Please ignore the health care reform in two states. That has nothi.docx

Please ignore the health care reform in two states. That has
nothing to do with this!
Morality and Market Failures: Asymmetry of Information
Xavier Landes and Pierre-Yves Néron
Introduction
The central idea defended in this article is that significant parts
of state reg-
ulation could be explained and justified by invoking the concept
of information
asymmetry (IA hereafter), that is, “situations in which not all
parties to a po-
tential exchange are equally well informed,”1 and that such a
concept should be
the target of more sophisticated normative and conceptual
scrutiny. The reason
for more scrutiny is that IA offers a moral vocabulary as well as
a concept to
think about appropriate, that is, morally justified, state
intervention. Moreover,
we argue that a normative account of IAs also needs to include
moral concerns
(equality, distributive and relational concerns, vulnerability,
and so on) that are
not directly related to efficiency (which is the primary focus of
the use of IAs in
economics: to identify and spell out the loss of efficiency, in
the insurance indus-
try for instance). To put it crudely, we argue that ethics of

market regulations is
(partly) a normative theory of market failures and, as such, it
ought to offer an
analysis of the wrongness of IAs, along with addressing other
market failures
such as externalities or adverse selection.
Of course, the idea that market failures, more than justifying
state interven-
tion, are the basis for a more complex regulatory architecture, is
not new. It is
the cornerstone of welfare economics.2 But we argue that there
is a need for an
explicitly normative account that could offer support for a
fruitful ethics of regu-
lation. As Rutger Claassen observes, few authors have
attempted to bring market
failures theorists together with moral and political
philosophers.3 Following the
development of the market failures approach to business ethics,
most notably by
Joseph Heath or Wayne Norman, we will attempt to offer a
philosophical and
normative account of the concept of IA.4
The idea embodied in the market failure approach to regulation
is to consider
that states are often more efficient than market and private
actors for delivering
various goods and services. This advantage is partly due to
states’ superior orga-
nizational and financial capacities, its power (police, law,
tribunals, and so forth),
its capacity to bind future generations, or to respond to
collective action problems
by enforcing collective solutions (e.g., by forcing contribution

to public goods
through taxation).5
An example is social insurance. If industrialized states, in
particular in
Europe, provide social insurance (i.e., mostly health insurance,
unemployment
benefits, public pensions) it is not only for redistributive
purposes or out of
© 2018 Wiley Periodicals, Inc.
DOI: 10.1111/josp.12260
JOURNAL of SOCIAL PHILOSOPHY, Vol. 49 No. 4, Winter
2018, 564–588.
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Morality and Market Failures: Asymmetry of Information 565
egalitarian motives (e.g., using unemployment benefits or
public pensions for re-
ducing socioeconomic inequalities), but also for efficiency
reasons.6 In many in-
stances, states have more capacities than private organizations
for collecting and
analyzing all sorts of data (e.g., morbidity, lifestyles, eating
habits, exposure to
pollutants) of a given population.7 Therefore, they are more
able to calculate prob-
abilities for various risks. Furthermore, states have access to
populations large
enough for producing reliable statistics (in virtue of the Law of
Large Numbers8).
In addition, states have broader resources for facing running

costs, exceptional
costs (e.g., those induced by a sudden economic downturn or a
major environ-
mental catastrophe), or deep structural changes (e.g., aging
population). States
are also better equipped for handling moral hazard: they can
impose stringent
regulations on policyholders (e.g., increased care requirements).
In his lecture
“Politics as a Vocation,” Max Weber describes how states have
a monopoly on
legitimate violence, which implies that they can legitimately
force their citizens
to adopt specific behaviors (e.g., decrease smoking). They also
have the power to
closely monitor behaviors through governmental agencies. No
other agent can put
into action such a combination of power and authority.
In other words, the state is better equipped than markets and
private actors
for handling market failures. This material superiority does not
mean that the
state is necessarily more efficient in all situations, it simply
means that the state
has some initial advantages by comparison with markets and
private actors. This
also implies that political theorists and normative thinkers
ought to pay attention
and that investigating such initial advantages should be a topic.
Of course, exter-
nalities have already started receiving some attention from
moral and political
theorists.9 Moreover, externalities are in the background of
John Stuart Mill’s
harm principle.10 Negative externalities (i.e., costs imposed on

agents who are not
part of the exchanges that generate these costs) are harms to
others, and, as such,
are subject to regulation from a Millian perspective.11
The discussion of the role of public institutions in handling
negative exter-
nalities is hardly new. However, market failures are not limited
to externalities.
They also include monopoly power, missing or incomplete
markets, and so on.
Among these failures, the question of information is central, as
highlighted by
research in economics. As Joseph Stiglitz argued, some of the
most important
developments in economics in the last forty years are related to
information.12
And IA is one of the major sources of market failures. IAs
generate failures
when different parties in a transaction do not possess the same
level of informa-
tion relevant for the transaction and when such difference
results in having one
side unduly advantaged in the transaction. (Our task is precisely
to clarify in
which sense advantages can be unwarranted and, therefore,
morally problematic.)
Economists use the terms information asymmetry or asymmetric
information
to describe situations in which buyers and sellers are not
equally well informed
about the characteristics of products or services. In these
situations, sellers are
typically much better informed than buyers, but sometimes the

reverse is true.13 As
a result, sellers have the opportunity to take advantage of
buyers. IAs are potential
566 Xavier Landes and Pierre-Yves Néron
sources of market failures because they impair the law of supply
and demand;
they lead some buyers to overpay for some goods and services,
diminishing the re-
sources available for other expenses. As such, buyers do not
maximize their utility.
IAs are pervasive in doctor–patient relations (what is referred in
the eco-
nomic literature as “physician agency”14) because doctors
usually know more
about diagnosis, diseases, morbidity, treatments, and so forth
than their patients.
(Nevertheless, this does not mean that there is something
morally wrong. More
on this point below.) Another example is the market for used
cars. The seller usu-
ally has important information about the car (e.g., past
incidents, usage) that he
could conceal from potential buyers for gaining a negotiation
leverage (i.e., if he
wants to obtain a better price).15
Two important caveats before pursuing. First, there are many
instances of
informational issues that do not involve asymmetries. An
example is when de-
fective or missing information impairs the optimization of the

utility function by
individuals. Bob wants to buy a used car; he bought one that
was more expensive
than another sold in the neighborhood. He did not know, nor did
the seller. In this
case, it is not an issue of IA because there is no asymmetry,
and, in any case, no
side in the transaction was unduly advantaged.
Another useful example is defective treatment of information
due to cogni-
tive biases and heuristics. Psychology and behavioral economics
convincingly
demonstrate how individual decisions are deeply affected by
biases such as over-
estimation and loss aversion.16 Nonetheless, perceptive and
cognitive biases in
themselves (i.e., as long as no agent takes advantage of them
during a transaction)
are not IAs because the whole population is assumed to be
equally exposed to
them, everything else being equal. Therefore, there is no
unwarranted advantage.
Two points are worth making about the widespread nature of
cognitive bi-
ases and heuristics. First, it does not mean that in a given
interaction, one agent
cannot have access to more information as a result of having
addressed her own
biases and heuristics. However, such IA is not inherent to biases
and heuristics.
It emerges because some agents have become aware of these
shortcomings and
decided to “fix” them. Second, it does not mean that some
agents cannot take

advantage of widespread biases and heuristics (it is actually one
of the pillars of
marketing and consumer behavior), in which cases there are
IAs. However, in
themselves biases and heuristics are not IAs, though they might
give rise to IAs.
There are also cases that could be labeled as IAs, but do not
raise any prima
facie moral problem. For instance, it is not morally
objectionable per se that your
family physician has more medical knowledge than you do.
Furthermore, it is
arguably beneficial to your health as long as your physician
respects his profes-
sional deontology. Of course, your physician can always abuse
his position, which
is the very reason why guardrails are necessary such as a code
of deontology
(derived from the Hippocratic Oath) and a self-regulatory body
in the form of a
medical college. The point is that it is not the IA itself between
your physician
and you that is morally problematic, but specific instances in
which specific phy-
sicians use IAs for abusing specific patients.
Therefore, our focus in this piece is on morally relevant IAs,
which does not
include situations where IAs do not offer any advantage17 to a
party to the trans-
action. For instance, Eva perfectly knows all about the Volvo

cars. Peter is selling
a used Renault. Prima facie, Eva’s knowledge does not give her
any advantage be-
cause Peter is the only one who possesses the relevant
knowledge about this used
car. To be morally relevant, asymmetries need to be taking
place in the relevant
set of information for the considered transaction.
Second, for the sake of this article, we assume that efficiency
concerns are cen-
tral justifications for markets, and therefore we put aside
freedom-based justifica-
tions. Since our main concern is IAs, we will therefore work
under this assumption
and will not try to show why efficiency might trump freedom.
Thus, the purpose
of our article is threefold. First, it is to offer criteria for
identifying morally relevant
IAs and moral issues conveyed by IA. Second, it is to determine
in which sense
these moral issues justify public regulation, and under which
form. We propose then
a typology of the institutional tools for dealing with IAs, and
for each of them we
highlight the reasons why public institutions may arguably be
better equipped than
private actors for addressing morally relevant IAs. Finally, our
article is a contribu-
tion to debates about public regulation. We propose research
avenues for elaborating
a robust normative theory of public institutions based on market
failures.
1. Moral Issues

