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cousin_it comments on Open thread, May 15 - May 21, 2017 - Less Wrong Discussion

1 Post author: Elo 15 May 2017 07:06AM

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Comment author: cousin_it 16 May 2017 04:32:25PM *  2 points [-]

There's a free market idea that the market rewards those who provide value to society. I think I've found a simple counterexample.

Imagine a loaf of bread is worth 1 dollar to consumers. If you make 100 loaves and sell them for 99 cents each, you've provided 1 dollar of value to society, but made 99 dollars for yourself. If you make 100 loaves and give them away to those who can't afford it, you've provided 100 dollars of value to society, but made zero for yourself. Since the relationship is inverted, we see that the market doesn't reward those who provide value. Instead it rewards those who provide value to those who provide value! It's recursive, like PageRank!

That's the main reason why we have so much inequality. Recursive systems will have attractors that concentrate stuff. That's also why you can't blame people for having no jobs. They are willing to provide value, but they can't survive by providing to non-providers, and only the best can provide to providers.

Comment author: RolfAndreassen 20 May 2017 09:10:30PM 3 points [-]

It seems like you have just reinvented the criticism "if you can extract almost all the value from each transaction (aka 'exploitation'), you will shortly be rich". Well, yes, but the point is that a market with competition generally prevents you from doing that. As someone pointed out, if you make 100 loaves then you have created 100 dollars of value; the question is how those 100 dollars are distributed. You construct an example where the baker is able to capture 99% of the value he created; good for him, but it relies on your construction of the price. Seeing the baker get rich, won't a bunch of other people decide that bread-making can't be that hard, make some loaves, and sell them for 98 cents? And so on until the price of bread is equal to the cost of production plus the smallest profit anyone is willing to live with, which in your example seems to be a penny.

Comment author: cousin_it 21 May 2017 08:57:17AM *  0 points [-]

This kind of "stuff gets cheaper, everyone benefits" advocacy is why I wrote that comment to begin with. The free market can't be always pushing down the price of all goods (measured in other goods), that's a logical impossibility. There's no magic force acting on one conveniently chosen side of each transaction. Why isn't the same force pushing down the price of labor then, making labor cheap in terms of bread, instead of making bread cheap in terms of labor? Oh wait, maybe it is. Maybe all these forces are acting at once and going into weird feedback loops and there's no reason why the end result would be moral in any way. That's my point.

Comment author: Lumifer 21 May 2017 10:57:27PM 2 points [-]

The free market can't be always pushing down the price of all goods

You are looking at the wrong thing. Specifically, you're looking at exchange ratios ("prices") when you should be looking at how much value gets produced and how much human input/labour does that value need (aka "the productivity of labour").

Maybe all these forces are acting at once and going into weird feedback loops

Let me try again, in all caps. REALITY CHECK.

there's no reason why the end result would be moral in any way

That entirely depends on your morality.

Comment author: ChristianKl 21 May 2017 09:16:33AM 2 points [-]

Why isn't the same force pushing down the price of labor then, making labor cheap in terms of bread

Because labor is in relatively fixed supply given that it takes decades to grow and child into an adult and educate it.

On the other hand, it's relatively easy to grow more wheat and make more bread.

Comment author: cousin_it 21 May 2017 09:24:17AM *  1 point [-]

That might work sometimes, but sadly market advantage isn't always connected to moral worth. For example, land supply is even more fixed than labor. If market advantage goes to the side with fixed supply, then most salary increases will be eaten by landlords raising rents. (Which pretty much happens in some places.) Also I'm not sure making labor is harder than e.g. starting a tech company. If market advantage goes to the side that's harder to make, then tech companies will use non-tech labor for cheap. (Which also happens, see Uber.) Like I said, immoral forces acting all at once.

Comment author: ChristianKl 21 May 2017 09:54:05AM 1 point [-]

Land supply is fixed but land supply isn't the problem with rising rent. The problem is the number of flats. Toyko's rents didn't rise in the last decades but rents in a place like San Fransico rise because the government enforcing zoning regulations that prevent the building of new housing.

