Why Free Markets Make Fools of Us(nybooks.com)
nybooks.com
Why Free Markets Make Fools of Us
http://www.nybooks.com/articles/archives/2015/oct/22/why-free-markets-make-fools-us/
8 comments
> In many cases nobody really knows what's in our best interests.
I may not know what is in my best interest, but I know what isn't - someone else lying to me and cheating me to pursue their own interest. The problem is hard because perfect solution is AI-complete and pretty much requires mind-reading. But we can at least try and eliminate the obvious problems. We could, for instance, start punishing marketers and salesmen for lying.
I may not know what is in my best interest, but I know what isn't - someone else lying to me and cheating me to pursue their own interest. The problem is hard because perfect solution is AI-complete and pretty much requires mind-reading. But we can at least try and eliminate the obvious problems. We could, for instance, start punishing marketers and salesmen for lying.
I'm sure most developed countries do that by fining businesses for false advertising, which would incentivise the businesses to pass the punishment on to the staff who did it. Lies aren't really the problem though, fooling us with truths we don't understand is.
About tobacco causing lung cancer? That's been widely known for decades but rates of smoking are increasing globally so it's not just false information.
About tobacco causing lung cancer? That's been widely known for decades but rates of smoking are increasing globally so it's not just false information.
But smoking is increasing in countries where the health effects aren't as well known, and decreasing in countries where they are.
Also, smoking companies spent a very long time making sure that the now widely-known health effects weren't so widely known. Lies and confusion. Some of it still happens, especially in '3rd world' countries.
Also, smoking companies spent a very long time making sure that the now widely-known health effects weren't so widely known. Lies and confusion. Some of it still happens, especially in '3rd world' countries.
They adjust their strategies to local conditions. In EU they can do little. Elsewhere, they actually sue countries[0] to keep their rights to advertise death.
[0] - https://youtu.be/6UsHHOCH4q8?t=486
[0] - https://youtu.be/6UsHHOCH4q8?t=486
> I'm sure most developed countries do that by fining businesses for false advertising, which would incentivise the businesses to pass the punishment on to the staff who did it.
In principle yes, but in practice the false advertising laws are way, way too lax.
> Lies aren't really the problem though, fooling us with truths we don't understand is.
True, but companies now tell bullshit that is so obvious to see through that it's often very clear whether they want to scam you or not. This again should be punished but currently isn't.
In principle yes, but in practice the false advertising laws are way, way too lax.
> Lies aren't really the problem though, fooling us with truths we don't understand is.
True, but companies now tell bullshit that is so obvious to see through that it's often very clear whether they want to scam you or not. This again should be punished but currently isn't.
Why not just ban advertising altogether?
Sounds extreme perhaps, but think about it... Isn't advertising all about trying to convince you to buy something you don't need? If you needed it (or even just wanted it), you wouldn't need advertising, you'd seek it out on your own.
Sounds extreme perhaps, but think about it... Isn't advertising all about trying to convince you to buy something you don't need? If you needed it (or even just wanted it), you wouldn't need advertising, you'd seek it out on your own.
The counter argument to this is that advertising serves useful discovery for new technologies.
Which is of course 99% bullshit since the vast majority is emotive and manipulative.
But to avoid this you could make advertising regulation 'white list' style. Only text based, only non-emotive descriptions of product function.
I mean take cola, their adverts are largely around the subtext of 'if you drink this you will have more friends, if you do not drink this you will be more lonely.' Of course this is never stated openly it's all in the subtext which given Colas efficient market defying profits seems to be incredibly effective.
Which is of course 99% bullshit since the vast majority is emotive and manipulative.
But to avoid this you could make advertising regulation 'white list' style. Only text based, only non-emotive descriptions of product function.
I mean take cola, their adverts are largely around the subtext of 'if you drink this you will have more friends, if you do not drink this you will be more lonely.' Of course this is never stated openly it's all in the subtext which given Colas efficient market defying profits seems to be incredibly effective.
> non-emotive descriptions of product function.
This sounds very similar to the rules that non-commercial stations are bound to, per the FCC. Fines can be issued for underwriting spots that contain calls to action, price information, qualitative claims, or are simply too long.[0]
[0] http://www.broadcastlawblog.com/2009/01/articles/fcc-fines-f...
This sounds very similar to the rules that non-commercial stations are bound to, per the FCC. Fines can be issued for underwriting spots that contain calls to action, price information, qualitative claims, or are simply too long.[0]
[0] http://www.broadcastlawblog.com/2009/01/articles/fcc-fines-f...
That's throwing out the baby with the bath water. Advertising serves a modicum of a public good, in that it's informative. If, say, I buy some fabric conditioner and quite like its effects but think it smells too intense, I might change brand. If I see an ad for the old brand saying 'now with a new and improved fragrance', that's genuinely useful information. Perhaps the problem I had with an otherwise satisfactory product is gone.
There's plenty of truly bad advertising out there and it definitely needs stronger regulation, but lets not be overly enthusiastic about it.
There's plenty of truly bad advertising out there and it definitely needs stronger regulation, but lets not be overly enthusiastic about it.
> "If I see an ad for the old brand saying 'now with a new and improved fragrance', that's genuinely useful information. Perhaps the problem I had with an otherwise satisfactory product is gone."
If that's the only reason to keep advertising, it can easily be replaced by independent consumer advice, similar to 'Which?' magazine but with a much wider remit... https://en.wikipedia.org/wiki/Which%3F
If that's the only reason to keep advertising, it can easily be replaced by independent consumer advice, similar to 'Which?' magazine but with a much wider remit... https://en.wikipedia.org/wiki/Which%3F
>"We could, for instance, start punishing marketers and salesmen for lying."
We already do, and it's called misleading advertising, or plain out fraud.
Edit, I see someone else also pointed this out.
We already do, and it's called misleading advertising, or plain out fraud.
Edit, I see someone else also pointed this out.
I am referring to the practical reality - we don't do it enough. Fraud is defined in such a way that lets companies still get away with blatant lies and abusive behaviour. The laws are also not enforced strongly enough.
Case in point: want to bet that VW will actually get hurt by the emissions cheating scandal?
Case in point: want to bet that VW will actually get hurt by the emissions cheating scandal?
Fine, but those are failings of the state, not of the free-market or competition.
The whole point of the "free-market" is that there are repercussions or effects for what we determine to be bad behavior (with or without a state). And currently, individuals are being misled (a tad bit ironic) by the state in the sense that we all "assume" that bad market actors are being punished, when in fact they aren't always.
Additionally, people bought VW cars under the assumption that they were thoroughly regulated and tested by the government.
VW won't get "hurt" as such, probably. But they should be mandated to submit a model that doesn't cheat, have it be tested, approved, and then give that model to all the recalled cars.
Ironically, discussions like these are what eventually drove me to consider non-state solutions to the problems around us. I looked around and was presented with really countless scenarios/problems that are "bad" or "unwanted", and the state not fixing it despite claims by them that it is a problem. E.g. car accidents/fatalities, 100+ years later, and still happening even in civilized countries.
The whole point of the "free-market" is that there are repercussions or effects for what we determine to be bad behavior (with or without a state). And currently, individuals are being misled (a tad bit ironic) by the state in the sense that we all "assume" that bad market actors are being punished, when in fact they aren't always.
Additionally, people bought VW cars under the assumption that they were thoroughly regulated and tested by the government.
VW won't get "hurt" as such, probably. But they should be mandated to submit a model that doesn't cheat, have it be tested, approved, and then give that model to all the recalled cars.
Ironically, discussions like these are what eventually drove me to consider non-state solutions to the problems around us. I looked around and was presented with really countless scenarios/problems that are "bad" or "unwanted", and the state not fixing it despite claims by them that it is a problem. E.g. car accidents/fatalities, 100+ years later, and still happening even in civilized countries.
> And currently, individuals are being misled (a tad bit ironic) by the state in the sense that we all "assume" that bad market actors are being punished, when in fact they aren't always.
> Additionally, people bought VW cars under the assumption that they were thoroughly regulated and tested by the government.
There are, in fact, but not enough. All legally available cars are thoroughly regulated and tested - that's why they don't explode on the road or poison people to death as they drive by. Every product out there is regulated against direct health hazards, and that's the only reason you can safely shop.
Also, the government did the testing for emissions, it's VW that cheated on them. You could question the quality of those tests but then again, if you know you'll have to test fraudsters, why don't just go ahead and arrest them instead of investing tons of resources in more fraud-proof tests? The government probably saved a lot of money trusting the companies to act in good faith. VW has just abused this trust, and it's entirely their fault.
> Fine, but those are failings of the state, not of the free-market or competition.
If those are failings of state not being strict enough, then let's state the corollary - that free market / competition are not saviours, but savage beasts that need to be controlled in order to put their power to good use.
> Ironically, discussions like these are what eventually drove me to consider non-state solutions to the problems around us. I looked around and was presented with really countless scenarios/problems that are "bad" or "unwanted", and the state not fixing it despite claims by them that it is a problem. E.g. car accidents/fatalities, 100+ years later, and still happening even in civilized countries.
