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Lumifer comments on Things I Wish They'd Taught Me When I Was Younger: Why Money Is Awesome - Less Wrong
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Them are fightin' words, y'know... :-D
It's more complicated than it looks
I'm aware, hence the hedging. I am not a food critic, and am relying on the judgments of food critics.
Yes, people rage at high prices, especially when demand jumps and supply falls. And I'm sure that the status threat of the price rising or being priced out makes it worse than just the scarcity.
But the right answer probably isn't lotteries. People are unhappier when others receive rewards for merit than they are when others receive rewards because of luck. The right answer almost certainly is efficiency.
This confuses me. Surely if people are made less unhappy by a luck-based distribution, that's an argument in favor of a luck-based distribution?
I'm not sure if you typed that backwards or not. I can think of plausible reasons for people to hate both luck and merit distributions.
I view it as an argument against the preferences of people.
So you did mean it as written. I'd kind of like to see the studies, if you have a link. I don't find it surprising, exactly, but it's not a question I'd considered before, and it seems like it would be amusing misanthropy fuel.
Maybe people don't actually believe in merit, in near mode. Maybe they think they do, but they are really thinking about status.
Distributions based on merit (that we don't recognize instinctively) simply seem unfair. Distributions based on tranparent luck seem like everyone at least had a fair chance.
Maybe the real problem with money is that it usually belongs to people we personally don't know, so we don't know what exactly they did and why exactly should we respect them, so it feels like they really don't deserve the money. And the rest is rationalization.
This is made worse by money anti-correlating with status when all other variables are controlled for, i.e., given two otherwise comparable jobs, the lower status one will pay more.
The right answer to which problem exactly? Temporary shortages of high-status goods aren't exactly a burning issue that really needs to be solved externally.
Locally, the Barbecue Distribution Problem. Globally, the Efficiency Problem. Imagine Franklin Barbecue as one of the broken windows of inefficiency; yes, it only wastes tens of years per year, and they're probably only losing tens or hundreds of thousands of dollars in revenue per year. But efficient markets in barbecue help make efficient markets in other things more reasonable.
I would assume that people who run the barbecue are (1) Aware of the problem; (2) Have incentives to deal with it; and (3) Are not entirely stupid. Given this I am not sure why do you think that what they are doing now is not "the right answer". For example, raising prices might be good in the short term but turn out to be a very bad idea in the medium term.
What is that problem and, again, what does it have to do with temporary shortages of high-status goods? And I'm less than convinced that the broken-windows theory applies to global efficiency. In any case, if so, wouldn't you want to start with government, instead? X-/
To give a trivial example, creating such a temporary shortage is popular marketing trick (if the company can pull it off, of course).
I think that (3) is not a good assumption to make, and I wouldn't word it that way. I know lots of artists who have never heard of sealed second-bid auctions (also known as Vickrey auctions), despite those auctions being the optimal way to sell artwork or commission slots online. Are they entirely stupid? No; they just have limited knowledge. Similarly, the barbecue auction problem has a potentially nontrivial complication: there are 5 different varieties of meat sold by the pound (and each variety of meat can either go into by-the-pound orders or sandwich or plate orders), and many people would like either their entire order, or none of their order. How do you find the optimal set of orders to fulfill, and what price do you charge people for those orders, in a way that doesn't skew their bidding incentives?
It's a solvable problem, of course, but it's the sort of problem you'd want to hand off to an optimization guy to solve for you, especially if your core competency is barbecuing meat.
It might- it's possible that once people could get it by paying more money, instead of more time, it would lose some of the specialness and people would go there less. But it's not clear to me that they would ever reach the point where they don't sell out of meat, and maybe they have to be open for dinner too instead of just lunch.
But it could also be that the steady-state long-term price of their brisket is $40 a pound, and they've been selling it at $17, and that it is a fantastic thing over the medium term.
(Also, I feel I should mention, since it may not have been obvious: they do allow pre-orders, if you're willing to pre-order by about a month. The amount of pre-orders they allow is obviously capped, so that there's still BBQ available day-of. Auctioning off meat should start as a small percentage of their total quantity moved as a test, and then expanded or contracted as desired. So long as some of it is available by waiting, it is unlikely to lose the popularity.)
Basically, not enough people thinking like economists.
Well, then, I see an excellent opportunity for you. You mentioned that they might be "losing tens or hundreds of thousands of dollars in revenue per year" -- surely if you go talk to them and point it out, they'll be glad to pay you some of that surplus that they are leaving on the table.
In the best case you'll earn a fair chunk of money and make friends in the BBQ business. In the worst case you'll learn a valuable lesson why theoretical economics doesn't apply to real life too well :-)
That's complicated. I understand what you are trying to say, but "thinking like an economist" is not an unalloyed good. For example, consider that economics (especially macro) is really bad at forecasting.
This is, in fact, my plan.
Cool!
Do report on success.
If the availability of their product to low-income people is a priority for the current owner, it might be possible to maintain that while raising cash prices by offering menial temp work (such as dishwashing) in exchange for store credit. This is a well-known strategy among restaurants looking to settle accounts with someone who has already eaten but proves unable to pay; the innovative part would be offering a more favorable rate of exchange, and work first for food later.
If jobs are scarce, the restaurant should already have enough dishwashers. Since the restaurant can't temporarily fire one of its existing dishwashers for a week in order to have the nonpaying customer wash dishes, it's hard for the restaurant to recover the money in free labor from the customer. It only works if the restaurant happens to have a job of the right length available I'd expect that to be pretty unlikely. Better just call the police. As a bonus, if you call the police you don't create perverse incentives for more people to stiff you on the bill in the future.
I realize your version of the story doesn't include this, but I've often heard it as the restaurant giving the guy a permanent dishwashing job, and sometimes even having the guy rise up in rank and eventually come to own the restaurant. This version is even unlikelier. (For instance, if the restaurant thinks a guy hired this way is better than a guy hired through the normal application process, why do they even have an application process? And if you're in a situation where jobs are scarce, then jobs are valuable things and the restaurant should be able to be very selective in who it hires.)
thanks for the link. I wonder if it would be feasible for companies to run lotteries for highly demanded goods.
In our economy most shortages are temporary -- the market takes care of them.
But lotteries for things in very limited supply certainly exist, see e.g. this