The goal of our normative inquiry is to flesh out IA’s ethical
dimensions, that
is, the moral aspects of the relations between agents who have
unequal access to
information. Also, because IA is often used for justifying public
regulation or
arguing that an institutional arrangement is defective, one needs
to clarify what,
if anything, is wrong with IA and why it calls for correction. In
other words, it is
essential to lay down the conditions of morally relevant IAs.
The normative issues raised by IA could be sorted into two
categories, which
partially overlap. The first category is efficiency. The second is
equality. Morally
relevant IAs (not IAs in general) are informational imbalances
that generate ef-
ficiency losses (by comparison with at least one feasible
alternative) that illegit-
imately benefits one agent while burdening another (cross-
subsidization). Stated
differently, morally relevant IAs are efficiency issues (in the
sense that they pre-
vent Pareto improvements18), which embody distributive
dimensions (in the sense
that agents extract illegitimate surplus from exchanges and
interactions19 at the
expense of other agents).20 Although the efficiency and
distributive dimensions
are intertwined, they remain conceptually distinct.
1.1. Human Cooperation and Efficiency
First of all, it is worth beginning with a discussion of the idea
that mor-

ally relevant IAs generate a problem of efficiency. IA may
undermine various
cooperative mechanisms by perverting their operation,
modifying the terms at
the expense of some parties, or lowering the collective benefits
being produced.
When it is so, IA alters cooperative efficiency and reduces the
social product.
Among the mechanisms negatively affected by IA, two deserve
special attention:
market transactions and risk pooling. These mechanisms are
central because
they cover a vast range of human activities in industrialized
economies.
1.1.1. Market transactions
IAs block Pareto improvements because one of the parties in a
transaction
extracts an undeserved surplus, which distorts the price system
and, therefore, the
structure of incentives (i.e., suboptimal activities appear more
profitable due to
IAs, thus resources get channeled and wasted in suboptimal
activities). Of course
IAs create Pareto suboptimal situations because some agents
become worse off
than they would have been with information symmetry. This
definitely embodies
a distributive issue21: some cooperative gains are redistributed
from the not well

informed to the better informed without solid justification
outside the initial,
uneven, distribution of information. If we leave aside the fact
that the extracted
surplus is undeserved (and therefore the moral legitimacy of the
redistribution op-
erated by IAs), this redistribution is economically inefficient
because it rewards a
market imperfection, namely concealing crucial information.
1.1.2. Risk Pooling
Another issue is the alteration of the conditions under which
individuals pool
their risks when they join an insurance scheme. When
individuals decide to pool
their risks, they do so on the basis of how they evaluate their
expected losses (the
product of each possible event probability by each possible
event outcome).22 In
other words, there is the need for an accurate actuarial
calculation of the differ-
ent risks subject to pooling, their probability and the potential
losses they may
incur. IAs jeopardize this calculation because some individuals
conceal crucial
information about their risk profile. In other words, they
conceal some informa-
tion about their risk profile that allow them to get better terms
for their insurance
(e.g., lower premiums or higher coverage) by comparison to a
situation where all
information about their risk profile would be available to other
policyholders.
Adverse selection and moral hazard are common market failures

for insur-
ance schemes. Adverse selection happens when individuals
underestimate their
risk exposure at the time they insure themselves for obtaining
lower premiums
than those they would have paid if other policyholders would
have access to a
more accurate knowledge of their risk profile (i.e., their
expected losses).
Adverse selection deeply affects insurance mechanisms: risks
are under-
estimated and, thus, premiums do not cover for overall risks.
Imagine that ten
merchants operate one vessel each for trading overseas. They
initially face the
same risk (.1) of losing their vessel and cargo. Each cargo is
1,000 euros worth.
Merchants have two options. They can face risk alone, which is
comparable to a
lottery where the outcome is either 1,000 (.9) or 0 (.1).
Alternatively, they can pool
their resources and pay a premium of 100 euros for
compensating the unlucky
merchant.
In the first case (individual lottery), the outcome is either 1,000
or 0, while in
the second case (insurance) it is 900. In both cases, the expected
outcome is 900;
the only difference is the certainty of the result. Whereas the

lottery produces
probabilistic outcomes, insurance leaves no uncertainty. In
technical language,
the standard deviation (from the expected outcome) has been
reduced. In the case
of the merchants, the standard deviation becomes zero, i.e., the
mean outcome is
the only possible outcome.
Now imagine that five merchants buy a defective vessel that has
twice more
probabilities (.2) to be wrecked than a normal vessel.
Additionally, imagine that
the five merchants know that their vessel is defective, but
decide to conceal the
information to save on their insurance premiums. Premiums are
now insufficient
to cover the expected losses that have been shifted from 1,000
to 1,500 euros per
turn (it could be that two ships, instead of one, are lost every
other turn). As it
stands the insurance fails to fulfill its function since the
initially agreed compen-
sation (900) does not cover any more for the expected losses.
After several turns, merchants would most likely realize that the
insurance
is defective in the sense that it fails to cover all losses. The risk
of a sunk vessel
is not .1, but .15 for the whole insured pool. If merchants are
not able to precisely
evaluate the defective vessels, the expected losses will be
spread evenly on every-
one. Therefore, each will pay a premium of 150 euros for being
covered for 850
euros of loss.

The problem becomes a redistributive one since the 150 euros
premiums
does not accurately reflect the risk profile of every member of
the insured pool.
Those who operate normal vessels overpay their insurance,
since they pay more
than their expected losses (100 euros), while those who operate
defective vessels
underpay their insurance, contributing less than their expected
losses (200 euros).
The result is a net transfer of (expected) wealth from the former
to the latter.
It should be noted that this only applies to cases where the
alteration of prob-
abilities has been partly identified (collectively but not
individually). If risks are
not correctly assessed, IA may lead to the insolvency of the
insurance pool due to
a lack of resources (i.e., collected premiums) for making up for
the losses.
The second information issue—moral hazard—characterizes
situations
where individuals, once being insured, adopt riskier behaviors
in comparison
with their before-insurance behaviors.23 The problem is that
moral hazard under-
mines original risk calculation because of the increase of
probabilities of adverse
events and/or attached losses posterior to insurance enrollment.
In addition to
offsetting the economic sustainability of insurance, moral
hazard is a form of hid-
den cross-subsidization: some policyholders paying for others.

And usually, the
issue is perceived as carrying a moral dimension (the unfairness
of the cross-sub-
sidization) since prudent policyholders are forced to pay for
part of the losses of
reckless policyholders.24
Morally relevant IAs take place when policyholders are not
aware of the
proper risks (i.e., probabilities and losses associated with
adverse events) except
for the bold and when the bold uses his knowledge for taking
advantage of the
situation, without a collective benefit, which runs against
cooperation and ef-
ficiency. Other policyholders believe that risks are pooled under
fair terms al-
though these terms are actually altered outside their knowledge
(and without their
consent). Furthermore, cooperation is less efficient because, as
long as the altered
behaviors are not addressed, the bold is likely to transfer part of
her expected
losses to other policyholders. In addition to being potentially
unfair, this imbal-
ance distorts the structure of incentives by handicapping less
risky activities (be-
cause of higher premiums than expected losses) and promoting
riskier activities
(because of lower premiums than expected losses).
IA raises two cooperative issues. First of all, it raises an issue

of (actuarial)
fairness since some material responsibility is shifted from
agents who benefit
from the IA to other agents (while material gains flow the
opposite way). Second,
it raises an issue of efficiency because it disrupts insurance
mechanisms. IA pres-
ents a deeper challenge to social cooperation: because they shift
part of their
expected losses, agents who benefit from IA have no incentive
to reduce their
risk exposure (or they have a lower incentive than if they will
face the full—ex-
pected—costs implied by their risk profile). As a result, the
community produces
more risks than in the absence of IA. This is a case of moral
hazard.
In sum, IAs permeate various situations. Our article deals with
two cooper-
ative settings that are located at the core of market economies:
transactions, that
is, when two or more individuals exchange goods and services,
and risk pooling,
that is, when two or more agents gather their resources for
facing risks. In these
situations, morally relevant IAs threaten the terms of social
cooperation by low-
ering the social product or undermining risk calculations (and
therefore the via-
bility of insurance). But, as seen in this section, morally
relevant IAs have another
characteristic: they illegitimately redistribute resources among
agents, which is
the focus of our next subsection.

1.2. Distributive Issues
Beyond threatening cooperation and efficiency, IA also raises
distributive
issues, that is, issues related to the fairness in the repartition of
the gains and bur-
dens of cooperation and market transactions, as we already
noticed with adverse
selection for insurance. Since IA characterizes situations where
there is an imbal-
ance between two or more agents concerning access to crucial
information, the
equality dimension seems obvious. It is actually possible to use
the vocabulary of
equality to formulate the moral issues carried by the
redistribution of gains and
burdens of cooperation and market transactions. Now, there is
the need to specify
which equality is at stake.
According to a preliminary interpretation, the problem is one of
equality of
opportunities. The fact that two (or more) agents have different
levels of knowledge
gives an advantage that can be cast in terms of opportunities.
Therefore, IA re-
allocates opportunities among agents and such reallocation
constitutes a moral
issue.
Nevertheless, it could be that such reallocation is morally

justifiable. It is
not because two agents have different information sets (one
being more complete
than the other) that it is necessarily morally wrong. For
instance, Eva has per-
haps spent more time investigating market conditions, prices,
and so on, while
Peter has spent his time playing tennis. As a result, Eva knows
more about the
product, and proper price, than Peter but it can be hardly
considered as an issue
of equality, especially of opportunities. Both Eva and Peter had
originally the
same opportunities, but their different levels of efforts lead to
different levels of
knowledge that appear to produce subsequent benefits. If there
are inequalities
of opportunities, they derive from choices for which individuals
could be held
responsible. (Formulated as such, the issue overlaps with many
of the discussions
surrounding luck egalitarianism, most notably discussions
involving gardeners
and tennis players.25)
Other unproblematic cases are when differences of knowledge
result from
education, division of labor, and specialization, differences that
constitute the
basis of the capitalist system as described by, among others,
Adam Smith.26 In
complex society individuals interact on the basis of different
degrees of more or
less specialized knowledge without that being a moral issue per
se (which does
not prevent moral issues in particular situations). For instance,

the fact that your
physician and you do not share the same level of medical
information is the
result of different educative and life choices. Your physician
decided to study
medicine, you decided to study something else or nothing. It is
also the result of
living in complex societies where individuals are put in highly
specialized func-
tions that require very specialized knowledge. In such cases, the
social division
of labor does not necessarily convey an objectionable
occupational inequality,
a problematic distribution of power and prerogatives, but simply
a useful occu-
pational differentiation, which is partly an epistemic
differentiation, based on
agents having highly specific and different sets of information,
knowledge, and
expertise.27
To be sure, in the case of your physician and you, there is an
asymmetry
that may lead to morally problematic situations (medical ethics
is full of such
cases). There is a potential for morally relevant IAs. For
instance, your physician
may take advantage of your poor medical knowledge to enroll
you in a test for
hazardous drugs or could prescribe expensive or unnecessary
medicine sold by a
pharmaceutical company in which she has a commercial interest
or stocks. The
situation is exactly the same with your car mechanic or the
person fixing your bi-
cycle. They both have a knowledge that you probably do not