I also had a similar turn towards non-state solutions, mostly because it's becoming evident that you couldn't design a system less capable of dealing with actual, serious issues than modern democracy. I looked briefly at private businesses for solutions and while they seem to be a much more efficient instrument than politics, the private sector is filled with even more corrupt people than there are in public. Which makes me both depressed and cheering for those few individuals and companies who honestly try to do some good.
> Additionally, people bought VW cars under the assumption that they were thoroughly regulated and tested by the government.
There are, in fact, but not enough. All legally available cars are thoroughly regulated and tested - that's why they don't explode on the road or poison people to death as they drive by. Every product out there is regulated against direct health hazards, and that's the only reason you can safely shop.
Also, the government did the testing for emissions, it's VW that cheated on them. You could question the quality of those tests but then again, if you know you'll have to test fraudsters, why don't just go ahead and arrest them instead of investing tons of resources in more fraud-proof tests? The government probably saved a lot of money trusting the companies to act in good faith. VW has just abused this trust, and it's entirely their fault.
> Fine, but those are failings of the state, not of the free-market or competition.
If those are failings of state not being strict enough, then let's state the corollary - that free market / competition are not saviours, but savage beasts that need to be controlled in order to put their power to good use.
> Ironically, discussions like these are what eventually drove me to consider non-state solutions to the problems around us. I looked around and was presented with really countless scenarios/problems that are "bad" or "unwanted", and the state not fixing it despite claims by them that it is a problem. E.g. car accidents/fatalities, 100+ years later, and still happening even in civilized countries.
I also had a similar turn towards non-state solutions, mostly because it's becoming evident that you couldn't design a system less capable of dealing with actual, serious issues than modern democracy. I looked briefly at private businesses for solutions and while they seem to be a much more efficient instrument than politics, the private sector is filled with even more corrupt people than there are in public. Which makes me both depressed and cheering for those few individuals and companies who honestly try to do some good.
If those are failings of state not being strict enough, then let's state the corollary - that free market / competition are not saviours, but savage beasts that need to be controlled in order to put their power to good use.
I don't think anyone, not even ancaps, disagrees that market participants can be fraudulent or destructive. The disagreement is about what to do about it.
I don't think anyone, not even ancaps, disagrees that market participants can be fraudulent or destructive. The disagreement is about what to do about it.
It's not that they 'can' be, but they will be (and are). A lot of people are in denial about it.
Who is in denial? That sounds like a strawman.
You're right, I admit I was weasel-wording there a bit, but that's because of hurry (as I'm again on HN procrastinating before life-or-death (for me) deadline).
By 'a lot of people' I meant the many people - from some of friends and colleagues to some members of various communities I participate in, HN included - that seem to be very convinced that total deregulation is the right thing to do and the market will turn benevolent if you remove all interference. I understand that there are subproblems for which deregulation indeed seems to be the right way to go; personally, I try to evaluate things on case-by-case basis. But it seems obvious that total, absolute deregulation would be disastrous and yet there are real people who seem to actually want exactly that absolute.
By 'a lot of people' I meant the many people - from some of friends and colleagues to some members of various communities I participate in, HN included - that seem to be very convinced that total deregulation is the right thing to do and the market will turn benevolent if you remove all interference. I understand that there are subproblems for which deregulation indeed seems to be the right way to go; personally, I try to evaluate things on case-by-case basis. But it seems obvious that total, absolute deregulation would be disastrous and yet there are real people who seem to actually want exactly that absolute.
Ah, yes. The confusion is assuming that advocating for deregulation means one thinks that markets are perfect - it doesn't. It just means they think that deregulation is not a good solution - much like someone can advocate against blood-letting as a cure for cancer without believing that cancer doesn't exist.
For example, in this case the regulation didn't prevent VW from polluting, but it did help them fool people by giving fraudulent approval to the cars - it's not hard to argue it actually did worse than if it hadn't existed. Then there's regulatory capture, misguided policies that promote worse solutions, etc.
For example, in this case the regulation didn't prevent VW from polluting, but it did help them fool people by giving fraudulent approval to the cars - it's not hard to argue it actually did worse than if it hadn't existed. Then there's regulatory capture, misguided policies that promote worse solutions, etc.
In addition to what TeMPOral said, we could ask for more balance in access to information. For example, why couldn't everything that the producer knows about the product (results of internal testing, how it was produced, what were the costs involved) be available to the customer? It seems only a fair deal to me. And it could be done in manner of not "forcing" anyone to do that - for example, only companies that do that would be eligible for government subsidies or contracts.
(Ironically, the optimal price by free markets is only proven when access to information is perfect and actors are rational. But then you don't really need the price to make the decision, do you? You can already calculate everything in your head.)
But in general, there is problem with complexity of things getting out of hand. It's impossible to ask the customers to rationally evaluate everything, experts need to do that anyway.
And I think, similar to what Chomsky said in "Responsibility of Intellectuals", I believe there should be a moral code for engineers to provide good solutions. Today, technical experts to often wash off their hands by thinking that the customer knows the best (usually in indirect way - by not pushing enough against businessmen, by believing too much in individualism).
(Ironically, the optimal price by free markets is only proven when access to information is perfect and actors are rational. But then you don't really need the price to make the decision, do you? You can already calculate everything in your head.)
But in general, there is problem with complexity of things getting out of hand. It's impossible to ask the customers to rationally evaluate everything, experts need to do that anyway.
And I think, similar to what Chomsky said in "Responsibility of Intellectuals", I believe there should be a moral code for engineers to provide good solutions. Today, technical experts to often wash off their hands by thinking that the customer knows the best (usually in indirect way - by not pushing enough against businessmen, by believing too much in individualism).
For example, why couldn't everything that the producer knows about the product (results of internal testing, how it was produced, what were the costs involved) be available to the customer?
How would you know that the public is getting everything that the producer knows about the product?
How would you know that the public is getting everything that the producer knows about the product?
It would be illegal to hide it. Everyone involved in hiding could be prosecuted, just like in any other criminal conspiracy. We try to do today pretty much the same thing with the government. The fact that it is imperfect doesn't mean that it's a bad idea.
I respect Robert Schiller a lot. And I think there are legitimate areas where people are being manipulated into buying expensive things (recent news on pharma companies are a good example of this). But the book (as presented in the article) is incredibly overreaching.
There is an easy solution to the phishermen/phools problem in many cases: don't buy what you are pushed by others to buy. Combine that with the proverbial "there is no free lunch" and you are more or less safe.
I remember when I was a student during the heyday of the financial swing that led to the 2008 crash, I was walking thorough the Hamburg airport and a young representative of American Express caught me and tried to convince me to sign up for American Express Gold (afaik, a product tier two steps down from the mythical American Express Black).
"What is your income?" she asked me. "I don't know. I'm a student, I live off 400 Euros a month." "Alright, I'll write 40 000 EUR annual income in the form."
At that point not alarm bells, loud ass alarm sirens were going off in my head and I've politely disengaged and walked on. And that was the suprisingly easy way how I avoided crippling credit card debt.
The problem is really not in the free market per se, but industries that don't allow robust competition and that aren't scrutinized by consumers. The first part is achieved by regulation. When was the last time utilities, energy companies, banks, and pharmaceuticals were challenged by a newcomer? The second part is made possible by us not caring what we buy or continuing buying something purely out of emotion. "What's that? Google now allows companies to directly put ultra-targeted adds in your inbox? That surely doesn't sound like legalized spam. And they say they're not evil."
There is an easy solution to the phishermen/phools problem in many cases: don't buy what you are pushed by others to buy. Combine that with the proverbial "there is no free lunch" and you are more or less safe.
I remember when I was a student during the heyday of the financial swing that led to the 2008 crash, I was walking thorough the Hamburg airport and a young representative of American Express caught me and tried to convince me to sign up for American Express Gold (afaik, a product tier two steps down from the mythical American Express Black).
"What is your income?" she asked me. "I don't know. I'm a student, I live off 400 Euros a month." "Alright, I'll write 40 000 EUR annual income in the form."
At that point not alarm bells, loud ass alarm sirens were going off in my head and I've politely disengaged and walked on. And that was the suprisingly easy way how I avoided crippling credit card debt.
The problem is really not in the free market per se, but industries that don't allow robust competition and that aren't scrutinized by consumers. The first part is achieved by regulation. When was the last time utilities, energy companies, banks, and pharmaceuticals were challenged by a newcomer? The second part is made possible by us not caring what we buy or continuing buying something purely out of emotion. "What's that? Google now allows companies to directly put ultra-targeted adds in your inbox? That surely doesn't sound like legalized spam. And they say they're not evil."
This is not an individual problem. We may be smart enough, well-rested enough, with enough financial reserves etc. to avoid these scams in most cases, but the whole market is warped by what works on the average person. You shouldn't have even been put in that position, the lady trying to hook people into debt should have been contributing something useful to society, as should the people who get hooked into debt and end up funding the next generation of scams.
I believe in the power of market competition, that's why externalities scare me so much.
