The scientific paper Stealers of light, Traders in Brilliance: Amerindian Metaphysics in the Mirror of Conquest, written by Saunders, N.J. in 1998 beautifully outlines the extreme extends to which Information Asymmetry can go.
In 1942, Christopher Columbus set sail to discover a new route to India, China, Japan, and the spice islands. However, he never ended up there but instead discovered the “New World” which we refer to as America today. From there on it did not take long for other countries to seek interest in the new world and many ships from various nations embarked on colonial expeditions. The Europeans quickly discovered the wealth of indigenous people and began to engage in trade activities with them. Soon, trade started to flourish and opened the door to a variety of goods that influenced both societies heavily.
However, the trade relationship was never fair as the Europeans were at great advantage over the indigenous Americans. This is because the indigenous Americans believed the Europeans to be gods or supernatural beings. The reason for this is that for the indigenous Americans shiny objects, such as the Europeans armors, were seen as indicators of something that came from above. When Christopher Columbus, for example, first encountered native societies he wanted to make an impression and ordered his men to wear their armors, blow trumpet fanfares and fire their guns in the air which left the natives in awe. This, alongside with the Europeans horses, dogs and technological tools such as mirrors or guns strengthened the indigenous Americans belief about them.
Both sides were interested in trading their belongings and thought of the objects of the other side to be extremely valuable. The Europeans admired the amount of gold and silver of the indigenous Americans, and the indigenous Americans admired the Europeans “supernatural” and “cosmological” objects such as mirrors, glass beads, ironwork or glazed pottery. Because the Europeans knew the real worth of their objects, and did not disclose it to the indigenous Americans, they were able to engage in trading activities that heavily benefitted them. Christopher Columbus, for example, exchanged glass beads and metal artefacts for golden ornaments worn by indigenous leaders and aristocrats. In another instance, one of Columbus sailors smashed a dish of glazed porcelain and exchanged the shiny fragments for large quantities of pearls.
In believe that this example demonstrates how information asymmetry can lead to extremely unfair outcomes in trading relationships. When one party possesses important information that the other one is missing, an imbalance is created that can be exploited for significant advantage. Such a scenario highlights the importance of transparency and fair information sharing for fostering healthy trading relationships.
References:
Saunders, N. J. (1998). Stealers of Light, Traders in Brilliance: Amerindian Metaphysics in the Mirror of Conquest. Res Anthropology and Aesthetics, 33, 225–252. https://doi.org/10.1086/resv33n1ms20167010
The article gives a very interesting and real historical example of Information Asymmetry, which is very attractive to read. Well done.
Most of the misjudgment of value by Americans was based on misunderstandings of origin and function, especially since Europeans deliberately exploited this misunderstanding. Europeans, however, had more market knowledge and knew that these items were actually relatively cheap in their own societies. This Information Asymmetry phenomenon is repeated throughout history and in modern commercial settings. Very interesting fact. Establishing transparent market mechanisms is essential to fostering healthy business relationships.
Hello Casper, I read your blog, and I really like the historical example you give of the much-discussed problem of information asymmetry. What I find most interesting is that from our perspective, the Native Americans obviously get a bad deal. Trading their gold for mirrors, ironwork and pottery, sounds unthoughtful, but if you change perspectives, maybe it’s not such a bad deal after all. If the Native Americans never had possession of items such as mirrors and value them higher then gold, something which they have plenty of, doesn’t this then make them right in some way. Even gold is only valued for its rarity, durability and aesthetic qualities and doesn’t really hold any intrinsic value. What I mean to say is that the Native Americans might not have made such a bad deal after all, because all deals are based on perceived value. What do you think about this? I’d like to know.
Thanks for this analysis, I could not agree more with your conclusion and it’s an intresting way of thinking outside the box about this topic. It’s interesting to see how unfair and exploitative this was even though the Indigenous Americans at the time didn’t realize it. It’s important to think about how these information differences where exploited by wester society for a long time.