Comment author: cousin_it 21 May 2017 11:27:04AM *  0 points [-]

That could be because Japan's population and economy aren't growing much. In any case, even if rent isn't a good example, there might be other bottlenecks in the economy besides labor, so labor won't always win.

Comment author: ChristianKl 21 May 2017 01:49:45PM 2 points [-]

Tokyo's population and economy are growing even when that's not true for Japan on the whole. The political decision to get rid of zoning regulations is quite clearly responsible.

Of course, there are resources that are scarce and then the market puts a high price on it but there's no way around scarcity. If the resource is really scarce you can't give it to everybody.

Comment author: satt 21 May 2017 04:16:08PM 0 points [-]

Tokyo's population has grown and is growing, but that seems to account for most of Tokyo's economic growth, not zoning regulations, since Tokyo's GDP per capita shows fairly anaemic growth from 2001 to 2012 (can't immediately find a longer time series).

Comment author: ChristianKl 21 May 2017 08:12:42PM 0 points [-]

I didn't want to argue that the lack of zoning regulations produced economic growth but that rent is stable despite grows.

Comment author: entirelyuseless 21 May 2017 03:25:45PM 1 point [-]

"there's no reason why the end result would be moral in any way. "

This is wrong. The reason is that everyone is doing what they want, which is, on average, more likely to benefit people than having to do what they do not want, since people typically want to do things that benefit them and avoid things that do not.

The above is, in fact, the basic but extremely simplified reason why no one yet has been able to come up with a better system.

Comment author: RolfAndreassen 22 May 2017 02:39:21AM *  0 points [-]

The free market can't be always pushing down the price of all goods (measured in other goods), that's a logical impossibility.

And yet that seems to be precisely what has happened.

However, supposing we hold tech progress and capital investment constant, then yes, we'll reach a steady state in which prices as a whole cannot fall further. But that still does not demonstrate that it is possible to maintain the sort of high-value-extraction transactions you outline for any great length of time. If the profit of bread is high then it will fall as people enter the market; this will, yes, slightly raise the profit of all other occupations, holding technology and capital steady. But the eventual equilibrium has all the profit rates being the same. Otherwise investment flows from the low-profit ones to the high-profit ones.

Comment author: Vaniver 16 May 2017 05:18:53PM 2 points [-]

Instead it rewards those who provide value to those who provide value! It's recursive, like PageRank!

Contra Lumifer, this looks right to me. Notice the second-order effects, where a value-provider not only gets tokens to spend, but also them having more tokens means that everyone else is more sensitive to their desires.

That's the main reason why we have so much inequality. Recursive systems will have attractors that concentrate stuff.

This isn't as clear to me. If transactions happen entirely at random, but debts aren't allowed, then you'll end up with a Boltzmann-Gibbs distribution for income, which will be highly unequal. If you allow debts, then probably the resulting distribution is normal or something, which is still highly unequal. That is, this likely explains the particular shape of inequality, but not the existence of inequality at all. (Note, for example, a world where everyone has the same utility function but has variable capacity to produce goods and services will have significant inequality, driven by the variable capacity rather than the spiralling effects.)

That's also why you can't blame people for having no jobs. They are willing to provide value, but they can't survive by providing to non-providers, and only the best can provide to providers.

Trying to reach a conclusion about blame seems like trying to cross the is-ought chasm, and note that not being able to satisfy producers doesn't imply being able to satisfy non-producers.

Comment author: Lumifer 16 May 2017 05:50:16PM *  0 points [-]

a value-provider not only gets tokens to spend, but also them having more tokens means that everyone else is more sensitive to their desires

This is a good thing, since you do want to incentivize people to provide value.

I also don't know about "everyone". If you are a baker selling loaves of bread for $1, there is no reason to care more about billionaire Alice than about working-stiff Bob if both happen to be your customers. Alice still can eat only one loaf a day so her billions are irrelevant to you.

distribution for income

Wealth distributions in societies tend to be power-law distributions and income is basically the first derivative of wealth.