I believe in the power of market competition, that's why externalities scare me so much.
I've been trying to live by the dictum "anything advertised is not worth buying," and I've rarely been forced to find exceptions. Buy what you need, and only what you need, and one can live very comfortably.
I think this is a good approach. Let the product speak for itself.
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> "anything advertised is not worth buying,"
Then how do you find out about new products or services? Remember, reading about it in a news paper or a news site or even a blog is also advertising. Paid for one way or another.
Basically any time you hear a brand name or see a brand name or read a brand name, that's an ad. A paid-for ad. Even your friends' t-shirts and computers and cars and stuff having their brand name on them ... that's an ad.
So if you never buy anything advertised, what then do you even buy?
Then how do you find out about new products or services? Remember, reading about it in a news paper or a news site or even a blog is also advertising. Paid for one way or another.
Basically any time you hear a brand name or see a brand name or read a brand name, that's an ad. A paid-for ad. Even your friends' t-shirts and computers and cars and stuff having their brand name on them ... that's an ad.
So if you never buy anything advertised, what then do you even buy?
This is not what GP meant and you know it, but I'll bite :).
Almost everything is advertised - you might not have seen the ad, but it was definitely somewhere at some point. The question is, whether or not you chose to buy things that you've seen advertised based on the ad, even indirectly. Personally, I attach negative value to ads, i.e. every time I see the product advertised, I purposefully lower my opinion of it.
(EDIT because of nitpicking - that's a heuristic and not the only rule I use; e.g. some companies are extempt if they have earned my trust personally and their advertisement are honest. My rule, born of experience that includes working with marketers, is to assume advertising is purposefully dishonest unless I know otherwise.)
> So if you never buy anything advertised, what then do you even buy?
So I've seen the product as used by a friend. Is that advertising? I've heard my friends who use it talk about it - is that an ad? I read third party blogs and forums on which I find recommendations by people who are experienced with the whole classes of products (hint: non-profit forums and blogs are the best). Is that an ad?
If so, then the word 'advertisement' here has acquired too much meaning and we need to split it for the discussion.
I am totally fine with buying things that are "advertised" by trustworthy actors who wish me well or at least are neutral to me. I reject buying on messages sent by dishonest people or those who have interest in profiting at my expense (e.g. salesmen, advertisers).
Almost everything is advertised - you might not have seen the ad, but it was definitely somewhere at some point. The question is, whether or not you chose to buy things that you've seen advertised based on the ad, even indirectly. Personally, I attach negative value to ads, i.e. every time I see the product advertised, I purposefully lower my opinion of it.
(EDIT because of nitpicking - that's a heuristic and not the only rule I use; e.g. some companies are extempt if they have earned my trust personally and their advertisement are honest. My rule, born of experience that includes working with marketers, is to assume advertising is purposefully dishonest unless I know otherwise.)
> So if you never buy anything advertised, what then do you even buy?
So I've seen the product as used by a friend. Is that advertising? I've heard my friends who use it talk about it - is that an ad? I read third party blogs and forums on which I find recommendations by people who are experienced with the whole classes of products (hint: non-profit forums and blogs are the best). Is that an ad?
If so, then the word 'advertisement' here has acquired too much meaning and we need to split it for the discussion.
I am totally fine with buying things that are "advertised" by trustworthy actors who wish me well or at least are neutral to me. I reject buying on messages sent by dishonest people or those who have interest in profiting at my expense (e.g. salesmen, advertisers).
>don't buy what you are pushed by others to buy
I think this is much easier said than done - your example of credit card pushers is an extreme example of pushiness.
I think in the majority of cases where you buy something, you may not realise that you've been pushed to buy it. Shopping in supermarkets is one example - they make a "path" for you to follow, stuff you may not usually buy is positioned in such ways that you stumble over them, things you usually wouldn't buy are on offer, your loyalty card gives you an offer on the stuff you usually buy, more examples here: https://theconversation.com/conspiracy-or-commercialism-are-...
You then wind up buying these things ("oh, I haven't cooked X in a while, that should be fun") without realising that the supermarket created the situation in which you thought this buy to be desirable, without explicitly pushing you.
I think this is much easier said than done - your example of credit card pushers is an extreme example of pushiness.
I think in the majority of cases where you buy something, you may not realise that you've been pushed to buy it. Shopping in supermarkets is one example - they make a "path" for you to follow, stuff you may not usually buy is positioned in such ways that you stumble over them, things you usually wouldn't buy are on offer, your loyalty card gives you an offer on the stuff you usually buy, more examples here: https://theconversation.com/conspiracy-or-commercialism-are-...
You then wind up buying these things ("oh, I haven't cooked X in a while, that should be fun") without realising that the supermarket created the situation in which you thought this buy to be desirable, without explicitly pushing you.
>Shopping in supermarkets is one example - they make a "path" for you to follow, stuff you may not usually buy is positioned in such ways that you
That's what Ikea does, and I hate them for that. I find it to be really condescending/paternalistic in relation to its clients, on top of the manipulative "buy-this-stuff!" thing.
> your loyalty card gives you an offer on the stuff you usually buy
My solution, which, granted, is not so great but works for me, is to never ever accept loyalty cards from stores. I understand that that implies that sometimes I pay 5% or 10% more, but I think it more than evens up by me not buying stuff that I don't really need because of the 5-10% price reduction. I also very rarely look for special prize offers on stuff I buy day to day, like food items, it only encourages me to buy more of it.
That's what Ikea does, and I hate them for that. I find it to be really condescending/paternalistic in relation to its clients, on top of the manipulative "buy-this-stuff!" thing.
> your loyalty card gives you an offer on the stuff you usually buy
My solution, which, granted, is not so great but works for me, is to never ever accept loyalty cards from stores. I understand that that implies that sometimes I pay 5% or 10% more, but I think it more than evens up by me not buying stuff that I don't really need because of the 5-10% price reduction. I also very rarely look for special prize offers on stuff I buy day to day, like food items, it only encourages me to buy more of it.
That's a good solution. Additionally, it protects your privacy.
On the silly "inequality is getting worse" claim:
"Contrary to the author's claim that the rich are getting richer, not due to underlying economic trends, but by using their power and influence to enrich themselves, I have in this column more than once suggested that the real reason is the enormous expansion of the world supply of unskilled and semi-skilled labour brought about by falling transport costs and trade barriers. With globalization, a billion or more rural people in Asia could be recruited into the urban industrial sector and produce the tradeable goods that undersell the goods hitherto produced in the United States and Europe. Until this new Asian labour is wholly absorbed and its wages rise to Western levels, U.S. and European unskilled wages will remain depressed and the share of profits in value added will rise. Ironically, while this sharpens inequality in the West, it promotes equality on a world scale as Asian and eventually also African peoples are lifted out of misery." http://www.econlib.org/library/Columns/y2012/Jasayinequality...
+ Even if there exits market failures, we don't want to replace them with government failures, which are usually even worse.
"Contrary to the author's claim that the rich are getting richer, not due to underlying economic trends, but by using their power and influence to enrich themselves, I have in this column more than once suggested that the real reason is the enormous expansion of the world supply of unskilled and semi-skilled labour brought about by falling transport costs and trade barriers. With globalization, a billion or more rural people in Asia could be recruited into the urban industrial sector and produce the tradeable goods that undersell the goods hitherto produced in the United States and Europe. Until this new Asian labour is wholly absorbed and its wages rise to Western levels, U.S. and European unskilled wages will remain depressed and the share of profits in value added will rise. Ironically, while this sharpens inequality in the West, it promotes equality on a world scale as Asian and eventually also African peoples are lifted out of misery." http://www.econlib.org/library/Columns/y2012/Jasayinequality...
+ Even if there exits market failures, we don't want to replace them with government failures, which are usually even worse.
Which is great for those Asian people, in the last 30 years alone around 500 million Chinese people have been lifted out of extreme poverty. Let that sink in, that's the entire population of present-day Europe.
But, as an Eastern European I'm of course biased. I grew up in the economy-controlled '80s when we were experiencing toilet paper shortages, among other things (question for the anti-free market people: how do you centralize the production of things like toilet paper? How do you decide how much toilet paper to make, in the absence of a free market?)
But, as an Eastern European I'm of course biased. I grew up in the economy-controlled '80s when we were experiencing toilet paper shortages, among other things (question for the anti-free market people: how do you centralize the production of things like toilet paper? How do you decide how much toilet paper to make, in the absence of a free market?)
"I grew up in the economy-controlled '80s"
Me too! I'm from Poland. And that's why I'm so sick of all those inteligentsia do-gooders who want to impose their own preferences on everybody else because they know better and this legitimizes them to orchestrate the society.
Me too! I'm from Poland. And that's why I'm so sick of all those inteligentsia do-gooders who want to impose their own preferences on everybody else because they know better and this legitimizes them to orchestrate the society.
> But, as an Eastern European I'm of course biased. I grew up in the economy-controlled '80s when we were experiencing toilet paper shortages, among other things (question for the anti-free market people: how do you centralize the production of things like toilet paper? How do you decide how much toilet paper to make, in the absence of a free market?)
