A welfare analysis of a simple noisy rational expectations model is carried out. It is shown that the more information prices convey, the worse off everybody is. However, the equilibrium where everybody is uninformed may not be Pareto optimal: imposing a tax on information gathering which finances a lump sum grant may allow everybody to be better off when some people are informed. A corresponding result holds when the model is used to consider the release of information by firms: all shareholders may be better off if information is released to a group of insiders as a form of compensation.
