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Jiro comments on Stupid Questions February 2015 - Less Wrong
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I suggest that allowing people to sell something where the market price of the item is much less than the price that most people would name if they were asked how much they would accept to sell it but were not in immediate need of money, is generally a bad idea.
This includes organs, prostitution, and signing away your house for a glass of water if you're dying of thirst in the desert and someone offers to give you water in exchange for your house.
I am confused about your suggestion. If the "market price" is much less than the price that most people would name, where does the market price come from?
Also, forbidding "signing away your house for a glass of water if you're dying of thirst in the desert" leads to you dying of thirst in the desert. That doesn't look like a desirable outcome.
I didn't say the price that most people would name, I said the price that most people would name if they weren't in immediate need of money. The market price can certainly be different from that.
It only leads to you dying of thirst in the desert if the existence of this prohibition doesn't change the behavior of the seller. As long as the legal maximum price is high enough that the seller can make a profit, the seller will change his behavior and sell the water for that price instead.
So, let's consider janitorial work. The market price (of an hour of labor) is considerably lower than " the price that most people would name if they weren't in immediate need of money", isn't it?
Why do we care about price perceptions by people who are not in immediate need of money, anyway?
You are making no sense. The existence of this prohibition DOES change the behavior of the seller -- he no longer spends his time standing in the middle of the desert with a glass of water.
Consider a realistic example. Some states have anti-gouging laws which basically prohibit raising the prices in the immediate aftermath of natural disasters. Let's say I run a lumberyard and state A (without anti-gouging laws) just had a hurricane. I would rent a box truck, stuff it full of lumber and plywood, and drive it over to state A to sell the contents for double the usual price. But if state B (with anti-gouging laws) just had a hurricane, I would sit in my yard and do nothing -- why would I? Net effect: residents of state A can start fixing up their houses much faster.
There are several ways in which the behavior of the seller changes. Some may benefit the buyer (as in your anti-gouging example) but some may not (such as if the guy with the glass of water would have had one anyway). Furthermore, there is no reason to believe that the benefit you describe happens only at the market price; it may be that people in the area are willing to pay 50 times the normal price for lumber, but 20 times is sufficient to incentivize you to truck in a load of lumber.
Sigh. Why do you think central planning failed?
I think this discussion would be both more pleasant and more productive (at least for people who are not you) with a higher engagement-to-sneering ratio.
That's not sneering, that's shortcutting. If you wish, I'll unroll.
One of the primary functions of the markets is price discovery. It is really important for the economy that the markets discover prices which then form the basis for future resource allocation.
The classic conceit of the central planner is that he doesn't need to learn the market prices -- he knows better and can allocate resources without all these unfair, chaotic, and messy markets.
In this subthread Jiro feels he doesn't need market prices -- he thinks it would be better if he set fixed prices (or floors or ceilings) based on his perceptions of fairness (see organs) or on what he thinks will be sufficient incentives (see lumber). That looks to me to much like the central planner conceit.
The problem, of course, is that central planning has been shown, empirically, to work badly in real life. The issue then becomes why does Jiro think that his scheme will do much better. Thus the question: why does Jiro thinks central planning has failed and why does he believe that his price manipulation will avoid that fate?
Agreed, Jiro is making this error. They postulates a situation where people pay (they say "willing to pay," but clearly is not talking about consumer surplus) 50, but 20 is enough. What Jiro and readers should wonder is why people are paying so much more than necessary to get what they want, and how Jiro knows this but the people in the actual situation do not.
Not exactly. The assertion is that you dont have to go all the way to equilibrium to capture most of the benefit while preventing most of the repugnant results of equilibrium.
Let me, correspondingly, unpack the motivation behind my comment a little.
There is a continuum running all the way from "completely free unregulated markets" to "totalitarian central state determines what will be made and what it will cost". It looks to me as if Jiro was proposing some regulation and you responded by saying that totalitarian central planning has a bad track record. That doesn't seem altogether reasonable.
Further, when you say "central planning failed" you're working with a rather small sample and one with a bunch of confounding factors. Consider the USSR, for example. It had central planning, its people were rather poor, and in the end it collapsed. But, also: those people were always much poorer per capita than, say, those of the USA or Western Europe; the USSR spent decades locked in economic and (indirect) military conflict with a much better-resourced opponent; it had not only central planning but outright totalitarianism with some rather crazed leaders. Maybe the primary reason why the USSR wasn't a roaring economic success was that central planning is inferior to free markets, but I don't think we have enough evidence to make that claim with a lot of confidence.
