Coincidentally, on my drive this morning I listened to 3 hours of "A Brief History of Almost Everything" and learned that Albert Einstein, a patent clerk 3d grade, submitted three essays that would later change the world for publication and was rejected because who would listen to the ramblings of a patent clerk? He then applied to teach high school and then college as a lecturer and was turned down both times.

The funny thing about the Akerlof story is that I think it illustrates his point: there is a market failure created by bad papers (on "trivial" topics) driving out the good. With Einstein, it's the ramblings of other patent clerks driving out the good.

Of course, one would have hoped that (unlike the used car example) the AER could have inspected the paper and discovered its quality. But, perhaps because of limited resources, they did not.

Vic, I disagree with your "drive out" theory on market failure. Heuristics based on credentialism is a simpler way to get the same wrong outcome; an author's status (an unpublished asst professor or a no-name patent clerk) affects the judgment of editors and their willingness to give the paper a fair assesment. There need not be a critical mass of bad papers on trivial topics or rambling patent clients to reject great work -- just old fashion snobbery. That said, the cite you provide is an excellent cautionary tale. Many thanks, bh.

I guess that's right. If it's costly to investigate the quality of papers, and the heuristic reduces that average cost of investigation (even at the risk of missing a good paper now and again) then you are right, the critical mass of bad papers is not essential. It is still a fun story, eh?

Vic, Given our system of multiple submissions, we can tell this kind of story about almost every law review article. Almost all are rejected by lots of journals before finding a home. Unfortunately, none of them will lead to a Nobel Prize in law.

Akerlof's experience isn't as unusual as you might think.

Gans & Shepherd have a 1994 Piece in the Journal of Economic Perspectives titled "How Are the Mighty Fallen: Rejected Classic Articles by Leading Economists,". For example, Black & Schole's option pricing piece bounced around to so many journals and took so long to be published that the empirical tests of the theoretical model were published before the piece with the model made it into print.

Maybe there's a piece there for you legal sorts - see if there are similar stories behind some fo your seminal works.

So perhaps SSRN can be a blessing, as there may be a blogger-groupie out there to hear the tree fall in the remote forest of articles.

I was reading Larry's post on Ideoblog that the market is efficient, but with a longer timeline. However, we think that the market for ideas corrects itself because these ideas finally were published -- Akerlof's, Einstein's, Black and Sholes'. But, we don't know anything about the great papers that were never published -- precisely because they weren't published. So, there could have been a paper written by an assistant professor that absolutely proved that [insert favorite theory] was wrong, but it never got published and the author gave up/died/became an investment banker.

Information Asymmetry or Asymetric information?

The difference is relevant because calls into discussion markets distribution properties.

Are there any entry barriers?
What determines appropriation of information?

"Cheapest cost avoider" principle in the end rules the matter.
Each agent is responsible for datamining, and each agent is responsible for endogenization of information.

Asymetric distribution of information is an advantage of the firm.
Asymetric endogenization of information is a matter of learning capabilities of the firm.

Asymmetry in the sense originally proposed by Akerloff is an unsolvable problem, one already included in Coase theorem.