Comment author: Vaniver 19 May 2017 09:16:59PM 0 points [-]

I also don't know about "everyone".

This is a component of the information conveyed by prices, which everyone is sensitive to.

Wealth distributions in societies tend to be power-law distributions and income is basically the first derivative of wealth.

Only for the rentier class. A fit of real-world income distributions to a combination of the Boltzmann-Gibbs for the bulk and then a power law for the top seems to perform better, because it separates the two classes.

Comment author: Lumifer 20 May 2017 02:53:42AM *  0 points [-]

This is a component of the information conveyed by prices, which everyone is sensitive to.

A price is a scalar, there isn't much information it can convey -- in simplified economics like what we are discussing, it just tells you where the intersection of the demand and the supply curves is. Even if you are a producer and can manipulate the prices to observe the shifts in demand, all you can find out is the approximate shape of the demand curve. There is no information about the total wealth of your customers in the price for common goods.

A fit of real-world income distributions to a combination of the Boltzmann-Gibbs for the bulk and then a power law for the top

An interesting paper, though it seems to suffer from a serious confusion between the map and the territory. I also wish it would show the fit of the distributions to the data and the errors. As it is, we have to peer at not-too-detailed graphs and I don't know if they are as convincing as the paper makes them out to be. In particular, to my eye the switching point between the two distributions in Fig. 2 isn't necessarily where the paper says it is.

Comment author: philh 17 May 2017 09:51:13AM 0 points [-]

I think "everyone" is pretty much true. Your counterexample seems like it only works as long as Alice and Bob's preferences aren't in conflict. And I guess they often won't be. But I don't think that being in that situation means people care about their preferences equally; it just means they don't have to choose right now.

To be more explicit about when your counterexample fails: suppose Alice wants a particularly fancy load of bread. It takes you all day to bake so you can't make bread for Bob (or any of your other customers) any more, but she's willing to pay $1000 for it.

She doesn't actually care very much about having this $1000 loaf over a $1 loaf, which is why she's only willing to pay $1000, which isn't very much to her. Bob's $1 has more value to him than $1000 does to Alice. The cost to Bob of not getting the $1 loaf is more than the value to Alice of getting the $1000 loaf instead of the $1 loaf.

But you make the $1000 loaf anyway. This is great for you. But it's pretty bad for Bob, and only slightly good for Alice.

Comment author: JEB_4_PREZ_2016 17 May 2017 04:03:17PM *  1 point [-]

Alice would probably not want to pay $1,000 for a loaf that she prefers only slightly to the $1 loaf. She'd likely be willing to pay $1.05 or $1.10 for it. And Bob would be willing to pay $2 or $3 or maybe even $4 since he wants it so badly.

Comment author: philh 19 May 2017 10:03:06AM 0 points [-]

Alice would probably not want to pay $1,000 for a loaf that she prefers only slightly to the $1 loaf. She'd likely be willing to pay $1.05 or $1.10 for it.

I did not intend that to be taken literally. I picked an extreme example to make the effect intuitively obvious, not because it was realistic.

If you think the effect doesn't exist, or is too small to be worth mentioning, at realistic levels, then that seems worth saying. But it doesn't seem very interesting to say that my example was unrealistic.

Bob would be willing to pay $2 or $3 or maybe even $4 since he wants it so badly.

There exists an amount that Bob can value a loaf of bread, where he's willing to pay $1 but not $2. Nothing I said is inconsistent with Bob valuing the bread at that level.

Comment author: ChristianKl 18 May 2017 03:23:59PM 0 points [-]

Some billionaire's like Warren Buffet do care about the price difference between a $1,000 and a $1 loaf but many don't.

It might be more clear when you replace "loaf of bread" with wine.

Comment author: JEB_4_PREZ_2016 18 May 2017 08:08:40PM *  1 point [-]

All [long-term] wealthy people care about price differences. They'd go broke if they didn't (see lottery winners). Even billionaires don't just throw their money around, because their money is still scarce and they want to spend it so as to maximize their expected utility.