As Eastern Germany (where I grew up) was not experiencing toilet paper shortages in the '80s, I'd say the main source of the problem wasn't the planned economy per se, but other contributing factors.
Amartya Sen makes a strong case for authoritarianism being the culprit, as there are numerous examples of famines and shortages in market-regulated, but authoritarian economies (like the 1943 Bengal famine, where millions of people died).
As Eastern Germany (where I grew up) was not experiencing toilet paper shortages in the '80s, I'd say the main source of the problem wasn't the planned economy per se, but other contributing factors.
Amartya Sen makes a strong case for authoritarianism being the culprit, as there are numerous examples of famines and shortages in market-regulated, but authoritarian economies (like the 1943 Bengal famine, where millions of people died).
Nonsense, the entire era of Industrial Revolution happened during authoritarian governments. Not to mention the economic success of Hong Kong or Chile.
PS. Yes, there was huge shortage of toilet paper in Poland during 80's. Huge! My family was standing in the queues for 2-3h to get it.
PS. Yes, there was huge shortage of toilet paper in Poland during 80's. Huge! My family was standing in the queues for 2-3h to get it.
> Nonsense, the entire era of Industrial Revolution happened during authoritarian governments.
And whole generations lived in misery during that period. I thought that's exactly what we were talking about?
> Not to mention the economic success of Hong Kong or Chile.
I don't know about Hong Kong, but in Chile the Chicago school free market era under Pinochet ended in the collapse of the economy in 1982.
And whole generations lived in misery during that period. I thought that's exactly what we were talking about?
> Not to mention the economic success of Hong Kong or Chile.
I don't know about Hong Kong, but in Chile the Chicago school free market era under Pinochet ended in the collapse of the economy in 1982.
> "question for the anti-free market people: how do you centralize the production of things like toilet paper? How do you decide how much toilet paper to make, in the absence of a free market?"
Why do you have to centralise it? You could split the task into regions. How many regions? Enough regions until it becomes efficient at measuring and responding to needs.
To use a phrase... think global, act local.
Why do you have to centralise it? You could split the task into regions. How many regions? Enough regions until it becomes efficient at measuring and responding to needs.
To use a phrase... think global, act local.
> Enough regions until it becomes efficient at measuring and responding to needs.
How do you respond to needs if it's all opaque? For example, for a city of 100,000 people how do you decide how many sheets of toilet paper you need? Or razor blades? Or tampons? I know it sounds all frivolous, but the lack of razor blades was mentioned even by Orwell in his "1984", and as for tampons, I first saw them after 1990, the central economy planners from my country had decided that cotton wool was good enough for women.
How do you respond to needs if it's all opaque? For example, for a city of 100,000 people how do you decide how many sheets of toilet paper you need? Or razor blades? Or tampons? I know it sounds all frivolous, but the lack of razor blades was mentioned even by Orwell in his "1984", and as for tampons, I first saw them after 1990, the central economy planners from my country had decided that cotton wool was good enough for women.
And how does the free market solve this problem? By overproducing the shit out of everything, letting it rot on the shelves and then throwing it away. This is the cost associated with the abundance of products - especially short-lived ones - in the stores.
Yes, in recent years the market learned to optimize, to run on supply lines with very little buffering at endpoints. Still - the producers get information about how much to make from the sales at endpoints. Why the same scheme should not be available to central planners? Does centralization somehow preclude from measuring at the endpoints?
Hell, if you really look at it, isn't the optimizations market learned basically central planning, but in the hands of private planners and not state ones?
Yes, in recent years the market learned to optimize, to run on supply lines with very little buffering at endpoints. Still - the producers get information about how much to make from the sales at endpoints. Why the same scheme should not be available to central planners? Does centralization somehow preclude from measuring at the endpoints?
Hell, if you really look at it, isn't the optimizations market learned basically central planning, but in the hands of private planners and not state ones?
Because no central planner can have all the information about every aspect of the market in order to plan correctly. This is impossible not only because of the volume of information, but because the information in question is highly subjective (they amount to personal preferences). So the "optimization" has to happen in a distributed manner, with each agent taking in account his own preferences and the information available to him.
Finally, a centrally planned economy precludes the entrepreneurial function.
Finally, a centrally planned economy precludes the entrepreneurial function.
So you don't manage it centrally, you manage it regionally and monitor stock levels.
One item taken = one sale, so you have the same level of information to manage the economy with.
One item taken = one sale, so you have the same level of information to manage the economy with.
Monitoring stock levels is hardly all you need to manage an economy.
You need to consider innovation, the creation of the very same information agents in an economy use to decide the actions they take. This is the entrepreneurial function. If production is ruled by coercion of a central planner, you eliminate that, and then what incentive is there for anyone to produce?
In this scenario, at the very best you get crony capitalism; at the worst, you get communism.
You need to consider innovation, the creation of the very same information agents in an economy use to decide the actions they take. This is the entrepreneurial function. If production is ruled by coercion of a central planner, you eliminate that, and then what incentive is there for anyone to produce?
In this scenario, at the very best you get crony capitalism; at the worst, you get communism.
> "Monitoring stock levels is hardly all you need to manage an economy."
I didn't say it was, what I did say is that you lose no 'sales' information from removing money from the process of transferring goods from the manufacturer to the consumer. In other words, removing money doesn't make managing an economy harder.
> "You need to consider innovation, the creation of the very same information agents in an economy use to decide the actions they take. This is the entrepreneurial function. If production is ruled by coercion of a central planner, you eliminate that, and then what incentive is there for anyone to produce?"
Innovation can happen faster without the overhead of competition. What you want to encourage instead is collaboration. Innovation does not have to be a top down affair if you remove money from the economy.
Whilst it's not a perfect example, consider the development methodology of open source. Whilst there are problems with the open source approach, I'd argue that shortage of innovation is not one of those problems.
I didn't say it was, what I did say is that you lose no 'sales' information from removing money from the process of transferring goods from the manufacturer to the consumer. In other words, removing money doesn't make managing an economy harder.
> "You need to consider innovation, the creation of the very same information agents in an economy use to decide the actions they take. This is the entrepreneurial function. If production is ruled by coercion of a central planner, you eliminate that, and then what incentive is there for anyone to produce?"
Innovation can happen faster without the overhead of competition. What you want to encourage instead is collaboration. Innovation does not have to be a top down affair if you remove money from the economy.
Whilst it's not a perfect example, consider the development methodology of open source. Whilst there are problems with the open source approach, I'd argue that shortage of innovation is not one of those problems.
> I didn't say it was
You said "One item taken = one sale, so you have the same level of information to manage the economy with." so I think you did.
> what I did say is that you lose no 'sales' information from removing money from the process of transferring goods from the manufacturer to the consumer
Money is a tool, and a useful one. It provides portability, divisibility and allows indirect exchange. How do you propose that manufacturer to be payed? Do you see a return to a barter economy? Or do does the manufacturer only gets whatever goods the central planner allocates to him?
> Innovation can happen faster without the overhead of competition.
Can you give an example of that? I'd be more inclined to say that competition is one of the major drivers of innovation. You have to provide more at a lower cost, or you lose your customers.
> Whilst it's not a perfect example, consider the development methodology of open source.
There is a lot of competition (and money!) in open source.
You said "One item taken = one sale, so you have the same level of information to manage the economy with." so I think you did.
> what I did say is that you lose no 'sales' information from removing money from the process of transferring goods from the manufacturer to the consumer
Money is a tool, and a useful one. It provides portability, divisibility and allows indirect exchange. How do you propose that manufacturer to be payed? Do you see a return to a barter economy? Or do does the manufacturer only gets whatever goods the central planner allocates to him?
> Innovation can happen faster without the overhead of competition.
Can you give an example of that? I'd be more inclined to say that competition is one of the major drivers of innovation. You have to provide more at a lower cost, or you lose your customers.
> Whilst it's not a perfect example, consider the development methodology of open source.
There is a lot of competition (and money!) in open source.
>"You said "One item taken = one sale, so you have the same level of information to manage the economy with." so I think you did."
If you think I said that, let me clarify then.
You said... "Monitoring stock levels is hardly all you need to manage an economy." ... I never claimed it was enough to run an economy, because it takes more than monitoring sales to manage an economy.
However, monitoring stock is enough to track sales, that's my point, tracking sales can be handled without money and without losing the benefits of money in tracking sales. By tracking stock you have all the sales information you need. However sales information is not enough on its own to manage an economy. Hope my point is clearer now.
>"How do you propose that manufacturer to be payed?"
Why would the manufacturer need to be paid when everything is free? I'm proposing a system without money, without a need for trade. There are many options, my personal favourites are variations on the resource-based economy ideas.
>"There is a lot of competition (and money!) in open source."
Competition yes, but largely uninhibited collaboration also.
As for money in open source, open source (or rather the free software movement) existed before the money started rolling in. Furthermore, the main benefit that the money brought was that people could work on open source full-time and enjoy a decent standard of living. If you take away the need to earn money to survive the level of activity around open source is unlikely to be diminished.
