When the Royal Swedish Academy of Sciences awarded this year's Nobel Prize for Economics to George J. Stigler, it cited his studies of public regulation.
Studies of regulation may have helped win the University of Chicago professor a Nobel award, but Dr. Stigler likes to talk about another area: the economics of information. That field of study deals with the costs and benefits to consumers of obtaining information needed to buy products or undertake other activities.
More information does indeed pay off, but only up to a point, Dr. Stigler says.
''If you're buying a new automobile and go to three or four different dealers , and specify the exact model and make and extras, and everything, you'll get different prices,'' he notes. ''They won't be enormously different, but they could vary by a hundred, or two, or three hundred dollars.''
But going to several more dealers simply will not pay back what it costs to make all those trips. ''There are costs of acquiring information. If I go to five dealers in Chicage for a Ford or Chevy or something, then go to 15 more, the likely return on those next 15 dealers is on the order of $5, or $10, something small,'' he explains. ''I've gotten most of it from the first visit.''
Since the tall, white-haired teacher pioneered the economics of information, it has been extended to cover a much wider area.
''It opens up a lot of other boxes,'' he says. ''It has immense application in the labor market. If you're looking for jobs and you're wondering about the safety of jobs, that's an information problem. And how good is the information workers possess with respect to injury?
''The whole area of protection of individuals against ignorance really needs an objective basis. The economics of information is a major scientific base for appraising when we need (more information), when we don't, and when it isn't worth what it costs.''
In general, he believes, people ''try to be informed to the extent it pays to be informed.''