Replacing bread with wine doesn't change anything; if a billionaire slightly prefers one type of wine to another, he doesn't arbitrarily pay a ton more for it. He pays the market price.

Comment author: ChristianKl 18 May 2017 08:51:14PM 0 points [-]

There's a reason the saying "If you have to ask for the price, it's too expensive for you" exists.

A huge reason why lottery winners go broke is that they don't earn more money, there are other rich people who do earn money and who spent it lavishly.

Comment author: JEB_4_PREZ_2016 18 May 2017 11:17:36PM *  1 point [-]

There's a reason the saying "If you have to ask for the price, it's too expensive for you" exists.

That saying has more to do with poor people not having the purchasing power of rich people and less to do with rich people and their lack of stinginess.

A huge reason why lottery winners go broke is that they don't earn more money

False. Most jackpot winners (and almost all of the ones that go broke), come from the lower and less educated classes. If they were to invest their entire prize in passive investments and live off the annual returns, they'd be earning far more money than any salary they could've ever hoped to achieve with their labor. These people don't go broke because they don't earn more money--they go broke because they squander multiple lifetimes worth of upper class earnings astonishingly quickly.

there are other rich people who do earn money and who spent it lavishly.

Not in the way that was described in the original example. Note that in philh's comment, Alice "doesn't actually care very much about having this $1000 loaf over a $1 loaf," but decides to go ahead and drop $1,000 on it anyways. The overwhelming majority of ultra rich people don't spend this way. And when they sort of do, they don't stay ultra rich over the long run.

Comment author: Lumifer 17 May 2017 02:45:04PM *  1 point [-]

I think "everyone" is pretty much true

In real life? I don't think so.

I don't expect that anyone at my supermarket, or at a corner gas station, or in the local Starbucks is "more sensitive" to the desires of the rich.

There are a couple of things going on here. First, someone rich has the resources to, let's say, exert an economic force. She can use that force to make things happen. Phrasing such events as "more sensitive to" is bad framing: we don't say that a weight is "more sensitive" to a greater force.

Second, as has been pointed out, in free markets a producer cares only about the demand supported by purchasing power. Some producers make expensive things and they are certainly more sensitive to the desires of the rich because the rich are their only customers. However a lot of other producers make common, inexpensive things -- bread, gasoline, jeans, etc. -- and they don't care much about the rich because the rich are a very small fraction of their customers and so a source of only a small fraction of their profit.

Comment author: philh 18 May 2017 11:32:41AM 0 points [-]

First, someone rich has the resources to, let's say, exert an economic force. She can use that force to make things happen. Phrasing such events as "more sensitive to" is bad framing: we don't say that a weight is "more sensitive" to a greater force.

The desires aren't the force, the money is. Being rich means the same amount of desire gets translated into a larger amount of money. Framing this as people being more sensitive to the desires seems natural to me. A physical analogy might be levers: a weight is more sensitive to force being applied at one end of a lever than the other end.

But I don't think we disagree about anything real.

Comment author: Dagon 18 May 2017 02:01:40PM 0 points [-]

People with money (or in other systems, people with birth rank or status or strength) definitely have more power than people without. So, what's the alternative to the individual freedom to choose to serve the powerful over the powerless?

I guess we can make all humans into serfs for the great AI. Not terribly appealing to me.

Comment author: philh 18 May 2017 05:25:09PM 0 points [-]

To clarify, I think capitalism is pretty great (applause light). I'm pointing at something that I think is a not-great feature of capitalism, but I don't have any better ideas.

Comment author: Dagon 18 May 2017 06:27:22PM *  2 points [-]

I get that. From my standpoint, this isn't a not-great feature of capitalism, it's a not-great feature of human choices, or maybe of a universe that contains limited resources and independent-goal actors. Capitalism is neither great nor problematic, in fact it's not a thing at all. It's a side-effect of individual agency and individual decisions about resources.

(edited to add) you can argue that it's also a side-effect of our particular consensual popular conception of "property". Ok, stipulated. But there's not much hope in having ANY system of persistent ownership that doesn't include lots of elements of capitalism. And without the idea of property ownership, everything goes to hell (well, to the strongest/cruelest/luckiest risk-taker).