If you think I said that, let me clarify then.
You said... "Monitoring stock levels is hardly all you need to manage an economy." ... I never claimed it was enough to run an economy, because it takes more than monitoring sales to manage an economy.
However, monitoring stock is enough to track sales, that's my point, tracking sales can be handled without money and without losing the benefits of money in tracking sales. By tracking stock you have all the sales information you need. However sales information is not enough on its own to manage an economy. Hope my point is clearer now.
>"How do you propose that manufacturer to be payed?"
Why would the manufacturer need to be paid when everything is free? I'm proposing a system without money, without a need for trade. There are many options, my personal favourites are variations on the resource-based economy ideas.
>"There is a lot of competition (and money!) in open source."
Competition yes, but largely uninhibited collaboration also.
As for money in open source, open source (or rather the free software movement) existed before the money started rolling in. Furthermore, the main benefit that the money brought was that people could work on open source full-time and enjoy a decent standard of living. If you take away the need to earn money to survive the level of activity around open source is unlikely to be diminished.
Well but you did! You quoted it yourself: "to manage the economy with", but then you started talking about sales, which you didn't mention when you first replied to me. Anyway, that's besidbeside the point now.
> Why would the manufacturer need to be paid when everything is free?
He would have to be payed somehow, otherwise why would he produce anything? If everything is free, what determines how much of each product someone can have?
In the system that you propose, the economic calculus is not possible. How do you determine if allocation of resources is efficient? How do you determine if a new production model can generate more at a smaller cost? How does one save in order to improve his conditions in the future?
Does the central planner decide all this? Even if it were possible, it would reduce people to cattle.
Wrt open source, there was always money involved, even if it was just university grants. And as you said, it allowed people to enjoy good living standards.
> Why would the manufacturer need to be paid when everything is free?
He would have to be payed somehow, otherwise why would he produce anything? If everything is free, what determines how much of each product someone can have?
In the system that you propose, the economic calculus is not possible. How do you determine if allocation of resources is efficient? How do you determine if a new production model can generate more at a smaller cost? How does one save in order to improve his conditions in the future?
Does the central planner decide all this? Even if it were possible, it would reduce people to cattle.
Wrt open source, there was always money involved, even if it was just university grants. And as you said, it allowed people to enjoy good living standards.
>"How do you respond to needs if it's all opaque? For example, for a city of 100,000 people how do you decide how many sheets of toilet paper you need? Or razor blades? Or tampons?"
You monitor stock levels.
The same functions that apply to a commercial enterprise would apply to a non-commercial one. You'd still have a 'merchandising department' monitoring stock levels, ensuring enough weeks of cover (based on usage trends), setting when to manufacture and how much, etc...
In addition, by having multiple sources of toilet roll you can temporarily boost the stock in one region if another region has a small surplus.
I'm sorry that you had to live through shortages, it's probably no consolation that the problems were caused by mismanagement, but from what I can see they aren't an intrinsic part of communism.
You monitor stock levels.
The same functions that apply to a commercial enterprise would apply to a non-commercial one. You'd still have a 'merchandising department' monitoring stock levels, ensuring enough weeks of cover (based on usage trends), setting when to manufacture and how much, etc...
In addition, by having multiple sources of toilet roll you can temporarily boost the stock in one region if another region has a small surplus.
I'm sorry that you had to live through shortages, it's probably no consolation that the problems were caused by mismanagement, but from what I can see they aren't an intrinsic part of communism.
I was under the impression that Piketty et.al. showed pretty conclusively that a) inequality indeed got worse and b) it's a matter of policy, not globalization per se. The paper you linked predates the publication of Capital in the 21st century, so the author had no chance to react on those findings.
No, Piketty showed that inequality is getting worse in the West. Inequality is getting smaller in global and it is an empirical fact. Anyhow, his theory has serious flaws:
http://www.econlib.org/library/Columns/y2014/Jasaypython.htm...
> Inequality is getting smaller in global and it is an empirical fact.
I acknowledge that inequality is getting smaller between averages of different countries, but is it truly getting smaller between individuals (that's what actually matters)? I don't think we can ascertain that, because I think Piketty would have included the historical data if he had them for developing countries.
> Anyhow, his theory has serious flaws
If I understand the critiquing author's argument correctly - is he saying that facts stated in the Piketty's book contradict his own toy model? Maybe then his model is flawed for whatever reason, but that's not a flaw of Piketty's book.
I acknowledge that inequality is getting smaller between averages of different countries, but is it truly getting smaller between individuals (that's what actually matters)? I don't think we can ascertain that, because I think Piketty would have included the historical data if he had them for developing countries.
> Anyhow, his theory has serious flaws
If I understand the critiquing author's argument correctly - is he saying that facts stated in the Piketty's book contradict his own toy model? Maybe then his model is flawed for whatever reason, but that's not a flaw of Piketty's book.
> No, Piketty showed that inequality is getting worse in the West.
Yes, I know. I was alluding to the following sentence: "Until this new Asian labour is wholly absorbed and its wages rise to Western levels, U.S. and European unskilled wages will remain depressed and the share of profits in value added will rise." - The author here talks about inequality in the West.
Yes, I know. I was alluding to the following sentence: "Until this new Asian labour is wholly absorbed and its wages rise to Western levels, U.S. and European unskilled wages will remain depressed and the share of profits in value added will rise." - The author here talks about inequality in the West.
The way we accept this at the level of society is also worrying. See, if a friend tried to do to you the things advertisers do all the time, you'd punch him in the face. But somehow we have no problems being intentionally manipulated, lied to and deceived by companies every day. In fact, we turned it into a legitimate occupation.
https://www.youtube.com/watch?v=oRzYJullFOs
Max Headroom, Season 2, Episode 13 "Lessons"
Max Headroom, Season 2, Episode 13 "Lessons"
Have you any idea how suc-suc-suc-cessful censorship is on TV?
Don't know the answer?
Hmm...
Successful, isn't it!
Indeed. Moreover, the fundamental glue of the society - the thing that enables a peaceful governance, whether democratic or not, and flourishing free trade is trust. Trust people have toward each other, trust they have in their companies and officials. Lying is an existential threat to society itself.
Many people are surprised by anti-vaccination movements, or anti-GMO and anti-nuclear crowds. One will say: "surely they must be stupid, they reject the science, the well-tested and replicated results of countless of studies". But they aren't, in fact, any more or less stupid than you and I. They had their trust in the system broken. They've seen enough shit pharma does to stop trusting doctors. They've witnessed enough scandals and have been victims of enough frauds to stop trusting the government or the big bio/tech businesses.
Those "anti-science" movements are only a symptom of the greater problem, of society losing trust in the authority. The trust that has been eroded by constant and countless lies. So yes, if you're a journalist or an editor who writes and publishes lies to "spice up the story", you're responsible. If you're a marketer or a salesman or a businessman who lies to people to get them to buy your product, you're responsible. If you're a scientist who manipulates results to get publications, you too are responsible. As much and as little as the system may have made you to do it, but you are responsible. Responsible for the blood and the deaths, and the fall of the civilization if it happens.
Many people are surprised by anti-vaccination movements, or anti-GMO and anti-nuclear crowds. One will say: "surely they must be stupid, they reject the science, the well-tested and replicated results of countless of studies". But they aren't, in fact, any more or less stupid than you and I. They had their trust in the system broken. They've seen enough shit pharma does to stop trusting doctors. They've witnessed enough scandals and have been victims of enough frauds to stop trusting the government or the big bio/tech businesses.
Those "anti-science" movements are only a symptom of the greater problem, of society losing trust in the authority. The trust that has been eroded by constant and countless lies. So yes, if you're a journalist or an editor who writes and publishes lies to "spice up the story", you're responsible. If you're a marketer or a salesman or a businessman who lies to people to get them to buy your product, you're responsible. If you're a scientist who manipulates results to get publications, you too are responsible. As much and as little as the system may have made you to do it, but you are responsible. Responsible for the blood and the deaths, and the fall of the civilization if it happens.
Despite this and all other evidence to the contrary, I don't understand how some people still stick to the idea of efficient markets and speak against government intervention. The market system must be our slave, not our master.
Indeed. There is this common meme among religious people that some men make money their god. Sometimes it's even illustrated with people worshipping riches. It always seemed to me to be a stretch. I've never seen anyone worshipping money like they would worship a god.
But what I am seeing every day is people worshipping Moloch[0]. Men and women so sure that The Market will save us if we only leave it alone. It's not the money that's the deity, it's the perfect, efficient Market that promises riches if only you could get that pesky government out of the way.
[0] - http://slatestarcodex.com/2014/07/30/meditations-on-moloch/
But what I am seeing every day is people worshipping Moloch[0]. Men and women so sure that The Market will save us if we only leave it alone. It's not the money that's the deity, it's the perfect, efficient Market that promises riches if only you could get that pesky government out of the way.