To be precise, he was proposing price fixing.
No, I did not -- the word "totalitarian" is a gratuitous addition by you.
Oh, but I do think we have more than enough evidence (have you looked at China, for example?). I don't think that claiming "we don't know yet" is a reasonable position -- this question has been settled.
"In immediate need of money" and "in need of money in their life, eventually and predictably", aren't the same thing. If you offered most people $200 for an hour of janitorial labor, they would take your offer. Assuming that the market price is close to minimum wage, that's a factor of 28. If you offered most people 28 times the market price for their organ, or 28 times the market price for prostituting themselves, they would not take it unless they were starving at the moment.
Citation needed. There's going to be a problem with that, since there are no market prices for organs at the moment.
Actually, there are some exceptions. Women, for example, can effectively sell their eggs. And it seems there is a market where sellers don't look to be "starving at the moment".
Citation still needed. The high-end prostitute prices are sky-high, say $5,000 / session. Times 28 is $140,000 -- what were you saying about most people?
If this is true, then what I said would not apply to the selling of eggs.
I agree that those particular prostitutes would meet the requirement--they make so much money that most people would be willing to prostitute themselves for some multiple of that amount which is not too high (compared to similar multiples for janitors). So I won't have a problem with letting them operate.
But that would not extend to prostitutes in general. (I might decide that most prostitution is bad but allow it for practical reasons, but that's different.)
This is not Wikipedia. If you really believe that average people would not behave this way, say so. If not, asking for a citation is just filibustering.
You are making naked assertions and I'm asking for data, evidence that supports your claims.
It is only appropriate to ask for data for an assertion if you think the assertion has a significant chance of being false.
Sure. Your assertion was:
I think that assertion has a significant chance of being false.
You know, I'm not one to throw the word "privilege" around, but I'll make an exception here. This is a profoundly privileged perspective. You're taking the stigma attached to prostitution and using that to decree, without personal experience or any hard data that you've deigned to produce, that it couldn't possibly be a rational decision for anyone at any reasonable price.
These people aren't stupid. A few of them might be desperate -- though fewer, I imagine, than you're giving them credit for -- but I'd expect that to give them a keen appreciation of their options. Are you really prepared to say that they don't know their own needs?
(By the way, I lived near the Nevada state line when I was in high school, and locker-room word of mouth at the time placed an hour at one of the so-called "bunny ranches" across the border at about $200. Accounting for inflation, let's call it $300 now. 28 times that is $8400 -- enough to tempt me as I am, and definitely enough that it would tempt me if I wasn't already working a high-paying job. No starvation needed.)
In addition: sugar babies/daddies are very popular, looks like.
If by "stigmatize selling X" you mean "refusing to sell X except for a price that is very high compared to what it gets on the market", then of course--you're just restating what I'm saying.
If you mean something else, please clarify.
I already agreed that there are high priced prostitutes who are making rational decisions, although I would not apply this to typical prostitutes.
1) Do the prostitutes actually get $200 take home pay, not just $200 receipts (some of which has to go to overhead and paying the pimp)?
2) The question about most people is really about most people somewhat like them. In particular, is your gender the same as the prostitutes'?
3) Even if the answers to the first two questions don't make it moot, are you a typical person in this regard?
I said "social stigma", and I meant "social stigma": the attitudes that make other people think less of you, on average, for taking X as a job than Y. My presumption is that that you're basing your extremely low estimate of the job's attractiveness on that stigma (there's really nothing else to explain orders-of-magnitude levels of aversion); I, on the other hand, would expect it to have been priced into the market already, along with a number of other externalities like health and legal risk, and that the people considering the job are competent to evaluate it (which is really just another way of saying the same thing). These are the same factors that make unskilled labor in a steel mill command more money than unskilled labor in data entry, and sex isn't magic.
(Bans can distort markets in unpredictable ways, but that's why I used Nevada as an example.)
But that wasn't even the important part of my post. The important part is that they are not you, neither in personality nor circumstances, and even if you believe that most people would find their career choice very aversive, it's presumptuous in the extreme to declare it illegitimate (for example by assuming it must be the product of coercion) on that basis. And on that note...
...this is almost exactly the wrong question to be asking. Comparative advantage is a thing! If one person is willing and able to produce more value for money in a given role than another, that means nothing more or less than that they're better suited to that role, at least in economic terms. There is absolutely no reason that a given job has to be attractive to a "typical" person. Mine isn't.