have. Therefore, they
can use this asymmetry for their own benefit, for example by
overcharging you.
This is what our distinction between IAs and morally relevant
IAs try to capture.
A strict distinction needs to be made for identifying more
precisely instances
of morally bad IAs. On the one hand, there is the IA and, on the
other hand,
there is the advantage that is extracted from the IA. In the case
of dishonest or
deceptive physicians and mechanics, the fundamental problem is
not the IA, but
the objectionable advantage that is extracted from the IA. In
other words, the
challenge is not to put an end to all instances of IA, but to be
sure that agents
in the advantageous situation in regard to the opportunities open
to them do not
push their advantage beyond a fair and decent point, that is,
transform a morally
relevant IA into a morally bad one.
“Fine,” you might think, “but what is ‘a fair and decent point’?”
The answer
is not straightforward and, to a large extent, it is contingent.
Despite this context
dependence, few landmarks can be established. First, the IA
should not be the
result of manipulation or deception, which means that the

acquisition of enhanced
opportunities should not be tainted by immoral or illegal means.
IA should re-
sult from the normal process of (self or institutional) education
or specialization.
Insider trading is an example of an unfair use of IA, leading to a
moral issue
(personal gains at the expense of other market agents).
Second, the advantage stemming from enhanced opportunities
should
not be pushed to the point where it is detrimental to the party
that has less
knowledge. Pushing an advantage beyond a decent and fair
point happens
when IA generates an interaction with a net loss that would not
occur if the
other party would have adequately known the outcomes.
Individuals should
not suffer from IA, which is the case when a physician enrolls a
patient for
a hazardous experiment while concealing the conditions and
implications of
such experiment.
Third, the advantage cannot be pushed up to the point where it
is used to rip
off all gains from interaction or cooperation. IA cannot lead to a
capture of all
social benefits of cooperation. For instance, an agent cannot
exhaust all surplus
of risk pooling mechanisms (i.e., the money collected for
paying out the losses
due to adverse events) for financing her risky activities (once
included the social
benefits generated by these activities).

The threshold of when an advantage is pushed too far ahead is
probably even
lower than “rip off all gains from interaction or cooperation.”
There are plenty of
situations where one agent does not “rip off all gains from
interaction or coop-
eration,” but nonetheless rip an amount large enough for
creating a moral issue.
Without expanding this point further, a general theory of
cooperation is obviously
needed for determining and justifying the legitimate share that
various agents can
extract from cooperative mechanisms, especially in regards to
the distribution of
information. But this exceeds the ambition of this article.
In sum, IA (which generates enhanced opportunities) in itself
(except if re-
sulting from manipulation or deception) is not the problem. In
addition, it should
be noted that IA often appears in situations where the object of
the market trans-
action is the knowledge itself, that is, that agents are
remunerated for the surplus
of information they hold. For instance, if you pay your
physician or mechanics,
it is partly for getting a diagnosis, that is, an appropriate use of
information on a
given problem.
To conclude, if IA should represent a problem of equality of

opportunities,
it is certainly not in itself, but in relation to the use some agents
make of their
initial advantage.
Another domain of equality at stake with IA is power. The very
fact that
Eva knows facts that are ignored by Peter could represent a
problem of equality
of power. But that being so, Eva should be able to change the
nature of the asym-
metry, that is, transform information into power. Apart from
considering that all
information is power, additional qualifications with regard to
information are
necessary.
The fact that your physician or mechanic has an extra
knowledge unknown
to you does not inherently create a moral issue. As indicated
above, it becomes
an issue when the agent on the upper side of the asymmetry
extracts undue sur-
plus or an extra advantage. At that very moment, it becomes
useful to frame the
advantage in terms of power.28 This is not to say that all
asymmetries of power
are morally reprehensible; only some are. The goal of ethical
reasoning consists
in setting the conditions and criteria for distinguishing morally
problematic from
unproblematic power asymmetries (as we have been doing so far
with the very
concept of IA).
Here, various theoretical frameworks can be used for

delineating the fron-
tiers of acceptable asymmetries of power and spotting
unacceptable ones. Neo-
republicanism is particularly fruitful in the sense that
objectionable power is at
the very heart of, for instance, Philip Pettit’s formulation:
power is objectionable
when it could lead to arbitrary interference.29 To be
objectionable, power does not
need to be exercised. It only takes an agent being able to
arbitrarily interfere in
the life of others (i.e., to dominate others). In other words,
asymmetry of power is
morally problematic because it grounds domination,
independently of such dom-
ination being exercised (or not).
Therefore, if we reframe our issue using a neo-republican
vocabulary, ob-
jectionable IA takes place when it creates a situation of
domination, that is,
when an agent has the capacity to use the additional information
to which she
has access for arbitrarily interfering in the activities of other
agents.30 What is
objectionable according to this line of thought is the
transformation of IA into un-
checked capacity to arbitrarily interfere in someone else’s life.
Therefore, neo-re-
publicanism offers a concept (domination) to clearly locate the
origin of the moral
issue with specific instances of IA.
An example is when your physician has some knowledge about
your health
he hides from you that could be later used to her advantage. Or

when your me-
chanic does not completely fix your car because it may be more
expensive (and
profitable for him) to fix later. In both cases, your physician
and your mechanic
do not take immediate advantage of the IA, but the additional
(concealed) knowl-
edge gives them the possibility to arbitrarily interfere in your
future (which they
will).
Briefly stated, it seems that IAs could induce asymmetries of
power (and
therefore become morally relevant) when no ex ante check
exists for preserving
against potential transformation of knowledge into power or
when no ex post
redress mechanism (that could reverse some detrimental
outcomes of accrued
power) is available. For instance, where physicians are not
subject to a deontolog-
ical code enforced by a professional order, where the law does
not protect patients
against unconsented and unbeneficial experiments, where
doctors are not legally
liable for their actions, IAs raise an issue of domination in the
neo-republican
sense.
Finally, IA could be a symptom of more fundamental underlying
inequalities

and vulnerabilities. People may suffer from the consequences of
IAs because
they are worse off on other dimensions. Often IAs are more the
symptoms of,
or predates on, underlying inequalities or injustices than they
are inequalities or
injustices in themselves. This is blatant in the case of credit
markets, in which the
most epistemically vulnerable agents are often the most
vulnerable ones from an
economic and social point of view.31
This is not banal. These dynamics were clearly at play during
the 2007–2008
financial crisis. The subprime crisis partly emerged because
some lenders tar-
geted borrowers with low income and assets (ironically
described as “NINJAs,”
“No Income, No Job and no Assets”) for predatory mortgage
loans. Lenders were
searching to maximize the commission they received on signed
loans with little
consideration of the ability of borrowers to repay their loans.
Moreover, they often
concealed information from borrowers or obfuscated the details
and timeline of
mortgage repayments, making it more difficult for the latter to
make appropriate
decisions. In addition, borrowers were usually lured into
contracting a mortgage
loan by a very low initial repayment rate, which quickly
climbed. To make things
worse, NINJA borrowers belonged to vulnerable socioeconomic
groups with low
resources, education, or knowledge of lending practices. In
short, some predatory

lenders took advantage of both IAs and borrowers’ poor
economic and social
conditions.
Furthermore, IA may build on or reinforce elitism, nepotism,
and other dem-
ocratic defects. Some individuals may acquire highly relevant
information for
specific market transactions because they belong to privileged
social categories,
professional networks, and so forth. Qua members of these
groups, they may have
the opportunity of extracting undue advantages (what
economists characterize as
“rents”) from market transactions with agents who do not
belong to these privi-
leged groups.32 A typical case of this is insider trading.
Here, IA does not (only) express distributive problems that
could be fixed
by redressing the outcomes of specific interactions or
cooperative mechanisms,
but also structural ones, that is, looming issues where some
individuals are con-
stantly at a disadvantage because of some socioeconomic
characteristics. The
fact that individuals are constantly disadvantaged in their access
to information
because they belong to certain groups highlights a deeper
problem: the existence
of structural inequalities within the society and the tendency of
such inequalities
to “contaminate” many dimensions of social life such as
relations to agents with a
specific knowledge (e.g., bankers, mortgage brokers,
physicians, and mechanics).

Again, IA in itself is not the most pressing issue here. It is only
the symptom of
some deeper, more worrying, problems.
2. IA and Public Regulation
Once we have shown that there are instances of IAs which are
morally prob-
lematic and we have identified different layers at which IAs are
problematic, two
questions are still begging:
1. Why could the state legitimately tackle IA? One thing is to
demonstrate
that IAs could be morally problematic; another quite different
question
is to identify the state as the appropriate institution to deal with
them.
Answering this question is to frame the principle of public
regulation.
2. How is it legitimate to do so? In addition, it is important,
once the principle of
public regulation has been generally justified, to delve into the
possible forms
of public regulation.
2.1. The Principle of Public Regulation
First, it should be noted that to identify morally relevant IAs is
different

from justifying public regulation as the proper response (if
there should be any
“proper response”). A different option could be to let
unregulated markets take
care of IA. Such an option would benefit from justifications for
free markets that
emphasize the efficiency of unconstrained markets for handling
and coordinat-
ing knowledge. Other options include dealing with these issues
through the court
system or implementing self-regulatory regimes (like labels).
Our point is that
public regulation requires more extensive justification than it is
often assumed.
For example, Friedrich Hayek considers that the complexity and
abundance
of local knowledge is the main argument for unregulated
markets.33 Because
knowledge is complex and spread over a multitude of agents,
and because markets
are precisely about knowledge creation and transmission
(through prices), it is
preferable for public institutions to stay clear of market
interactions and to impose
as little constraint as possible on individual free interactions. In
this scheme, any
public intervention for altering prices or quantities translates
into disequilibria
and, ultimately, welfare losses (on the top of unjustified
restrictions to freedom
of exchange).
A second point is that public regulation does not mean that
public institutions
should replace private initiatives in any instance where IAs