Comment author: philh 19 May 2017 10:03:50AM 0 points [-]

Yes, I agree with that too.

Comment author: cousin_it 16 May 2017 05:46:19PM *  0 points [-]

Yeah. My previous version of this idea was "the free market maximizes money-weighted utility instead of utility", but the one with recursion is nicer because it evokes a dynamic picture.

The word "blame" is a bit is-ought to begin with :-) Still, it seems like less disposable income leads to fewer jobs which leads to less disposable income etc, so at least part of unemployment should be blamed on the recursive effect and not on individuals.

Comment author: strangepoop 18 May 2017 11:40:32PM 1 point [-]

Incidentally, Gary Drescher makes the same (citation free) statement in a footnote in Chapter 7 - Deriving Ought from Is:

Utilitarian bases for capitalism—arguments that market forces promote the greatest good—are another matter, best suited for other books. For here, suffice it to note that even in theory, an unconstrained market does not promote the greatest good overall, but rather the greatest good weighted by the participants’ relative wealth.

I remember asking for a reference about a year ago on LWIRC, but that didn't help much.

Comment author: satt 21 May 2017 05:06:52PM *  2 points [-]

Brad DeLong wrote in 2003 that "the market system's social welfare function gives each individual a weight inversely proportional to his or her marginal utility of wealth", which he found "a completely trivial result"! Here is his algebra. Last year he pointed to Takashi Negishi as someone who published the result in 1960.

Edit: though to get the result that the weights are proportional to relative wealth you have to add the assumption that utility goes as log wealth.

Comment author: cousin_it 18 May 2017 11:58:05PM 0 points [-]

Nice find. Yeah, Gary and I are often in agreement :-)

Comment author: Lumifer 16 May 2017 05:56:21PM 0 points [-]

The free market doesn't maximize any utility.

Perhaps you want to point out that the only demand the market cares about is the demand supported by purchasing power (aka money)? That is true. If you want bread but have no money, the market will not help you.

less disposable income leads to fewer jobs

That's straight-up Keynesianism which isn't quite the generally accepted consensus.

Comment author: Lumifer 16 May 2017 05:00:47PM 2 points [-]

Nope.

Imagine a loaf of bread is worth 1 dollar to consumers. If you make 100 loaves

...then you have created value, $100 worth of it.

And don't forget that "you" is also part of the society. In both cases society got richer by $100, it's just the distribution is different: in the first case you : others is 99 : 1 and in the second case you : others is 0 : 100.

the market doesn't reward those who provide value

Reality check: fail.

Comment author: cousin_it 16 May 2017 05:17:51PM *  1 point [-]

You're right that rich people can create value for themselves, I'm not arguing against that. But I often see claims that rich people must've given a lot to others, and poor people must've not given enough. That's what I'm arguing against. It's possible that many rich people are rich because they're giving mostly to themselves, and many poor people are poor because they give more than they receive. That strikes against the idea that the market is fair.

Comment author: Lumifer 16 May 2017 05:44:09PM 1 point [-]

Well, let's take a look at how the markets work.

Step one is value production. There are entities (people and organizations) which produce tradeable value. That ability is not limited to "rich people" -- anyone can do it.

Step two is you offer the value you created to the market. The transactions are voluntary, so each purchaser of your goods gains from that exchange (that's called a "consumer surplus" in economics). This way the value of the good = price + consumer surplus.

Price, in turn, is production cost + profit, so

value = production cost + producer's profit + consumer surplus

Rich people are rich (in this stylized context) because they collected a lot of profit. That could be because the profit was high or because the volume of sales was high -- or both, of course. But note that the consumer surplus is always positive. Each and every transaction results in gains for the consumer.

Now, the easiest way to be poor is not to produce anything of value. No profit, no consumer surplus, no nothing. In this case, sure, the non-producing poor are poor because they do not produce. Tyler Cowen has a term, "ZMP workers", that is, Zero Marginal Productivity workers. They exist.

