A knowledge curse: how knowledge can reduce human welfare

Abstract

Greater knowledge is always an advantage for a rational individual. However, this article shows that for a group of rational individuals greater knowledge can backfire, leading to a worse outcome for all. Surprisingly, this can happen even when new knowledge does not mean the discovery of a new action but simply provides a deeper understanding of the interaction at stake. More specifically, enhanced knowledge about the current state of nature may hinder cooperation among purely self-interested individuals. The paper describes this paradoxical possibility—a ‘knowledge curse’—and analyses the evolutionary process that occurs if, initially, only a few people have access to the greater knowledge. It concludes with a tentative comment on ways to avert this potential knowledge backlash.