(could) appear, for
example by nationalizing health care or turning mechanics into
civil servants. It
simply means that rules, more stringent than those free markets
could possibly
set, should be established. It also means that some external
control, that is, control
that is external to markets and private actors, should be
exercised. Finally, it also
implies that external coercion should be available.
So why appeal to public regulation? We have seen that most of
the problems
are not due to IA per se, but to the capacity of agents to exploit
IAs by extracting
additional benefits, acquiring illegitimate power that creates
domination (i.e., the
capacity of an agent to arbitrarily interfere in the life of another
agent), and so
forth. Left to themselves, it is very likely that free markets and
agents will leave
such a capacity untouched. In relation to this shortcoming,
public institutions
have several advantages over private institutions such as
markets.
First, public institutions operate from outside markets, meaning
that they can
alter the conditions under which agents enter markets or the
outcomes of market
transactions.34 This last point does not mean that public
institutions should not be

limited in their capacity to interfere in individual transactions.
Second, public institutions, in virtue of being public, that is,
state-admin-
istered, have extensive powers for imposing disclosure or
demanding comple-
mentary information in specific contexts (e.g., informed consent
for medical
interactions). They can use legal provisions to alter the rules of
the game, for
example by forcing the disclosure of important information
(basis of consumer
law). Through specific agencies, they can monitor market agents
and transactions
to be sure that they respect some standards with regard to the
diffusion of strate-
gic information or conflicts of interest. In addition, they can
punish agents who
unduly benefit from IA.
Third, liberal democratic public institutions, in virtue of being
public, that
is, founded on popular will and subject to the rule of law, are
less prone to arbi-
trariness. (There is still the risk of the tyranny of the majority,
but overall the risk
of arbitrariness is less important in political regimes founded on
popular will
than in alternatives such as oligarchy, monarchy, despotism,
totalitarianism, and
so on.) Of course, this condition assumes that private interests
have not captured
public institutions,35 that the legislative power is issued from
the popular will,
that the executive power is accountable in some meaningful
sense, and that state

activities are checked against the background of fundamental
rights and a legal
apparatus.
Except for radical libertarians, the principle that public
institutions may be
(and are often as a matter of fact) more efficient for addressing
IAs is uncontro-
versial.36 Thus, we do not discuss further whether public
institutions could be
more efficient than private actors or free markets, but assume
this general pos-
sibility for the rest of our article. Instead, we discuss the
conditions under which
public regulation is preferable to self-regulation, that is,
regulation by market ac-
tors themselves within free, minimally constrained markets.
An obvious answer is to pay attention to contingent comparative
advantages,
that is, to situations where public institutions are more efficient
for taming mor-
ally relevant IAs than private counterparts. However, as said,
this answer is very
simple, ad hoc (limiting itself to a case-by-case analysis by
comparison with
identifying deep reasons and broad mechanisms for state
superior efficiency) and,
furthermore, it does not acknowledge that the comparative
advantage of public
institutions may not be self-evident.

Nevertheless, if we put aside the question of comparative
efficiency, there
are also principled reasons for favoring public regulation under
certain condi-
tions. As we mentioned, IAs raise problems of equality between
well-informed
agents and epistemically vulnerable ones.37 Under these
circumstances, there
might be good reasons for regulating such interactions.
Moreover, the princi-
pled reason one may mobilize to justify state intervention is
somewhat a logical
consequence of one’s views of the general responsibilities of
the state. For in-
stance, if one considers that it is a state’s responsibility to
guarantee equality of
opportunities or power and that morally relevant IAs are shown
to undermine
equality of opportunities or power, then a prima facie case for
state regulation
has been made. However, it also means, as we argue in this
article, that a nor-
mative account of IAs (and market failures in general) cannot
go without rein-
troducing broader normative categories to sharpen the
principled case for public
regulation.
It is important to highlight this. We argue in favor of something
slightly dif-
ferent from Heath’s normative account of market failures,
although we are sym-
pathetic to his approach. Heath suggests that a clear account of
market failures
helps us to articulate what he calls the “implicit morality” of
the market, namely a

set of requirements that are embedded in the key conditions
(like perfect compe-
tition and information) that a market economy needs to satisfy
in order to produce
efficiency.38
But he somehow stops there. According to his view, a clear
account of market
failures is enough to unveil the implicit morality of the market
and the justifica-
tions for its regulation. We suggest that it goes both ways. If the
economic theory
of market failures sheds light on the implicit normative
requirements of the good
functioning of markets, political philosophy also provides a
moral vocabulary
to think more clearly about both what kind of problem markets
failures like IAs
represent and the institutional implications of attempting to
tackle them.
However, that also means that the arguments advanced as well
as our discus-
sion below assume that our readers assign some duties to public
institutions with
regard to efficiency and equality (under various forms). In this
article, we have no
ambition to convince readers who would deny such duties.
2.2. The Forms of Public Regulation
Once the principle of public regulation is justified, the next
question is how
to regulate IA. Again, it is worth insisting that the search for
justifying public
regulation does not imply that the state should substitute itself

for private actors.
Often it means that public institutions should step in and impose
rules on interac-
tions and transactions. Public institutions should determine the
rules of the game
and control the respect of the rules by various market agents.
We list below the main forms that could be used by public
institutions in
order to address morally relevant IAs. For each form of
regulation, we indicate in
which sense they address the morally problematic aspect of IAs.
2.2.1. Compulsory disclosure
Although private regimes of labeling might represent an
appealing alterna-
tive, only public institutions can (de jure and de facto) force
market agents to
disclose all or the main bits of information they use when
transacting. Such re-
quirement is already imposed by consumer law in many
countries with regard
to the composition of products (e.g., if they contain allergens
such as nuts, ge-
netically modified organisms, colorants, conservators,
chemicals, and so on) and,
often, their origin (e.g., for the traceability of meat in Europe).
Compulsory disclosure aims at redressing the original
informational imbal-
ance and setting on a relatively equal footing the agents

engaged in a transaction
or interaction. In other words, it aims at fostering equal
opportunities by reducing
IAs.
Compulsory disclosure is a privileged tool for public
institutions because cor-
porations or individuals freely interacting on markets have
many, usually self-re-
garding, reasons for not disclosing all relevant information
about their products,
services, personal attributes, or risk profile. They might not be
willing to reveal
they have been using cheaper, but more hazardous, components
in their products
or that they have severe preexisting medical conditions. In
addition, state agen-
cies are often the sole agents to be able, by law, to force and
monitor information
disclosure. Finally, it is worth emphasizing that compulsory
disclosure has the
virtue of being usually minimally invasive, since it does not
require a change in
behavior.39
Addressing morally relevant IAs through compulsory
disclosure, however,
has a serious shortcoming: for the information to matter, it is
important that in-
dividuals have adequate cognitive abilities and sufficient time
for processing the
information and to decide on this basis. (Hence the importance
of the cooling-off
period in consumer law: humans are sometimes slow at making
up their minds,
even after the sale.) If they do not have adequate abilities or

enough time, the
detrimental aspect or consequences of IAs, in terms of
opportunities and power,
will remain.40
2.2.2. Complementary/alternative information
Public institutions may provide alternative channels of
information available
to all at a minor cost (because of the scale effect for the
information collected and
distributed by the state and its broader resources for
undertaking this task). That
could help counterbalance some asymmetries. The difference
with the previous
instrument is that it is not the producers or direct partners that
are forced to reveal
information. Information is in that case produced by either the
government itself
or third parties.
In the former case, government provides information through
specific
agencies (e.g., customer information), public announcements, or
public media
(e.g., radio or television broadcasting). In the latter case, it is
usually the role of
independent research institutions (universities, think tanks),
monitoring bodies,
media, nonprofit organizations, and so on. Still, governments
can play an indirect

role here by funding these institutions.
Again, complementary/alternative information aims at
redressing the infor-
mational imbalance, that is, at promoting more equal
opportunities. An aspect is
also to provide more variety in the sources of information
available, for example
to consumers, which is a good thing.41 Then, individuals have
access to more
comprehensive information, in addition to a plurality of views
and opinions (some
of it supported by the state) that could help them to better
integrate this volume
of information.
The comparative advantage of public institutions is that,
through taxation,
they can levy great resources for funding various information
channels and ini-
tiatives. They have a higher power of investigation and, also,
can reach a broader
public (potentially, all inhabitants of the territory where state
authority prevails).
They can also impose that given activities and practices are
monitored by inde-
pendent bodies.
The use of complementary/alternative information may
encounter difficul-
ties. The main one is the independence of these initiatives. Of
course, in a market
economy structured by powerful economic interests it may
prove challenging for
independent bodies to do their job without being influenced.
There is also the risk

that public institutions themselves color the information they
distribute, influence
the work of these independent initiatives and then the quality of
information they
diffuse. Nonetheless, such risk does not constitute an argument
against state pro-
vision or support of information. It is an argument in favor of as
objective as pos-
sible public provision of information and minimum (and
controlled) interference
in the work of independent bodies and initiatives.
2.2.3. Educating individuals
IA is sometimes harmful because individuals lack the ability to
search for
and process the right kind of information (i.e., accurate and
relevant for their situ-
ation). They may lack adequate cognitive abilities, as
convincingly shown by re-
search in psychology over recent decades (e.g., the work of
Daniel Ariely, Daniel
Kahneman, and Amos Tversky), which is the shortcoming of the
two previous
instruments. Through general or more specialized education,
public institutions
then can help citizens to acquire the necessary skills to become
more efficient at
compensating initial IA.
Unlike the two previous instruments, education does not
enhance the quality
of information. It enhances the capacity of individuals to
process information. In
that respect, it may be argued that education plays a deeper role
in strengthening