But, of course, that's not the only way to be poor. You can be highly productive and someone might take all the surplus away from you. Such people also exist (and their plight has been well explored by e.g. Karl Marx).

Comment author: MrMind 17 May 2017 03:10:08PM *  0 points [-]

That could be because the profit was high or because the volume of sales was high

Or because the cost of production was comparably very small, for example externalizing some factors (cfr. the classic example of a factory that saves by not installing filters but pollutes the air).

Comment author: Lumifer 17 May 2017 03:45:07PM 0 points [-]

That's an example of high profit since profit = price - cost of production.

Comment author: MrMind 18 May 2017 02:38:56PM 0 points [-]

Right, I wasn't thinking in terms of fixed price.

Comment author: satt 21 May 2017 05:43:20PM 0 points [-]

For example, if you're a single mother minding a child, you're providing value, but your child is unlikely to pay you for that! (You reminded me of the feminists' observation that women disproportionately do work, like childcare, which is often left uncounted or under-counted in conventional economic accounts.)

Comment author: MrMind 17 May 2017 04:13:48PM 0 points [-]

But I often see claims that rich people must've given a lot to others, and poor people must've not given enough

But that's a different claim from what you've argued originally. Perfect free markets are perfect allocators, not perfect distributors, and an easy example is a utility monster.

Comment author: Val 19 May 2017 09:29:10AM 1 point [-]

If you make 100 loaves and sell them for 99 cents each, you've provided 1 dollar of value to society, but made 100 dollars for yourself.

Not 99 dollars?

Comment author: cousin_it 19 May 2017 09:31:18AM *  1 point [-]

Whoops! Fixed. Thank you.

Comment author: entirelyuseless 17 May 2017 02:51:34PM 1 point [-]

"If you make 100 loaves and sell them for 99 cents each, you've provided 1 dollar of value to society, but made 100 dollars for yourself. "

The argument here is that since the loaves are worth $1 to each consumer, and they pay $0.99, they gain only one cent by buying them. (That's improbable, since they would likely not buy them at all if it was only as useful as picking up a penny.) The problem is that something is going to happen to that $100 that the seller takes. If the seller does not spend it, then the average value of money in society will go up, meaning that society will have profited by $100, not by $1. If the seller does spend it, others will receive that $100 in return for other things that they valued less. And so once again, society will profit by more than $1.

Comment author: Viliam 17 May 2017 01:56:10PM *  1 point [-]

The trick is in the word "value".

If you play some motte-and-bailey around it, you could redefine "value" to mean "that, which is maximized by the free market", and then prove that free market indeed maximizes value. I expect that most pro-market answers you will get at most places will be a variant of this.

The question is, how closely related is such definition to our intuitions about value, i.e. what we actually mean by "value". That is tricky, because human intuitions are in general unreliable (e.g. likely to change if you describe the same situation using different words), inconsistent, implemented on a broken hardware, etc. But of course that doesn't give us a license to redefine words arbitrarily, so... as the saying goes, it's complicated.

You are correct about the similarity between free market and PageRank. Free market is recursive -- you can only gain money by selling to people who have money, who in turn gained that money by selling to people who had money, etc. If you are a starving person with no money and nothing to sell, well, sucks to be you; there may be tons of food on the market, but no way to sell it to you, unless someone gives you some money first.

Money is not the same as value, though, and that is one of the places where the whole process is grounded in something other than recursion. Value can be created by work, or by selling or renting resources you have.

Also, economical value can be brought from outside of the free-market system. For example, an African warlord can extract resources locally using murder or slave work, but then can exchange those resources at the international free market for something else. What I am hinting at here is that even if you would in abstractly prove that "free market benefits all participants", that doesn't necessarily mean it benefits all humans, because some "participants" at the market are e.g. slave owners, and the "benefits" for them include the ability to exploit their slaves more safely and easily. That doesn't necessarily imply that it benefits the slaves, too; it may sometimes be the other way round. (Lenin would say: "Those naive libertarians in Silicon Valley keep inventing and selling on free market a cheaper and stronger rope with which we can now hang more people, mwa-ha-ha-ha!")