[0] - http://slatestarcodex.com/2014/07/30/meditations-on-moloch/
You may be interested in Mark Blyth[1]'s take[2] on this, in which he also blames the seductive quality of mathematical models. Math can give an illusion of accuracy, when the real world is chaotic and often has far more confounding variables than you know about in something as complex as "the economy".
Treating "efficient markets" as if it was a law of nature is probably inevitable when you combine a trust of bad models with the greedy side of human nature (Moloch) that is biased to overlook the differences between reality and a model that tells you what you want to hear
[1] Prof. Econ. at Brown University, who is probably most well known these days for his warnings about the dangers of "austerity" (e.g. https://www.youtube.com/watch?v=B6vV8_uQmxs#t=673 )
[2] https://www.youtube.com/watch?v=hmWbkPezgtU
Treating "efficient markets" as if it was a law of nature is probably inevitable when you combine a trust of bad models with the greedy side of human nature (Moloch) that is biased to overlook the differences between reality and a model that tells you what you want to hear
[1] Prof. Econ. at Brown University, who is probably most well known these days for his warnings about the dangers of "austerity" (e.g. https://www.youtube.com/watch?v=B6vV8_uQmxs#t=673 )
[2] https://www.youtube.com/watch?v=hmWbkPezgtU
> Math can give an illusion of accuracy, when the real world is chaotic and often has far more confounding variables than you know about in something as complex as "the economy".
I don't know what you folks are talking about on this thread branch (what with "efficient markets") but Keynesian Economics is the "theory" that suffers from this "illusion of accuracy".
I don't believe in efficient anything, but I know Free Markets Theory involves no Math (only deductive methods like Praxeology).
I don't know what you folks are talking about on this thread branch (what with "efficient markets") but Keynesian Economics is the "theory" that suffers from this "illusion of accuracy".
I don't believe in efficient anything, but I know Free Markets Theory involves no Math (only deductive methods like Praxeology).
> I don't believe in efficient anything, but I know Free Markets Theory involves no Math
That's actually not a good sign. Math is refined thinking. If your theory doesn't involve math, it's probably little more than handwaving and could be significantly improved by being formalized a little more.
There is always the risk that people confuse the map with the territory, but it's present regardless of whether you have a differential equation handy for everything or you're just sharing campfire stories.
That's actually not a good sign. Math is refined thinking. If your theory doesn't involve math, it's probably little more than handwaving and could be significantly improved by being formalized a little more.
There is always the risk that people confuse the map with the territory, but it's present regardless of whether you have a differential equation handy for everything or you're just sharing campfire stories.
The deductive process on which Austrian School theory is based, is itself based on Logic. That's as formal as you can get.
> Math is refined thinking.
No, Mr. Poet. Math is an abstract science that can be applied to concrete fields. So far no one has been able to meaningfully apply mathematics to economics, or we would have computers that can simulate markets like we can simulate tornadoes.
> Math is refined thinking.
No, Mr. Poet. Math is an abstract science that can be applied to concrete fields. So far no one has been able to meaningfully apply mathematics to economics, or we would have computers that can simulate markets like we can simulate tornadoes.
> So far no one has been able to meaningfully apply mathematics to economics, or we would have computers that can simulate markets like we can simulate tornadoes.
That only proves those problems are incredibly hard - and require incredible resources and work to think about in a formal, precise way. It's also worth noting that you are therefore no more likely to be a good economist by guessing and waving hands than you're likely to be a good meteorologist by spinning make-believe stories about which way the weather should be. Failure to understand the meaning of this point is a source of tremendous amount of stupid decisions and pointless politics.
Also, don't confuse logic with math. The former is just a subset.
That only proves those problems are incredibly hard - and require incredible resources and work to think about in a formal, precise way. It's also worth noting that you are therefore no more likely to be a good economist by guessing and waving hands than you're likely to be a good meteorologist by spinning make-believe stories about which way the weather should be. Failure to understand the meaning of this point is a source of tremendous amount of stupid decisions and pointless politics.
Also, don't confuse logic with math. The former is just a subset.
Well, many oppose government intervention because they don't agree that it makes the market system our slave - any more than the government itself is.
"If a company can make money by deceiving or manipulating people, someone is going to create such a company, and it will prosper (unless the law regulates it). And if it prospers, companies that do not deceive or manipulate people may well be at a competitive disadvantage."
EDIT: I was just quoting the article for discussion purposes. There's no reason to down vote.
EDIT: I was just quoting the article for discussion purposes. There's no reason to down vote.
> EDIT: I was just quoting the article for discussion purposes. There's no reason to down vote.
Copying and pasting a quote without providing any further context is implicitly endorsing it.
People are downvoting you because they don't agree with the quote.
Copying and pasting a quote without providing any further context is implicitly endorsing it.
People are downvoting you because they don't agree with the quote.
The only companies that I sometimes continue to engage with after they deceive and manipulate me are governmnent-granted monopolies, like Time Warner Cable.
This assumes you know that they are deceiving you. If the company is successfully deceiving you, then you will not know it.
This is some really distorted thinking in an attempt to salvage the false notion that we are all helpless without the government protecting us from "evil" companies.
99% of companies I interact with have no way to deceive me in any significant way, and the few that do (e.g. maybe a bank, insurance, or other financial companies) I double check on and I take action to mitigate the risks.
Moreover, companies who commit fraud eventually get caught and their people go to jail.
That is all part of a free market system, not a command-style, over-regulated Marxist one, which just hurts people in the long run.
People who advocate that kind of system are serious evil.
99% of companies I interact with have no way to deceive me in any significant way, and the few that do (e.g. maybe a bank, insurance, or other financial companies) I double check on and I take action to mitigate the risks.
Moreover, companies who commit fraud eventually get caught and their people go to jail.
That is all part of a free market system, not a command-style, over-regulated Marxist one, which just hurts people in the long run.
People who advocate that kind of system are serious evil.
Moreover, companies who commit fraud eventually get caught and their people go to jail.
Which is why all the bank executives are currently in jail? (Contrast DOJ enforcement after the latest financial blowup to their conduct after the S&L crisis).
See Bernanke's take: http://www.usatoday.com/story/news/politics/2015/10/04/ben-b...
Which is why all the bank executives are currently in jail? (Contrast DOJ enforcement after the latest financial blowup to their conduct after the S&L crisis).
See Bernanke's take: http://www.usatoday.com/story/news/politics/2015/10/04/ben-b...
That is out of context for this discussion. Banks have regulatory capture. Plus, I'm not aware of bank execs committing fraud. Plus, I'm not saying that the tort system works perfectly, I'm staying that is what we should fix, rather than having a command-and-control regulatory [capture] system like progressives/Marxists want.
Upvoted. It's a great quote, stating the obvious truth that somehow still eludes great many people. The market rewards things that are effective, discriminating against any value that hurts the profit. If honesty is effective, it will be rewarded. If it hinders profitability, it will be discriminated against. Thus in time the optimal amount of honesty will be found.
Given the obvious information asymmetry between the seller and the buyer we shall not expect that amount to be high.
Given the obvious information asymmetry between the seller and the buyer we shall not expect that amount to be high.
But dishonesty does hinder profitability. You can't get away with much of it for very long before customers leave, and you get a bad reputation.
> Given the obvious information asymmetry between the seller and the buyer we shall not expect that amount to be high.
There really isn't that much. You can't concretize this (i.e. give real examples) because it's easy for customers to do some research.
There is a lot of "theorizing" going on here that is no good because it is not empirical enough.
> Given the obvious information asymmetry between the seller and the buyer we shall not expect that amount to be high.
There really isn't that much. You can't concretize this (i.e. give real examples) because it's easy for customers to do some research.
There is a lot of "theorizing" going on here that is no good because it is not empirical enough.
> But dishonesty does hinder profitability. You can't get away with much of it for very long before customers leave, and you get a bad reputation.
Does it now? I could point you (in private) to at least two companies (big on my country's market in their particular segments) I know personally cheat and steal, including lying on the phone to people who have managed to figure out the deception and called in to complain. One of those companies has figured out a strategy to stay on top of user complains so that they're free to do whatever they want. The other one has their office in a low-population region and is the one of the few available employers for the locals - this allows the CEO to both abuse the employees and to avoid scrutiny by keeping the local work inspector bribed.
On top of that, it's an open secret that food stores do shit like cleaning stale meat with dish liquid and then selling it to people as fresh. There are many, many ways in which Joes and Janes Random Entrepreneurs abuse customers; it's pretty much common practice. As long they don't to it in a blatantly illegal way, they're fine.
> it's easy for customers to do some research.
No, it's not. Also, research is what you do when you buy a car; no one has the time to check out the place where they do groceries, and even if they did, everyone else cheats as much, so it's not that you have an alternative.
Customers voting with their wallets is bullshit in most industries and companies know it. People are quick to get outraged but slow to change their habits.
Does it now? I could point you (in private) to at least two companies (big on my country's market in their particular segments) I know personally cheat and steal, including lying on the phone to people who have managed to figure out the deception and called in to complain. One of those companies has figured out a strategy to stay on top of user complains so that they're free to do whatever they want. The other one has their office in a low-population region and is the one of the few available employers for the locals - this allows the CEO to both abuse the employees and to avoid scrutiny by keeping the local work inspector bribed.