equality of opportunities and more. Because it equips
individuals with cognitive
tools for finding, understanding, and acting on adequate
information, education is
important for lifting barriers in the transformation of
opportunities into outcomes.
Public institutions are particularly fit for the task, especially if
one considers the
success of public education in industrialized nations. It is not to
say that cognitive
abilities cannot be developed in private settings (e.g., private
schools) or voluntary
initiatives (e.g., self-education). The point here is to underline
the importance of
the state for citizens’ education, through publicly funded
schools and universities
and for supporting educational campaigns and instruments (e.g.,
TV programs,
public debates) that enhance individuals’ cognitive and critical
thinking skills.
The advantage of public institutions can be understood by,
again, a scale
effect (i.e., the broader, the more capable, the less costly, the
more efficient, and
so on). States have great resources for educating citizens,
subsidizing high quality
media, and so on. At first blush, states are also less likely to
give way to particular
interests (e.g., corporate interests) when they educate people.
Effective state neu-

trality toward the diverse conceptions of the good life (even if
public policies can
never be totally value-free42) as well as the promotion of
science are advantages
when it comes to building initiatives for improving citizens’
cognitive skills.
Nonetheless, public intervention has not always been supportive
of the
Enlightenment enterprise of enhancing cognitive and critical
abilities. History
is full of examples of states using education for subjugating
citizens, promot-
ing blind obedience, enforcing conformism, and silencing
critical thinking.
Nonetheless, it should be acknowledged that modern democratic
states are less
exposed to these shortcomings that other political regimes
thanks to political
pluralism, institutional checks and balances, fundamental rights,
public debates,
free press, and other ingredients of what could be labeled as
“democratic culture”
(or, more prosaically, the development of democratic
institutions). In any case,
education highlights the importance of democratic institutions.
2.2.4. Constraining and monitoring transactions and interactions
Public institutions are essential for controlling market
transactions and out-
side market interactions (e.g., between patients and doctors
within the public
healthcare sector). They can monitor the terms of market
transactions and other
interactions to spot cases where one party exploits the other

party through IA.
Such monitoring can be performed ex ante by constraining what
individuals can
do during transactions or interactions43 or ex post by reviewing
the outcomes of
past transactions and interactions.
Monitoring transactions and interactions helps to prevent and
redress some
of the negative effects in terms of unjustified advantages or
imbalance of power
stemming from morally relevant IAs. At the difference of the
first three instru-
ments, which have an internal dynamic, monitoring is external:
instead of trying
to influence individual behavior from within by improving
informational or cog-
nitive skills, it externally constrains and checks transactions as
well as interac-
tions. Monitoring is about making sure that agents refrain from
exploiting IAs.
The advantage of public institutions is, again, an affair of
greater—financial
and legal—resources (the scale effect mentioned above). The
state defines the
legal rules for everyone operating on its territory. Private actors
have less reach.
They cannot enact rules for all citizens, they have fewer
resources for monitoring,
and less (democratic) legitimacy for undertaking these tasks.

Public regulation encounters challenges when it comes to
altering the context
of choice and monitor particular interactions and
transactions.44 There is the risk
of ill-intentioned, undemocratic state manipulation. Because the
architecture of
choice is manipulative by definition, there is a risk of sliding
from justifiable to
unjustifiable intervention. The context of choice can be altered
for either reducing
or increasing morally relevant IAs (e.g., by blocking any
alternative source of
information).
Another challenge is the potentially detrimental effect of state
intervention on
individuals’ morality and psychology. By excessively
interfering in transactions
and interactions, states can nurture psychological mechanisms
that undermine in-
dividual moral traits (at least so the argument goes). For
instance, individuals may
increasingly rely on public institutions and become less
autonomous, they might
eschew their responsibility by blaming public institutions for
adverse events in
their life, and so on. The corroding effect of state intervention
is omnipresent in
the literature on paternalism (e.g., John Stuart Mill and the
claim that paternalism
threatens individuality45). However, pointing at the risks
carried by public inter-
vention does not invalidate the principle of public regulation or
the comparative
advantages of public institutions. But it calls for close

democratic scrutiny and
clear rules delineating public action. In other words, it calls for
a proper ethics of
public regulation.
2.2.5. Controlling asymmetries
Public institutions may also engage with broader asymmetries,
for example
asymmetries of power. For instance, they can devise
mechanisms for limiting ac-
cumulation of power. By doing so, they lower vulnerabilities.
The difference with
previous instruments is that asymmetries are indirectly
controlled by engaging
deeper imbalances that may not be about information per se.
There is a strong assumption at the core of this fifth instrument,
namely the
idea that morally relevant IAs are to a significant extent the
result of background
imbalances that could be efficiently addressed by public
institutions. Such a view
can find support in political theories such as neo-republicanism
or Marxism, and
it raises questions about the nature of background imbalances,
the kind of influ-
ence they exert on IAs, and so on.
Without claiming that morally relevant IAs are solely symptoms
of deeper
asymmetries, it is plausible to argue that morally relevant IAs
are perhaps gen-
erated, or at least accentuated, by deeper asymmetries. As a
matter of fact, it
is difficult to deny that socioeconomic inequalities drastically

impact individu-
als’ access to information (through cultural capital), but also
their ability to pro-
cess information and use it to gain and retain various
advantages (e.g., Pierre
Bourdieu’s habitus or how individuals can transform cultural
capital in deeply
ingrained habits, skills, and dispositions).46 If we accept this
idea that morally
relevant IAs are partly the consequence of profound
socioeconomic structures
and dynamics and if we agree that IAs present a real moral
problem, it becomes
legitimate to consider the means for lessening or correcting
these background
imbalances.
Here again, the advantages of public institutions are obvious.
Thanks to the
size of their material, legal and human resources, states can
adequately address
background imbalances. If the problem of IAs is due to
(increasing) economic
inequalities, a solution could be to adopt a more aggressive
taxation policy on
income and wealth. In other words, the state can be more
efficient than private
initiatives for addressing background imbalances. Even if these
“background” in-
terventions cannot be properly labeled as direct forms of market
regulation, there

are good reasons to think that an ethics of market regulation
should be equipped
to make sense of them.
Of course, the shortcomings are the same as for any social
engineering.
There is a serious risk of states tampering with social structures
in a way that
does more harm than good. Extreme cases involve the
Communist experience of
the twentieth century when the state carried on an ambitious
project of redesign-
ing a “new man” through completely revamped social structures
leading, in most
places, to undermine civil society (e.g., citizens’ capacity of
mobilization) and
jeopardize social cooperation (e.g., trust). However, addressing
background in-
equalities does not imply the complete recomposition of the
structure of society.
And again, the success of taming asymmetries depends on
effective democratic
control and strict rules imposed on public regulation. It is
another plea for a solid
ethics of public regulation.
2.2.6. Direct provision
Despite all these tools, some markets might be so crippled by
IAs that it is
difficult or impossible to regulate them efficiently while leaving
the supply side
in private hands. Therefore, public institutions may legitimately
offer goods and
services for bypassing IA. The main difference with previous
tools is that direct

provision is properly about public institutions replacing private
actors.
Public health insurance is an obvious example. Despite serious
informational
problems, namely adverse selection and moral hazard, the state
offers health in-
surance directly to individuals. The justification is public
institutions’ higher effi-
ciency at imposing rules on agents (such as automatic disclosure
of their medical
conditions), nudge them by promoting less risky behaviors
(such as less fat diet
or more exercise), evaluate more accurately their expected
losses (due to the size
of the insured population and the collection of nationwide
statistics), and spread
losses.
Direct provision is probably the most obvious remedy against
market
failures: when markets fail (i.e., when they fail to produce the
outcomes they
were expected to, which could manifest through distorted prices
or rents, ex-
cess of demand or supply), the solution appears to replace
competition by public
monopolies. To be clear, public monopolies remedy morally
relevant IAs in two
different ways. First, direct provision of goods and services
addresses the issues

in a straightforward way because it allows governments to
ensure that all con-
sumers are adequately informed. Second, public monopolies
have this effect of
removing the need to make choices by substituting fixed options
for free choice.
In such a case, there is no need to worry about the information
that is supposed
to inform choice.
Public monopoly, however, does not offer in itself any
guarantee against the
exploitation of IAs. Moreover, it does not protect against abuses
of state power.
It is not because public institutions provide goods and services
that consumers
will be fully informed about the nature of the products, their
composition, their
effects, and so on. It is an independent issue. Also, public
provision opens, again,
the possibility that the state will use such provision to subject
people, as shown
by history’s multiple examples. Direct provision underscores
the necessity of an
ethics of public regulation.
3. Toward a Normative Theory of Public Institutions Based on
Market
Failures
Whereas the first section of our article reviewed the main
ethical dimensions
of morally relevant IAs and the second section tried to unfold
the main venues
for public regulation, this third section delineates few general
principles that are

useful for designing an ethical theory of public regulation. Such
a theory seems
to us intimately intertwined with a theory of public institutions
based on market
failures.
In brief, the question is twofold: what are the advantages of
adopting a mar-
ket failure approach? Which ethical principles of public
regulation are underlined
by an approach based on market failures?
To answer this question, it is useful to try to identify the
different normative
commitments that emerge from an analysis of morally relevant
IAs. First of all,
it suggests that a general condemnation of the exploitation of
morally relevant
IAs is a key feature of well-functioning markets and good
public policies. To put
it otherwise, the nonexploitation of morally relevant IAs is a
crucial part of what
Heath calls the implicit morality of the market.47
From this general principle, two more specific moral
commitments seem to
emerge from a closer attention to morally relevant IAs.
(a) The need to reduce morally relevant IAs. In some
situations, the presence
of IA calls for a more equitable distribution of information
between economic
agents. This dimension is mostly an institutional duty (i.e., one
that applies to and
is performed by institutions).
(b) The need to refrain from exploiting IAs. In some situations,

the presence
of IAs calls for economic agents to refrain from exploiting
them, which can be
achieved by devising control mechanisms that assure that agents
who possess
extra knowledge does not take too much advantage of it. This
second dimension
is more a general duty applying across the board to institutions
and individual
actors.
Most regulatory measures, like the ones identified in the second
section, aim
to achieve these two tasks by either reducing IAs or making
sure agents will re-
frain from exploiting them. However, this distinction is
important because it also
suggests guidelines, not only for an ethics of market regulation,
but also for an
ethics of market actors. From such a point of view, where
regulation is incomplete
or imperfect, firms ought to either reduce IAs (by voluntarily
disclosing infor-
mation, for example) or refrain from exploiting it (by avoiding
certain advertising
strategies, for instance).
Hence, one of the implications of this approach is, as Norman
puts it, to cre-
ate more symmetry between the language, principles, and tools
we use to justify

