Is It Worth Finding Out? The Value of Information

How to judge whether gathering more information is worth its cost, and why choosing not to know everything can be rational.

Before making a decision, we can usually learn more. We can read another review, get a second medical opinion, or run another test. But learning takes time and money. When is it worth finding out more?

Information has value only if it could change your decision

The value of information comes from its ability to improve a decision. If no possible answer would change what you do, the information is worthless for that decision, however interesting it might be.

Suppose you are deciding whether to carry an umbrella. A weather forecast is valuable because it might change your choice. But if you always carry an umbrella anyway, the forecast adds nothing to that decision.

Weighing value against cost

Economists compare the expected value of information, how much better your decision is likely to be, with its cost. It is worth gathering more information when the expected improvement exceeds the cost. This explains why careful research makes sense before buying a house but not before buying a sandwich.

A medical test

A doctor considers ordering a test that costs 500 dollars. If every possible result would lead to the same treatment, the test adds cost without changing anything. But if a positive result would lead to a different and much better treatment, the test may be well worth its cost. Health economists use this reasoning when deciding which tests to fund.

Rational ignorance

Sometimes it is sensible to stay uninformed. The economist Anthony Downs described rational ignorance in 1957: because a single vote is very unlikely to decide an election, a voter may find it not worth spending many hours studying every policy. The same idea applies to many everyday choices, where the effort of becoming fully informed exceeds the likely benefit.

Rational ignorance can create problems when many people make the same choice. If most voters know little about a complex policy, small, well-informed groups with a large stake in it can have outsized influence.

Thinking more research is always better

Endless research can delay decisions and waste time, sometimes at real cost. Good decision-making means gathering information until the expected benefit of learning more falls below its cost, then acting.

Key takeaways

Information is valuable only if it could change your decision.
It is worth gathering when the expected improvement exceeds the cost.
Rational ignorance means it can be sensible not to learn everything.
When many people are rationally ignorant, well-informed interest groups can gain influence.