Just come across a paper by two Italian economists on the social value of public information.

Post Britain’s Northern Rock banking debacle, the words of two other economists [pdf] seem a little prescient:

For a decision maker facing a choice under uncertainty, greater access to information permits actions that are better suited to the circumstances. Also, to the extent that one decision maker’s choice is made in isolation from others, more information is generally beneficial. This conclusion is unaffected by whether the incremental information is public (shared by everyone) or private (available only to the relevant individual).

How far does this conclusion extend to social contexts where decision makers are interested parties in the actions of others? Public information has attributes that make it a double-edged instrument.

…

In the highly sensitized world of today’s financial markets populated with Fedwatchers, economic analysts, and other commentators of the economic scene, disclosure policy assumes great importance. Our results suggest that private sources of information may actually crowd out the public information by rendering the public information detrimental to the policy maker’s goals.

The heightened sensitivities of the market could magnify any noise in the public information to such a large extent that public information ends up by causing more harm than good.

If the information provider anticipates this effect, then the consequence of the heightened sensitivities of the market is to push it into reducing the precision of the public signal. In effect, private and public information end up being substitutes, rather than being cumulative.

(Social Value of Public Information. Authors: Morris S.; Shin H.S.. Source: The American Economic Review, Volume 92, Number 5, 1 December 2002)