market regulation and the language, principles, and tools we can
use to justify
ethical constraints and beyond-compliance obligations in the
conduct of business
firms.48
This is crucial because it is, according to Heath, a clear
advantage of the
market failures approach.49 It allows us to identify problematic
or straightfor-
wardly immoral behaviors of economic actors without relying
on a theory of
“general morality,” like Kantian or Aristotelian ones. Indeed,
instead of applying
somewhat clumsily the general principles of those theories to
market interac-
tions, it starts from the underlying conditions for achieving
market efficiency
and the normative requirements that are embedded in those
conditions. It then
proceeds by identifying practices that contradict those
requirements and under-
mine those conditions, such as the exploitation of IAs. From
this point of view,
what is wrongful about business practices such as deceptive
advertising, and what
precisely grounds their regulation, is not that it represents a
violation of a Kantian
duty or a departure from the virtue of honesty, but that it
represents an exploita-
tion of a market failure, namely IAs.
Whereas we share Heath’s insight and ambition, we nonetheless
hope to
have shown in this article that such an approach cannot go
without reintroduc-

ing broader normative categories such as social inequality,
vulnerability, power,
arbitrary interference, and so on.50 Even if one takes Heath’s
guidance from a
normative reading of market failures, that is, one that gives us a
sense of the nor-
mative dimensions of economics in general and markets in
particular, it seems
nonetheless to be both useful and inevitable to reintroduce
broader concerns, like
egalitarian ones.51 IAs, like other market failures, are not
purely isolated. They
emerge alongside other issues and can actually be useful in
order to assess the
various qualities of specific interactions. And a sophisticated
ethics of market
regulation should account for this.
That being said, it might be useful here to say a few words
about how the
market failures approach differs from other ways of thinking
normatively about
markets and their limits. Take, for instance, the “corruption”
theory of the limits
of markets, developed by Michael Sandel and others.52
According to this view,
markets reach their limits when they degrade the nature of
specific goods, like
honors, health, and so on. And it is why markets should be, if
not forbidden, care-
fully monitored and restricted, or at least “put in their place.”

Our analysis probably has a lot in common with this approach.
However,
it is useful to remark that our account of IAs focuses less on the
nature of spe-
cific informational goods, like knowledge, expertise, cultural
production, and so
on, than on the objectionable nature of some economic
interactions or relations.
Hence, even though, at first sight, our analysis seems to rely on
analysis of a spe-
cific good, namely information, it ultimately gives a lot of
weight to interactional
concerns. Normatively, the analysis of morally relevant IAs is
more about objec-
tionable interactions or relations than it is about specific goods.
In sum, the asymmetries at the core of IAs express imbalances
between in-
dividuals and, often, categories of individuals within a given
society (e.g., so-
cioeconomic status, membership in privileged groups, and
access to relevant
information). In many cases, morally relevant IAs are not only
informational
asymmetries, they are relational asymmetries. They overlap and
nurture differ-
entials of status among citizens. In other words, their unchecked
existence threat-
ens democratic equality in the sense given to the concept by an
author such as
Elizabeth Anderson.53 Future research might attempt to
highlight the relations
between forms of market failures and the egalitarian concern for
equal relations.
After all, both share the common goal of improving the quality

of our social and
economic relations.54
Notes
1Robert H. Frank and Ben S. Bernanke, Principles of
Microeconomics (New York: McGraw-Hill Ir-
win, 2009), 341; Joseph Heath, “Three Normative Models of the
Welfare State,” Public Reason
3, no. 2 (2011): 13–43.
2William J. Baumol, Welfare Economics and the Theory of the
State (London: London School of
Economics and Political Science; New York: Longmans, Green,
1952).
3Rutger Claassen, “Externalities as a Basis for Regulation: A
Philosophical View,” Journal of Institu-
tional Economics 12, no. 3 (2016): 541–63.
4See Joseph Heath, Morality, Competition and the Firm: A
Market Failures Approach to Business
Ethics (Oxford: Oxford University Press, 2014).
5David Moss, When All Else Fails: Government as the Ultimate
Risk Manager (Cambridge: Harvard
University Press, 2002); Heath, “Three Normative Models of the
Welfare State.”
6François Ewald, L’État Providence (Paris: Grasset, 1986);
Joseph Heath, “The Benefits of Coopera-
tion,” Philosophy and Public Affairs 34, no. 4 (2006): 313–51.
7An example is the system of personal number and health card
in place in Scandinavian countries
that give public institutions access to large amounts of personal

data about health.
8The Law of Large Numbers is the “mathematical premise
stating that the greater the number of
exposures, (1) the more accurate the prediction; (2) the less the
deviation of the actual losses
from the expected losses (…); and (3) the greater the credibility
of the prediction (…). This law
forms the basis for the statistical expectation of loss upon which
premium rates for insur-
ance are calculated. Out of a large group of policyholders the
insurance company can fairly
accurately predict not by name but by number the number of
policyholders who will suffer the
loss.” Harvey W. Rubin, Dictionary of Insurance Terms
(Hauppauge, NY: Barrons Educational
Series, 2008), 272–73.
9Claassen, “Externalities as a Basis for Regulation.”
10John Stuart Mill, On Liberty (1859).
11Frank applies Mill’s harm principle for justifying the
regulation of positional externalities; e.g.,
Robert H. Frank, “Should Public Policy Respond to Positional
Externalities?,” Journal of Public
Economics 92, no. 8–9 (2008): 1777–86.
12Joseph Stiglitz, “Information and the Change in Paradigm in
Economics,” The American Economic
Review 92 (2002): 460–501.

13Frank and Bernanke, Principles of Microeconomics, 333.
14Thomas G. McGuire, “Physician Agency,” in Handbook of
Health Economics, Volume 1A, ed.
A. J. Culyer and J. P. Newhouse (Amsterdam: North-Holland,
2000), 461–536.
15George A. Akerlof, “The Market for ‘Lemons’: Quality
Uncertainty and the Market Mechanism,”
Quarterly Journal of Economics 84, no. 3 (1970): 488–500.
16George Ainslie, Breakdown of Will (Cambridge: Cambridge
University Press, 2001); George A.
Akerlof and Robert J. Shiller, Animal Spirits (Princeton, NJ:
Princeton University Press, 2009);
Daniel Ariely, Predictably Irrational (New York: HarperCollins,
2008); Daniel Kahneman,
Thinking, Fast and Slow (New York: Farrar, Straus and Giroux,
2011); Robert J. Shiller, Irratio-
nal Exuberance (Princeton, NJ: Princeton University Press,
2005).
17An open question is the nature of the advantage that is
morally relevant for this discussion. The
classic interpretation is of actual advantage: morally relevant
IAs are situations where advan-
tages are actually extracted. A concurrent interpretation is of
potential advantage: morally
relevant IAs are situations where advantages could be
potentially extracted.
18A situation is Pareto superior (or represents a Pareto
improvement) to a default situation when
there is a possibility to improve the situation of at least one
agent without worsening the situa-
tion of any other agent.

19Unless stated otherwise, we use exchanges for qualifying
market exchanges while interactions
define more general inter-individual relations that do not imply
the trade of goods or services in
exchange of money.
20If an IA is efficient, meaning that it leads to a Pareto superior
situation by comparison to a situ-
ation characterized by no IA, then it would still be
hypothetically possible to compensate the
disadvantaged part (Kaldor-Hicks criterion). If an IA is
inefficient in the Pareto sense, it means
that it generates a situation where at least one agent is
disadvantaged (in equal proportion to the
advantage obtained by the better-informed agent) by comparison
with a situation without IA.
Thus, both efficiency and redistribution contribute turning IAs
into morally relevant IAs.
21Both parties may benefit from such a transaction. Thus, it is
not needed that the transaction is
detrimental to one of the parties. Most of the time IAs do not
produce a net loss, but a relative
loss by comparison with a situation without IA and, more
importantly, such a loss is without
legitimate reasons. We will return to this point below.
22Xavier Landes, “Insurance,” in Encyclopedia of Corporate
Social Responsibility, ed. Samuel O.
Idowu, Nicholas Capaldi, Liangrong Zu, and Ananda Das Gupta
(New York: Springer, 2013),
1433–40.
23Xavier Landes, “Moral Hazard,” in Encyclopedia of
Corporate Social Responsibility, ed. Samuel

O. Idowu, Nicholas Capaldi, Liangrong Zu, and Ananda Das
Gupta (New York: Springer, 2013),
1715–22.
24For a complete discussion of the moral dimensions of moral
hazard, the reader can refer to Benjamin
Hale, “What’s so Moral About Moral Hazard?,” Public Affairs
Quarterly 23, no.1 (2009): 1–26.
25Will Kymlicka, Contemporary Political Philosophy: An
Introduction (Oxford: Oxford University
Press, 2002), 72–74.
26Adam Smith, An Enquiry into the Wealth of Nations (1776):
Book I. chapters 1–3.
27For these notions, see Samuel Arnold, “The Difference
Principle at Work,” Journal of Political
Philosophy 20, no.1 (2012): 94–118.
28For an analysis of power and informational issues in
principal-agent theory, see Terry M. Moe,
“Power and Political Institutions,” Perspectives on Politics 3,
no. 2, (2005): 215–33.
29Philip Pettit, Republicanism (Oxford: Oxford University
Press, 1997).
30An important distinction here is between the potential
leverage that any IA gives to any agent who
holds extra knowledge and the cases described here in which
specific IAs come with asymmet-

ric power. The difference lies in the presence or the absence of
institutional checks limiting the
potential transformation of knowledge in actual power such as a
medical college for physicians
or any professional self-regulatory body.
31Concerning the relations between financial crises and
economic inequalities, see of R.G. Rajan,
Fault Lines (Princeton, NJ: Princeton University Press, 2011);
Michael Kumhof and Romain
Rancière, Inequality, Leverage and Crises, IMF Working Paper
(2011) 10/268; 3–37.
32This kind of rent seeking is basically Stiglitz’s explanation
for the rise of inequalities in United
States. Joseph E. Stiglitz, The Price of Inequality (New York:
W.W. Norton, 2012).
33Friedrich A. Hayek, “The Use of Knowledge in Society,”
American Economic Review 35, no. 4
(1945): 519–30.
34A stronger formulation could be made: public institutions
actually create markets. Without prop-
erty rights guaranteed by public force and law enforced by
courts, no durable and functioning
market is possible. Daron Acemoğlu and James A. Robinson,
Why Nations Fail (New York:
Crown Business, 2012).
35The capture is one of the major concerns of the literature on
winner-take-all politics. Larry M. Bar-
tels, Unequal Democracy (Princeton, NJ: Princeton University
Press, 2008); Jacob S. Hacker
and Paul Pierson, Winner-Take-All Politics (New York: Simon
& Schuster, 2010).