On top of that, it's an open secret that food stores do shit like cleaning stale meat with dish liquid and then selling it to people as fresh. There are many, many ways in which Joes and Janes Random Entrepreneurs abuse customers; it's pretty much common practice. As long they don't to it in a blatantly illegal way, they're fine.
> it's easy for customers to do some research.
No, it's not. Also, research is what you do when you buy a car; no one has the time to check out the place where they do groceries, and even if they did, everyone else cheats as much, so it's not that you have an alternative.
Customers voting with their wallets is bullshit in most industries and companies know it. People are quick to get outraged but slow to change their habits.
This is just a false narrative to try to justify a more controlled society.
> I could point you (in private) to at least two companies (big on my country's market in their particular segments) I know personally cheat and steal, including lying on the phone to people who have managed to figure out the deception and called in to complain.
So those customers should just switch to a different provider. Now, if we are talking about companies that have regulatory capture, which we probably are, that's a different story. But you want to expand that regulation...
> The other one has their office in a low-population region and is the one of the few available employers for the locals - this allows the CEO to both abuse the employees and to avoid scrutiny by keeping the local work inspector bribed.
No one has to stay in a low-population region.
> There are many, many ways in which Joes and Janes Random Entrepreneurs abuse customers; it's pretty much common practice.
It's not common practice to sell tainted meat. It's not the case that everybody does it. And since meat is already regulated by the government everywhere, apparently your solution doesn't work, anyway (though actually it does work OK and you are blowing up the problem).
> Customers voting with their wallets is bullshit in most industries and companies know it. People are quick to get outraged but slow to change their habits.
That is absolutely false. Customers go for the best deal they can get. They switch if they get pissed off and have other options. And they always have other options unless there is regulatory capture.
I'm sorry, but people are just not utter morons that keep repeating the same tasks over and over again even if they have bad consequences. Your view of humanity is really unrealistic.
> I could point you (in private) to at least two companies (big on my country's market in their particular segments) I know personally cheat and steal, including lying on the phone to people who have managed to figure out the deception and called in to complain.
So those customers should just switch to a different provider. Now, if we are talking about companies that have regulatory capture, which we probably are, that's a different story. But you want to expand that regulation...
> The other one has their office in a low-population region and is the one of the few available employers for the locals - this allows the CEO to both abuse the employees and to avoid scrutiny by keeping the local work inspector bribed.
No one has to stay in a low-population region.
> There are many, many ways in which Joes and Janes Random Entrepreneurs abuse customers; it's pretty much common practice.
It's not common practice to sell tainted meat. It's not the case that everybody does it. And since meat is already regulated by the government everywhere, apparently your solution doesn't work, anyway (though actually it does work OK and you are blowing up the problem).
> Customers voting with their wallets is bullshit in most industries and companies know it. People are quick to get outraged but slow to change their habits.
That is absolutely false. Customers go for the best deal they can get. They switch if they get pissed off and have other options. And they always have other options unless there is regulatory capture.
I'm sorry, but people are just not utter morons that keep repeating the same tasks over and over again even if they have bad consequences. Your view of humanity is really unrealistic.
I thought people were naturally pessimistic more than optimistic.
Anything can make fools of gullible people. Free markets or oligarchies.
The key insight being, every single human being is gullible when you attack from the right angle.
Indeed. Everyone has their sensitivities, vulnerabilities and emotional/other needs. A company that has figured out how to push the right buttons in its sales pitch/ad has found its subset of "gullible people" - who will be driven more by animal passions than by reason. Humans are very well capable of overlooking potential long term harm in favor of short term pleasure, or even convincing themselves that the ill effects won't apply to them.
That being said, I wouldn't agree that every single human being is gullible when attacked from the right angle. Example: there are many stressed out people who don't smoke, it doesn't matter how or how much you try to convince them. One can peddle snake-oil on the streets, but only a subset of passersby will stop by and an even smaller subset will buy it - this does not imply that only the most afflicted are the ones making the purchase.
That being said, I wouldn't agree that every single human being is gullible when attacked from the right angle. Example: there are many stressed out people who don't smoke, it doesn't matter how or how much you try to convince them. One can peddle snake-oil on the streets, but only a subset of passersby will stop by and an even smaller subset will buy it - this does not imply that only the most afflicted are the ones making the purchase.
> Example: there are many stressed out people who don't smoke, it doesn't matter how or how much you try to convince them.
I wonder if it isn't because companies are severely restricted in their means of convincing people. Consider historical figures[0][1]. Between 1950s and today smoking rates in US dropped from around half of the population to around one in five person. Have the citizens of US suddenly became less gullible, or did their lives became less stressful? Or maybe as smoking changed from being a social custom to something despised (which can be partially attributed to regulations, though some would say[2] they were just following the social trend), 90% of smokers quit.
Manufacturing a social custom is hard, but if you can pull it off, it's basically a superweapon. People will buy not because it's good or needed, but because it's expected. De Beers has managed to do that for diamonds[3] decades ago, and guess what people are still buying for engagement rings.
That's only one, albeit an extremely effective way to trick people into parting with their money. There are others. Different people have different needs so if they avoid one trap, they'll trip on another. Sometimes the traps are less obvious. Let me give you an example.
I can honestly say there's no advertising that could convince me to chose the grocery store on my street over the one little further but much cheaper. And yet I often shop in the former one because they employ mostly nice, pretty students, and I love to chat with them. Simple as that. I've bought many things I didn't need only to have a pretext to go there and talk with the crew. I've made friends with the entire staff, hell, I met my SO there. But the point still stands that I've been tricked into economically worse option by a simple management decision of hiring nice girls. Everyone has their weak spot.
[0] - http://www.cdc.gov/tobacco/data_statistics/tables/trends/cig...
[1] - http://www.infoplease.com/ipa/A0762370.html
[2] - http://www.paulgraham.com/addiction.html
[3] - http://www.theatlantic.com/past/issues/82feb/8202diamond1.ht...
I wonder if it isn't because companies are severely restricted in their means of convincing people. Consider historical figures[0][1]. Between 1950s and today smoking rates in US dropped from around half of the population to around one in five person. Have the citizens of US suddenly became less gullible, or did their lives became less stressful? Or maybe as smoking changed from being a social custom to something despised (which can be partially attributed to regulations, though some would say[2] they were just following the social trend), 90% of smokers quit.
Manufacturing a social custom is hard, but if you can pull it off, it's basically a superweapon. People will buy not because it's good or needed, but because it's expected. De Beers has managed to do that for diamonds[3] decades ago, and guess what people are still buying for engagement rings.
That's only one, albeit an extremely effective way to trick people into parting with their money. There are others. Different people have different needs so if they avoid one trap, they'll trip on another. Sometimes the traps are less obvious. Let me give you an example.
I can honestly say there's no advertising that could convince me to chose the grocery store on my street over the one little further but much cheaper. And yet I often shop in the former one because they employ mostly nice, pretty students, and I love to chat with them. Simple as that. I've bought many things I didn't need only to have a pretext to go there and talk with the crew. I've made friends with the entire staff, hell, I met my SO there. But the point still stands that I've been tricked into economically worse option by a simple management decision of hiring nice girls. Everyone has their weak spot.
[0] - http://www.cdc.gov/tobacco/data_statistics/tables/trends/cig...
[1] - http://www.infoplease.com/ipa/A0762370.html
[2] - http://www.paulgraham.com/addiction.html
[3] - http://www.theatlantic.com/past/issues/82feb/8202diamond1.ht...
Agreed - everyone has their weak spot, but not for everything. Its like everyone has their price, but not the fellow considerably richer than you.
As for smoking, if companies were allowed to actually misstate it is good for you, there would be myriad other organizations working to prove it isn't. A reasonable person might well do his own/independent fact finding.
Someone can say eating an octopus is yucky [it is actually used with salad in many places] but for a large amount of money you can convince/bribe them to try it. But if Warren Buffet says no, good luck bribing him. You can try another [practical, not theoretical] incentive, but I'm sure he could buy that too. One can say rich people must live certain lifestyles, but Steve Jobs lived an almost monastic life [save the Mercedes and a couple of other things maybe].
That inherent need has to be present for an advertiser to target/exploit it. And the person has to actually buy the premise of the proposition. Many have the guts to go against the crowd and some even take it as a badge of honor.
Valentine's day is a manufactured custom too. Many are religious about it, many others abhor it - despite the concerted, and mostly successful, efforts to create a romantic custom out of the day. Diamonds, I agree - in many cultures, especially the US. But in many other cultures, such as the Nordic, it is less common [1 - a forum thread]. That doesn't mean de Beers doesn't try its level best to manufacture the same kind of social custom in Sweden. That need for extravagantly showing off a romantic pre-commitment just doesn't exist in that market.
