Originally developed by the economist George Stigler, the “economics of information” perspective looks at search and storage costs related to information needed by decision makers, according to Richard B. McKenzie, Why Popcorn Costs so Much at the Movies (Copernicus Books 2008) at 73 and 108.
An unheralded fact of law department life is that it takes time and effort to collect information. Notwithstanding the prevailing belief, especially among younger people, that all information is a click away on the World Wide Web, it may not be or you burn up considerable time to find and absorb it (See my post of March 9, 2007: the price of legal information is being driven to zero; May 30, 2006: limits on our working memory; Jan. 10, 2006: lawyer time online; Nov. 15, 2005: online resources; Jan. 13, 2006: free online information; Jan. 28, 2008: hard to find the right law firm through the internet; and Jan. 25, 2008: Martindale-Hubble and shared evaluations of law firms.).
An economics-of-information analysis explains why we resort to shortcuts, heuristics, and seat-of-pants guidance from colleagues to know enough to take a decision. It suggests why law departments like panel firms and preferred providers: they reduce search costs (See my post of June 18, 2007: law-firm panels with 13. Sole-sourcing eliminates search costs even further (See my post of July 28, 2008: single law firm to handle large geography or representation.). Many other examples of the economics of information are evident in law departments.