36Most economics textbooks include discussions of this idea
and treat it as being fairly uncontrover-
sial; e.g., Frank and Bernanke, Principles of Microeconomics.
37For an interesting account of epistemic injustices, see
Miranda Fricker, Epistemic Injustice: Power
and the Ethics of Knowing (Oxford: Oxford University Press,
2007).
38See Joseph Heath, Morality, Competition and the Firm: A
Market Failures Approach to Business
Ethics (Oxford: Oxford University Press, 2014), chap.7. For an
attempt to develop further the
idea of an implicit morality of the market, see Pierre-Yves
Néron, “Rethinking the Ethics of
Corporate Political Activities: Political Equality, Corporate
Citizenship and Market Failures,”
Journal of Business Ethics 136, no. 4 (2016): 715–28.
39We would like to thank one anonymous reviewer for urging
us to make this point.
40Oren Bar-Gill, Seduction by Contracts (Oxford: Oxford
University Press, 2012).
41Ibid.
42The emphasis on the illusion of a state fully neutral on moral
and cultural matters is arguably one
of the most important contributions of the debates on
multiculturalism that have taken place
since the 1990s.
43Frank adopts a similar position when he argues in favor of an
incremental tax on consumption.
His rationale is the following: since individuals are trapped in
unhealthy patterns of over-con-

sumption, i.e., in a collective action problem, it is necessary to
alter the context of choice by
rendering consumption steeply more expensive. Robert H.
Frank, Luxury Fever (New York: The
Free Press, 1999). For a critical discussion, refer to Xavier
Landes, “Why Taxing Consumption:
Justifications, Objections and Social Cooperation,” in
Philosophical Explorations of Justice
and Taxation: National and Global Issues, ed. Helmut P.
Gaisbauer, Gottfried Schweiger, and
Clemens Sedmak (New York: Springer, 2015), 101–17.
44For a general discussion of the political challenges of
architecture of choice, one may refer to the,
by now, broad literature on nudge and architecture of choice;
e.g., Bryan Jones, Politics and
the Architecture of Choice (Chicago: University of Chicago
Press, 2001); Cass R. Sunstein,
Why Nudge? (New Haven, CT: Yale University Press, 2014);
Richard H. Thaler and Cass R.
Sunstein, Nudge (New Haven, CT: Yale University Press,
2008).
45Peter de Marneffe, “Avoiding Paternalism,” Philosophy and
Public Affairs 34, no. 1 (2006): 68–94.
46See Pierre Bourdieu, Distinction: A Social Critique of the
Judgement of Taste (Cambridge: Har-
vard University Press, 1987).
47Heath, Morality, Competition and The Firm, chap. 7.
48Wayne Norman, “Business Ethics as Self-Regulation: Why

Principles that Ground Regulations
Should Be Used to Ground Beyond-Compliance Norms as
Well,” Journal of Business Ethics
101 (2012): 43–57.
49See Heath, Morality, Competition and The Firm, chap. 3–4.
50For an attempt to do something similar, see Abraham Singer,
“Justice Failure: Efficiency and
Equality in Business Ethics,” Journal of Business Ethics (2016):
https://doi.org/10.1007/
s10551-016-3086-x
51Singer, “Justice Failure.”
52Michael Sandel, What Money Can’t Buy: The Moral Limits of
Markets (New York: Farrar, Straus
and Giroux, 2012). For a similar but different account, see
Debra Satz’s excellent book, Why
Some Things Should Not Be for Sale: The Moral Limits of
Markets (Oxford: Oxford University
Press, 2010).
53Elizabeth Anderson, “What Is the Point of Equality?,” Ethics
109, no. 2 (1999): 287–337.
54See Pierre-Yves Néron, “Rethinking the Very Idea of
Egalitarian Markets and Corporations:
Why Relationships Might Matter More than Distribution,”
Business Ethics Quarterly 25, no. 1
(2015): 93–124.
https://doi.org/10.1007/s10551-016-3086-x
https://doi.org/10.1007/s10551-016-3086-x

Course Project - Healthcare Reform in Two States
Healthcare Reform in Two States
Description
Part I: The world is becoming smaller and smaller and when
companies look to expand they often look outside their original
footprint. Rasmussen Healthcare Systems is looking to expand
their system to another state. To help advise Rasmussen on this
decision, you will write 4 pages that compare and contrast the
healthcare reform policies of the state where you reside and
another state of your choice. Please keep in mind the position
and facility you selected. Make sure to include the following:
a. Discuss the purpose of each state's reform.
b. Describe a minimum of three specific examples of
similarities and differences in healthcare reform policies in the
two states.
c. Discuss in detail some of the ethical issues and moral
disputes in each state's reform.
d. Discuss your recommendation on whether Rasmussen
Healthcare Systems should expand to the second state.
e. This portion of your assignment will require you to research
and examine information from various sources. Use a minimum
of five credible sources for your paper, with three being an
academic source (don't forget to include in-text citations
throughout your paper with paraphrasing or quoting).
f. Make sure to include your APA formatted reference page.
Example of Potential Useful Websites
· http://mn.gov/health-reform/
· http://www.kdheks.gov/hcf/ppaca/
Part II: PowerPoint is typically the application of choice when
conducting a meeting. There are many philosophies on how to
create an effective PowerPoint, so do some research on the dos
and don'ts. Then create a professional PowerPoint that you
would present to the management team at your location that
highlights your research. SkillSurfer in the online tutoring
platform offers beginner, intermediate, and advanced tutorials
on Microsoft Office products. Make sure to include the

following in your PowerPoint:
a. Length of PowerPoint is up to the student.
b. Highlight specific policy changes in each state's reform.
c. Highlight each similarity and difference.
d. Highlight your final recommendation on whether York
Healthcare Systems should expand to the other state.
e. Use the Notes area on each slide as needed to expand on the
key points.
Your presentation should include an introduction, a concise
discussion of each slide, and a conclusion. Make sure to use
audience specific language and tone in your PowerPoint.
Remember, you would be presenting this to the management
team at your location. The presentation will be assessed on your
overall knowledge of the content, clarity of your voice,
pronunciation of words, organization of your presentation,
proper recording of your presentation, overall aesthetics and
professionalism, and general clarity to your presentation.
Save both your paper and PowerPoint presentation to a folder on
your computer. Then, zip or compress your folder. Upload the
zipped folder (with both the paper and PowerPoint) to the
assignment dropbox
Course Project - Healthcare Reform in Two States
Healthcare Reform in Two States
Description
Part I: The world is becoming smaller and smaller and when
companies look to expand they often look outside their original
footprint. Rasmussen Healthcare Systems is looking to expand
their system to another state. To help advise Rasmussen on this
decision, you will write 4 pages that compare and contrast the
healthcare reform policies of the state where you reside and
another state of your choice. Please keep in mind the position
and facility you selected. Make sure to include the following:
a. Discuss the purpose of each state's reform.
b. Describe a minimum of three specific examples of

similarities and differences in healthcare reform policies in the
two states.
c. Discuss in detail some of the ethical issues and moral
disputes in each state's reform.
d. Discuss your recommendation on whether Rasmussen
Healthcare Systems should expand to the second state.
e. This portion of your assignment will require you to research
and examine information from various sources. Use a minimum
of five credible sources for your paper, with three being an
academic source (don't forget to include in-text citations
throughout your paper with paraphrasing or quoting).
f. Make sure to include your APA formatted reference page.
Example of Potential Useful Websites
· http://mn.gov/health-reform/
· http://www.kdheks.gov/hcf/ppaca/
Part II: PowerPoint is typically the application of choice when
conducting a meeting. There are many philosophies on how to
create an effective PowerPoint, so do some research on the dos
and don'ts. Then create a professional PowerPoint that you
would present to the management team at your location that
highlights your research. SkillSurfer in the online tutoring
platform offers beginner, intermediate, and advanced tutorials
on Microsoft Office products. Make sure to include the
following in your PowerPoint:
a. Length of PowerPoint is up to the student.
b. Highlight specific policy changes in each state's reform.
c. Highlight each similarity and difference.
d. Highlight your final recommendation on whether York
Healthcare Systems should expand to the other state.
e. Use the Notes area on each slide as needed to expand on the
key points.
Your presentation should include an introduction, a concise
discussion of each slide, and a conclusion. Make sure to use
audience specific language and tone in your PowerPoint.
Remember, you would be presenting this to the management
team at your location. The presentation will be assessed on your

overall knowledge of the content, clarity of your voice,
pronunciation of words, organization of your presentation,
proper recording of your presentation, overall aesthetics and
professionalism, and general clarity to your presentation.
Save both your paper and PowerPoint presentation to a folder on
your computer. Then, zip or compress your folder. Upload the
zipped folder (with both the paper and PowerPoint) to the
assignment dropbox
Petition to the President of the United States, July 17, 1945,
Miscellaneous Historical Documents Collection.
-
JuJ.:r 17, 194S
A PllTlTlON TO Tiii PRBSlllENT OF THI UNITBD STA~
Diacoverieo Of which tM people of the United states are not
••are IUJ' affect
the 1r8l!are of this nation 1n tM near tuture . n.. liberation of
atollic power Wbich bu
bean achiend pi.c.a atollic boaba in th& bands or the AzwT. It
places in ;your bands, ..
C0111111&Dder-1n-<:tli•r, the ratetul daciaion wbetlwr or not
to eanetion the uaa o! such bombe
in the present pbue or th• •ar against Japan.
We, tbe undaraianad aciantiata, have been workina 1n the field
of atooal.c power .
•
Until recently ,.. haYe had to !ear that the United atatea llight

