There are two types of economists when the discussion turns to transparency.  First, there are the economists who favor transparency.  Second, there are the economists who oppose transparency.

The fact economists break into two camps when talking about transparency is very surprising.

Why?

Transparency is the necessary condition for the invisible hand of the market to work properly.

As originally conceived of by Adam Smith, the invisible hand sets prices that efficiently allocate resources when the buyers know what they are buying and the sellers know what they own and are selling.  This can only be achieved in the presence of transparency when both buyer and seller have access to all the useful, relevant information in an appropriate, timely manner so they or third party experts they hire can assess this information before a transaction occurs.

Of course, there are the economists who oppose transparency.  They put forth a variety of arguments  that can be summarized as “transparency is not necessary for the invisible hand of the market to work properly”.

If these economists are right, then the following must be true:

The invisible hand of the market works properly when either buyers or sellers or both are blindly gambling.

Hmmm…..  I am not an economist, but if blindly gambling produces the same results as buyers knowing what they are buying and sellers knowing what they own and are selling, then the whole edifice of economic theory is highly suspect.  After all, common sense suggests over the long-run blindly gambling should not produce the same results as informed buyers and sellers transacting.

I am always amazed by the large number of articles opposing transparency in the peer reviewed economic journals.  There are two possible reasons these articles are not rejected by the economists who reviewed them.  First, despite their PhD, the economists reviewing the articles are clueless that transparency is the necessary condition for the invisible hand of the market to work properly.  Second, the economists reviewing the articles actually believe that blindly gambling produces the same results over the long run as informed buyers and sellers transacting.

While the first explanation cannot be completely discounted, the second explanations suggests a large number of economists who subscribe to the “crap-shoot theory of the invisible hand”.