Are ignorant managers better?

It is commonly assumed that managers should be making well-informed decisions. That is just common sense and should apply at all levels. In fact, one of the reasons why it is believed a centrally managed economy like in the Soviet Union failed is that central managers could not have all the relevant informations. Interestingly two Russians claim there are situations where it is better that managers should be to some extend ignorant.

Sergei Guriev and Anton Suvorov bring the following idea. Suppose employees need to make some sort of investment in a project. If managers subsequently get little information, they will not change decisions, stick to the course and this gives good incentives for the employees to make that investment. On the other hand, if managers get a steady flow of information, they may change the course of the project, and employees facing this uncertainty will be more reluctant to invest effort in it. It is thus in the interest of managers to avoid getting information.