be attacked by atomic bombs
during th1e •ar and that her only · defense might lie in a
counterattack by the eue mean• .
Today, nth the defeat of (lennacy, thia danger is averted and we
feel impelled to say wllat
!ollon1
The war baa to be brought epeedily to a succeutul conclueion
and attacks b,-
ato.l.c bombs may very well be an effective method of warfare.
We feel, however, that such
attaeka on Japan could not be justified, at leut not unleoa the
terms Wllicb 1r1ll be l.m-
posed after the war on Japan •ere made public in detail and
Japan lr9re given an opportunity
to au.rrender.
If eucb public announcement gave assurance to the Japanese
that they could look
forward to a life devoted to peacetul pureui ts in their homeland
and if Japan still re-
fused to surrender our nation lligbt than, in certain
c1rcW1atancee, find itself forced to
resort to the use of atamic bombs. Such a step, holr8ver, ought
not to be made at any time
without aeriouely conaidaring the 110ral responsibilitiea 1rb1cb
are involved.
The development or atc:mic power 1r1ll provide the nations
lritb new neane o!
des truction. The atollic bomba at our disposal represent only
the first step 1n tl1•
direction, and there 1a aJ..oat no lbdt to the destructive powar
Wbieb 1r1ll become nail-
able 1n the course of their tutur• development. Thus a nation
Wllich sets tbe precedent

of using t hese newly liberated forces of nature tor purposes of
destruction llAy have to
bear the reeponeibility of opening the door to an era or
devastation on an unillaginable
scale.
If after thia war a aituation is allowed to develop in the world
which permits
rival powers to be 1n uncontrolled possession of these new
means of destruction, the cities
of the United States aa well •• the cities of other nations 1r1ll
be 1n continuous danger or
sudden 111nih1lation. ID t.b• resources of the United StatH,
moral and material, 1111.Y ban
to be 110bil11ed to pr&'fent tM adHnt or 1uch a world
situation. Its prevention 1o at
present the solemn reaponaibility o! the United Stetea-•in&led
out by virtue or her lead
1n the field of atollic power.
The added material atrenath Wbicb this lead gives to the United
States brings
with it the obligation of restraint and if we •ere to violate thia
obligation our moral
position would be weakened 1n the eyea of the world and 1n our
own eyes. It would then
be more difficult for us to live up to our responsibility of
bringing the unloosened forces
of destruction under control.
In v181r o! the !oreaoing, wa, tbe undersigned, respectfully
petition1 !1rat,
that you exercise your power •• COllmlllder-in-chiet, to rule
that the United St.~•• ohall
not re1ort to the use of atomic bcmbe 1n this war unleu the
terms which 1r1ll be imposed

upon Japan have been ma.de public 1n detail and Japan knolring
these terma haa retuaed to
aurrender1 second. tbat 1n aueb VI e•e11t the ouestion whether
or not tn nftft atoaic hnoohs
"'-• •n-•• I •• ••••- 1 ·~-· -• .. ...,., ... _. .. u••u&u •&&u 't"'uwv
... ut& ••uvvttv&. V &. &&uv UU 1.1.Ull:J •;UI~ ... VVlUVQ
be decided by you in the liiht ot t he conaideration1 presented
in tbis petition aa well aa
all t he other moral reeponaibilitias which are involved .
. ~
..
Harper’s Magazine
THE DECISION TO USE THE ATOMIC BOMB
HENRY L. STIMSON
Henry L. Stimson, Secretary of War 1911–13, Secretary of State
1929–33, Secretary of War 1940–45,

was the man who had to make the recommendation to the
President.
In recent months there has been much comment about the
decision to use atomic bombs in attacks on
the Japanese cities of Hiroshima and Nagasaki. This decision
was one of the gravest made by our
government in recent years, and it is entirely proper that it
should be widely discussed. I have therefore
decided to record for all who may be interested my
understanding of the events which led up to the attack
on Hiroshima on August 6, 1945, on Nagasaki on August 9, and
the Japanese decision to surrender, on
August 10. No single individual can hope to know exactly what
took place in the minds of all of those
who had a share in these events, but what follows is an exact
description of our thoughts and actions as I
find them in the records and in my clear recollection.
Plans and Preparations, September 1941–June 1945
It was in the fall of 1941 that the question of atomic energy
was first brought directly to my attention.
At that time President Roosevelt appointed a committee
consisting of Vice President Wallace, General
Marshall, Dr. Vannevar Bush, Dr. James B. Conant, and myself.
The function of this committee was to
advise the President on questions of policy relating to the
student of nuclear fission which was then
proceeding both in this country and in Great Britain. For nearly
four years thereafter I was directly
connected with all major decisions of policy on the development
and use of atomic energy, and from May

1, 1943, until my resignation as Secretary of War on September
21, 1945, I was directly responsible to the
President for the administration of the entire undertaking; my
chief advisers in this period were General
Marshall, Dr. Bush, Dr. Conant, and Major General Leslie R.
Groves, the officer in charge of the project.
At the same time I was the President’s senior adviser on the
military employment of atomic energy.
The policy adopted and steadily pursued by President
Roosevelt and his advisers was a simple one. It
was to spare no effort in securing the earliest possible
successful development of an atomic weapon. The
reasons for this policy were equally simple. The original
experimental achievement of atomic fission had
occurred in Germany in 1938, and it was known that the
Germans had continued their experiments. In
1941 and 1942 they were believed to be ahead of us, and it was
vital that they should not be the first to
bring atomic weapons into the field of battle. Furthermore, if
we should be the first to develop the
weapon, we should have a great new instrument for shortening
the war and minimizing destruction. At no
time, from 1941 to 1945, did I ever hear it suggested by the
President, or by any other responsible
member of the government, that atomic energy should not be
used in war. All of us of course understood
the terrible responsibility involved in our attempt to unlock the
doors to such a devastating new weapon;
President Roosevelt particularly spoke to me many times of his
own awareness of the catastrophic
potentialities of our work. But we were at war, and the work
must be done. I therefore emphasize that it
was our common objective, throughout the war, to be the first to
produce an atomic weapon and use it.
The possible atomic weapon was considered to be a new and

tremendously powerful explosive, as
legitimate as any other of the deadly explosive weapons of
modern war. The entire purpose was the
production of a military weapon; on no other ground could the
wartime expenditure of so much time and
money have been justified. The exact circumstances in which
that weapon might be used were unknown
to any of us until the middle of 1945, and when that time came,
as we shall presently see, the military use
of atomic energy was connected with larger questions of
national policy.
The extraordinary story of the successful development of the
atomic bomb has been well told
elsewhere. As time went on it became clear that the weapon
would not be available in time for use in the
European Theater, and the war against Germany was
successfully ended by the use of what are now
called conventional means. But in the spring of 1945 it became
evident that the climax of our prolonged
atomic effort was at hand. By the nature of atomic chain
reactions, it was impossible to state with
certainty that we had succeeded until a bomb had actually
exploded in a full-scale experiment;
nevertheless it was considered exceedingly probable that we
should by midsummer have successfully
detonated the first atomic bomb. This was to be done at the
Alamogordo Reservation in New Mexico. It
was thus time for detailed consideration of our future plans.
What had begun as a well-founded hope was
now developing into a reality.

On March 15, 1945 I had my last talk with President
Roosevelt. My diary record of this conversation
gives a fairly clear picture of the state of our thinking at that
time. I have removed the name of the
distinguished public servant who was fearful lest the Manhattan
(atomic) project be “a lemon”; it was an
opinion common among those not fully informed.
The President . . . had suggested that I come over to lunch
today . . . . First I took up with him a
memorandum which he sent to me from––who had been alarmed
at the rumors of extravagance in the
Manhattan project. ––suggested that it might become disastrous
and he suggested that we get a body of
“outside” scientists to pass upon the project because rumors are
going around that Vannevar Bush and Jim
Conant have sold the President a lemon on the subject and ought
to be checked up on. It was rather a
jittery and nervous memorandum and rather silly, and I was
prepared for it and I gave the president a list
of the scientists who were actually engaged on it to show the
very high standing of them and it comprised
four Nobel Prize men, and also how practically every physicist
of standing was engaged with us in the
project. Then I outlined to him the future of it and when it was
likely to come off and told him how
important it was to get ready. I went over with him the two
schools of thought that exist in respect to the
future control after the war of this project, in case it is
successful, one of them being the secret close-in
attempted control of the project by those who control it now,
and the other being the international control
based upon freedom both of science and of access. I told him
that those things must be settled before the
first projectile is used and that he must be ready with a

statement to come out to the people on it just as
soon as that is done. He agreed to that . . . .
This conversation covered the three aspects of the question
which were then uppermost in our minds.
First, it was always necessary to suppress a lingering doubt that
any such titanic undertaking could be
successful. Second, we must consider the implications of
success in terms of its long-range postwar
effect. Third, we must face the problem that would be presented
at the time of our first use of the weapon,
for with that first use there must be some public statement.
I did not see Franklin Roosevelt again. The next time I went
to the White House to discuss atomic
energy was April 25, 1945, and I went to explain the nature of
the problem to a man whose only previous
knowledge of our activities was that of a Senator who had
loyally accepted our assurance that the matter
must be kept a secret from him. Now he was President and
Commander-in-Chief, and the final
responsibility in this as in so many other matters must be his.
President Truman accepted this
responsibility with the same fine spirit that Senator Truman had
shown before in accepting our refusal to
inform him.
I discussed with him the whole history of the project. We
had with us General Groves, who explained
in detail the progress which had been made and the probable
future course of the work. I also discussed
with President Truman the broader aspects of the subject, and
the memorandum which I used in this
discussion is again a fair sample of the state of our thinking at
the time.

Please ignore the health care reform in two states. That has nothi.docx

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