You really think it's appropriate to object to somebody calling out your unsupported claims as unsupported when they are A) obviously disagreeing with you, to the point where there's absolutely no need to explicitly state it, and B) providing evidence in support of their own claims, with both reasonable arguments and supporting links? In that case, what would it take to convince you?
(Emphasis mine) Should I take it that this is then something you can't actually be convinced of by anything short of incontrovertible proof to the contrary?
Data set of one, but I find Lumifer's arguments far more convincing than yours. This is largely based on the fact that they are actually backed up by something more than the assumption that everybody begins with your personal model of how people make decisions.
A disagreement about priors is not nontrivially "can't be convinced by anything short of incontrovertible proof".
I'm in favor of legal prostitution and am not denying your claim generally, but the idea most people (or frankly any more than let's say doubleish the current real world rate of people) being willing to prostitute themselves for six figures does not agree with my intuition at all.
Do you have a source in mind or do we just have different intuitions?
Look beyond your own social circle.
Look e.g. at the numbers for the so-called sugar daddies/sugar babies sites. (here or here, etc.)
Oh I did, the figures for any social circle in which I am has a rate of 0% .
I may be misinterpreting, but wouldn't that fall within the "current real world rate" of prostitution I mentioned?
But I guess as to the question asked, of a data source for the prostitution rate change at six figure rates, that might be a hard (albeit perhaps quite fun for researchers) study to run, so I'll just take that add a no.
Again, total tangent. I agree with your base claim.
If we grant for the sake of argument that these are the facts, it's still not clear to me that banning the sale is a good thing.
Suppose we have three people, Alice (who lives a comfortable upper-middle class life), Bob (currently starving), and Carol (rich and in need of a kidney). Alice doesn't particularly care about money, but if there is a lack of kidneys she is willing to give one to feel that she is doing good in the world. Bob cares very much about money---if he can't sell the kidney he will starve to death.
In this hypothetical there are enough donors to fill demand even with a $0 price ceiling, so Carol doesn't care either way. But by banning the sale, the benefit of the transaction now goes to Alice (who gets some extra warm fuzzies) rather than Bob, even though Bob is in much more dire need.
"Make a profit" is not the limiting factor. "Make enough of a profit to make it worth scouring the desert for thirsty people" is. If I'll get $3 for a glass of tap water, I'll sell it to someone who knocks on my door. If I'll get $100,000 for it, I'm going to rent a chopper and fly around the Sahara.
I stand corrected, but that doesn't really change what I'm trying to say.
Too many analogies, what specific harms do you think would result from people being able to sell their organs and some regulated price? If there is informed consent, then the monetary benefit should exceed the health cost.
I think that if the regulated price was either a ceiling that is low enough, or a floor which is high enough (or both, as in the case for wages), then harms would not result at all. A law which said "all organ selling must be either a free donation, or accompanied by a payment of at least $2 million" would probably be okay.
But that is a very noncentral description of organ selling. The majority of advocates of organ selling don't want such limits on it.
Either regulate the price of organs, or not allow people who are desperate (could be defined by income or wealth) to sell their organs.
We already do that. We regulate the price at $0.
Actually, there are two ways to limit it. If the price is very low, such as $0, desperation would not affect people's willingness to sell their organs because the price is so low that it can't relieve desperation. If the price is very high, desperation is not making people sell the organs for a lowballed price. It's prices in the middle that are the problem.
(We also do this with normal labor. You can give away your labor for $0, and you can work for an amount that is at least the minimum wage, but nothing inbetween.)
Ahem.
The minimum wage only affects a particular subset of labor relations.
It feels like you are playing the "Gotcha!" game with the goal of winning rather than communicating your objection to organ selling. I can't see why else you would argue that organ donation is regulated sale with a price $0.
In that case I am not likely to respond further. It seems obvious to me what the benefits are of a high price with thorough testing, informed consent and exclusion criteria : it would solve the organ shortage and allow for faster advances in research. As to what the harms are I am still unclear.
It's not a gotcha. I'm not just saying "well, technically, $0 is a number, so that fits what you literally said". Limiting the price to $0 really is regulation of the price; setting the price to $0 is meant to alleviate some of the problems that could result from allowing a higher price, because it changes the incentives.
What do you think would happen if we duplicated the minimum wage structure in this arena? 'You can give away your kidney, or sell it for at least X dollars' where x is some amount deemed to reduce exploitation of the desperate? I like this idea.
Edit: saw comment below.