About Misinformation”:

Misinformation won’t work unless the listeners are themselves naive, dogmatic, emotional, or otherwise intellectually defective. In economic jargon, the problem is that the story mistakes an information problem for a rationality problem.

Bryan Caplan
“Misinformation About Misinformation”

John Stuart Mill was a British economist who, in the mid-1800s, worked to define the term homo economicus: that humans would be economical (efficient) with their actions. Said a different way: Man would act in their own economic self-interest. And, if they did, markets would work themselves out.

Rational choice theory underscored the economic (monetary) aspect of this, which is why I believe Caplan emphasized this word in his piece. People will make decisions in their lives that make the most economic and social sense for them.

The problem is: They don’t. We’ve known humans act irrationally. It’s funny that I have to say that because if you’re reading this sentence, you’re nodding your head because you know someone who is in debt and just bought a new car. In the face of disease, people are unwilling to act in order to take preventative measures and instead hope to avoid infection.

I agree with Caplan’s premise: It’s not the fault of the entities who produce the poor product. Rationally, their market should cease to exist. If they kept selling a bad product, rational actors would not buy in and the market would dry up.

Except we all know that’s not the case.

via Tyler Cowen

¹ Professor of Economics at George Mason University who authors a Substack called Bet On It