**Looking for resources on information asymmetry, monetary trust, and political influence**
I have a B.A. in economics with a finance concentration from Roanoke College, but I have been away from academic economics for some time. Most of my recent work has involved process analysis, contracts, financial reconciliation, and looking at how written rules affect actual outcomes.
I have been thinking about whether the lemons problem can be applied to money, government debt, and other public claims. I may simply be combining theories that have already been addressed elsewhere, so I am mainly looking for reading recommendations or help identifying the correct area of research.
The basic idea is that the public accepts money or government obligations without being able to fully observe their future quality. The government or issuing authority has more information, but it also has the ability to change that quality later through monetary, tax, redemption, or regulatory policy.
There may be an additional problem when parties with concentrated capital have better access to information and greater influence over those policy decisions. A favorable policy produces additional capital, and some of that capital can then be used to obtain more access or influence during the next round. This creates a repeated cycle:
capital creates influence, influence affects the rules, the changed rules create additional capital, and the additional capital strengthens future influence.
The losses may then be spread across currency holders, taxpayers, small savers, public services, or future participants who were not represented when the decision was made.
I initially approached this through Akerlof’s lemons problem, but it also seems related to Stigler’s economics of information and theory of regulatory capture, along with moral hazard, rent seeking, public choice, and repeated games. What I am having trouble determining is whether there is already a model that brings these parts together.
One historical example I am considering is Hamilton’s funding system and the whiskey excise. Federal policy increased the value and credibility of government securities, while some original holders had already sold their claims at substantial discounts and frontier communities carried part of the tax and enforcement burden. I am not presenting that as proof of the larger argument, only as a possible case for examining how information, political authority, and the distribution of gains interacted.
Is there an established literature or model that would be the best place to start? I would especially appreciate recommendations that could help me separate adverse selection from moral hazard and regulatory capture in this type of problem.