Now let's reasonably assume your SO is well aware of the hiring-pretty-girls-policy, and does not prefer you buying from that store given that there are better economic alternatives, and add in a touch of reasonable jealousy. Do you still frequent that store, given that you are happy with your SO?
Could I sell you an extravagant snake-oil panacea if I were a hot bird?
[1] http://www.thelocal.se/discuss/index.php?showtopic=32620
As for smoking, if companies were allowed to actually misstate it is good for you, there would be myriad other organizations working to prove it isn't. A reasonable person might well do his own/independent fact finding.
Someone can say eating an octopus is yucky [it is actually used with salad in many places] but for a large amount of money you can convince/bribe them to try it. But if Warren Buffet says no, good luck bribing him. You can try another [practical, not theoretical] incentive, but I'm sure he could buy that too. One can say rich people must live certain lifestyles, but Steve Jobs lived an almost monastic life [save the Mercedes and a couple of other things maybe].
That inherent need has to be present for an advertiser to target/exploit it. And the person has to actually buy the premise of the proposition. Many have the guts to go against the crowd and some even take it as a badge of honor.
Valentine's day is a manufactured custom too. Many are religious about it, many others abhor it - despite the concerted, and mostly successful, efforts to create a romantic custom out of the day. Diamonds, I agree - in many cultures, especially the US. But in many other cultures, such as the Nordic, it is less common [1 - a forum thread]. That doesn't mean de Beers doesn't try its level best to manufacture the same kind of social custom in Sweden. That need for extravagantly showing off a romantic pre-commitment just doesn't exist in that market.
Now let's reasonably assume your SO is well aware of the hiring-pretty-girls-policy, and does not prefer you buying from that store given that there are better economic alternatives, and add in a touch of reasonable jealousy. Do you still frequent that store, given that you are happy with your SO?
Could I sell you an extravagant snake-oil panacea if I were a hot bird?
[1] http://www.thelocal.se/discuss/index.php?showtopic=32620
I don't think people like Warren Buffet or Steve Jobs are safe from being manipulated. As you say:
> That inherent need has to be present for an advertiser to target/exploit it. And the person has to actually buy the premise of the proposition.
The needs of people safe in monetary ways are often more nuanced and complex, but they are there. Some rich people are still insecure about status, and you can attack that. Others want to do good for the world, so they're perfect targets for various "charitable" organizations (thankfully, GiveWell / Effective Altruist movement tries to do something about that).
> Many have the guts to go against the crowd and some even take it as a badge of honor.
Yeah, I know. But you know how nonconformists strangely look alike? Capitalism has managed to go meta - being anti-capitalist has also been packaged and shipped to stores.
> Now let's reasonably assume your SO is well aware of the hiring-pretty-girls-policy, and does not prefer you buying from that store given that there are better economic alternatives, and add in a touch of reasonable jealousy. Do you still frequent that store, given that you are happy with your SO?
You got me here :). Now that my SO no longer works there, I neither feel the need to visit the store that often (though I still pop in from time to time, because I like buying in a place that is friendly to me, but not for extended chats), nor would I like to give her reasons for being jealous :).
I guess we're still dancing around the point, so let me restate my assertion. You say:
> everyone has their weak spot, but not for everything. Its like everyone has their price, but not the fellow considerably richer than you.
I say: everyone may have a different set of weak spots, but everyone has them and market economy does and will exploit all of them. By saying "everyone is gullible if you attack from the right angle" I didn't mean that angle is universal for everyone. Different people respond to different strategies, but there is a way to get to everyone.
> Could I sell you an extravagant snake-oil panacea if I were a hot bird?
If you were and I wasn't in a relationship, I'd encourage you to try :). Hell, I might buy if it would make you talk some more :).
> That inherent need has to be present for an advertiser to target/exploit it. And the person has to actually buy the premise of the proposition.
The needs of people safe in monetary ways are often more nuanced and complex, but they are there. Some rich people are still insecure about status, and you can attack that. Others want to do good for the world, so they're perfect targets for various "charitable" organizations (thankfully, GiveWell / Effective Altruist movement tries to do something about that).
> Many have the guts to go against the crowd and some even take it as a badge of honor.
Yeah, I know. But you know how nonconformists strangely look alike? Capitalism has managed to go meta - being anti-capitalist has also been packaged and shipped to stores.
> Now let's reasonably assume your SO is well aware of the hiring-pretty-girls-policy, and does not prefer you buying from that store given that there are better economic alternatives, and add in a touch of reasonable jealousy. Do you still frequent that store, given that you are happy with your SO?
You got me here :). Now that my SO no longer works there, I neither feel the need to visit the store that often (though I still pop in from time to time, because I like buying in a place that is friendly to me, but not for extended chats), nor would I like to give her reasons for being jealous :).
I guess we're still dancing around the point, so let me restate my assertion. You say:
> everyone has their weak spot, but not for everything. Its like everyone has their price, but not the fellow considerably richer than you.
I say: everyone may have a different set of weak spots, but everyone has them and market economy does and will exploit all of them. By saying "everyone is gullible if you attack from the right angle" I didn't mean that angle is universal for everyone. Different people respond to different strategies, but there is a way to get to everyone.
> Could I sell you an extravagant snake-oil panacea if I were a hot bird?
If you were and I wasn't in a relationship, I'd encourage you to try :). Hell, I might buy if it would make you talk some more :).
The idea of selling to people based on their needs assumes that everyone has needs/insecurities which, if correctly targeted, will result in a successful sale.
To this extent, we're fully aligned. Take a step back. To the theory of needs, one of the earliest and best known variants of which was proposed by Maslow. (There have been numerous updates to Maslow over the years [1]. A common theme in all variants of the theory of motivation/needs is the concept of self-actualization.)
If individuals' needs are the foundation of selling to them, someone motivated by love and belongingness needs ought to be motivated by things that will help him feel closer to others. Indeed, this is the base of the couple of examples we discussed (pretty girl selling snake oil, and the supermarket with good looking sales girls). Similar arguments can easily be put forward for each and every kind of need - doesn't matter what the actual product is, what matters is what the buyer thinks/believes it will help him achieve, ergo, what need(s) will it is perceived to fulfill.
The crux of my counter-argument is based on the exceptions - the self-actualized individuals, who admittedly form a very small fraction of the population. You're right in the general case, of course. I'm saying there is a proper subset which is an exception to the rule. Going by the theories of motivation/needs, the self actualized people are driven solely by what they believe their "purpose" in life to be. It is also supposed, in these theories, that self actualized individuals either do not have needs (what you rightly phrased as insecurities), or aren't driven/motivated by them.
In the general case: As long as there is an illusion that need x will be met by a product y, people who are motivated by x can be sold y. In the case of self-actualized individuals, it is harder to sell an illusion - which won't be sustained in the face a logical/rational analysis. Since there is no underlying need/insecurity to target, all that remains is a factual analysis of what material benefits the product confers vis-a-vis what the self-actualized individual's goals are.
So I guess it boils down to: what's your take on the theories of motivation and the notion of self-actualized individuals?
[1] I found a good summary + a new approach at a Medium blog post, which seems reasonably well researched and presented. https://medium.com/@faracrosstherubicon/rethinking-maslow-a-...
To this extent, we're fully aligned. Take a step back. To the theory of needs, one of the earliest and best known variants of which was proposed by Maslow. (There have been numerous updates to Maslow over the years [1]. A common theme in all variants of the theory of motivation/needs is the concept of self-actualization.)
If individuals' needs are the foundation of selling to them, someone motivated by love and belongingness needs ought to be motivated by things that will help him feel closer to others. Indeed, this is the base of the couple of examples we discussed (pretty girl selling snake oil, and the supermarket with good looking sales girls). Similar arguments can easily be put forward for each and every kind of need - doesn't matter what the actual product is, what matters is what the buyer thinks/believes it will help him achieve, ergo, what need(s) will it is perceived to fulfill.
The crux of my counter-argument is based on the exceptions - the self-actualized individuals, who admittedly form a very small fraction of the population. You're right in the general case, of course. I'm saying there is a proper subset which is an exception to the rule. Going by the theories of motivation/needs, the self actualized people are driven solely by what they believe their "purpose" in life to be. It is also supposed, in these theories, that self actualized individuals either do not have needs (what you rightly phrased as insecurities), or aren't driven/motivated by them.
In the general case: As long as there is an illusion that need x will be met by a product y, people who are motivated by x can be sold y. In the case of self-actualized individuals, it is harder to sell an illusion - which won't be sustained in the face a logical/rational analysis. Since there is no underlying need/insecurity to target, all that remains is a factual analysis of what material benefits the product confers vis-a-vis what the self-actualized individual's goals are.
So I guess it boils down to: what's your take on the theories of motivation and the notion of self-actualized individuals?
[1] I found a good summary + a new approach at a Medium blog post, which seems reasonably well researched and presented. https://medium.com/@faracrosstherubicon/rethinking-maslow-a-...
You only have to look at laws forbidding marijuana use or homosexual acts to realize that governments aren't competent to make these decisions since they just reflect what the popular opinion of the "phools" already is.