Speaking about human values, we have terminal and instrumental values, and the instrumental values are also recursive by nature.

So...

Seems to me that the recursive nature could be a red herring. Markets are recursive. Instrumental values are recursive. Maybe these things actually match each other well. Perhaps we should focus on (1) whether the non-recursive parts also match each other; and if there is a difference, (2) whether the recursive parts amplify the difference.

(I do have some opinions on that, but this comment is already too long, and contains important parts I wouldn't want to get ignored just because I write something controversial afterwards.)

Comment author: cousin_it 17 May 2017 08:54:29PM *  0 points [-]

Free market is recursive -- you can only gain money by selling to people who have money, who in turn gained that money by selling to people who had money, etc. If you are a starving person with no money and nothing to sell, well, sucks to be you

I guess my point was that "sucks to be you" situations don't just happen when you have nothing of value to sell, as libertarian-minded folks (like Lumifer in this thread) seem to believe. It also happens when you have stuff to sell, but the folks who would normally buy it from you can't pay you enough to survive today, because they don't have anything to sell, and the problem can start randomly and build on itself. Or at least I don't know any argument why it wouldn't. It feels like this horrible recursive process that doesn't approach anything good except by accident.

Comment author: entirelyuseless 18 May 2017 05:09:25AM 2 points [-]

"It feels like this horrible recursive process that doesn't approach anything good except by accident."

Much like PageRank doesn't turn up any useful websites except by accident, naturally.

Comment author: cousin_it 18 May 2017 11:02:02AM *  1 point [-]

If every website was a sentient creature that felt pain in case of low PageRank, our world would be pretty much hell for those creatures. So the analogy between market and PageRank isn't flattering to the market.

Comment author: entirelyuseless 18 May 2017 01:12:15PM 3 points [-]

The analogy between the market and PageRank is this:

  • PageRank cannot directly give a high rank to useful pages, because there is no known algorithm for that. So it uses a recursive structure to approximate this.

  • The market cannot directly give value to providers of value, because there is no known algorithm for that. So it uses a recursive structure to approximate this.

And it does approximate it; if you think it does not, you can certainly propose a better algorithm.

Of course, people would be happy to have value even if they don't provide any value, and disappointed not to have it. And likewise, the unlucky people who do provide value but which the algorithm misses, are especially unhappy, like the low ranked but useful websites.

If your position is, "Let's not provide value just to providers of value, but to everyone!" then you can certainly propose a means to bring that about.

Comment author: Lumifer 18 May 2017 02:42:50PM *  1 point [-]

"Let's not provide value just to providers of value, but to everyone!" then you can certainly propose a means to bring that about.

There, of course, was a highly popular proposal to do just that -- it starts with "c" and ends with "ommunism". Unfortunately, it... didn't quite work out.

Comment author: cousin_it 18 May 2017 03:58:00PM *  0 points [-]

For me morality is mostly about maximizing average or total utility, not giving value to providers of value recursively.

Comment author: entirelyuseless 19 May 2017 04:51:01AM 3 points [-]

The reason the market approximates rewarding the providing of value is not because there is something morally special about that situation, but because without doing that, it is very difficult to get any value or utility at all, for anyone.

A system that rewards the creation of value results in a substantial amount of average utility, even if not high utility for everyone. But if you have a system that does not reward the creation of value or utility, there will be many people who will not bother to create any value, and consequently you will get low average value or utility. That was why St. Paul had to tell his communities that "if someone will not work, neither shall he eat."

If you think you have an idea for a system that will create higher average value or utility than markets do, as I said, you can propose one. I do not think anyone has yet made any reasonable proposal of that kind.

Comment author: cousin_it 19 May 2017 08:39:12AM *  1 point [-]

I know the usual arguments why rewarding value creation is a good idea, and I'm not trying to argue against that. Instead, my first comment points out how markets don't always reward value creation. They do a more complicated and recursive thing. You can think of it as "if your product is awesome but your customers are poor, you're screwed". Only even worse because there's feedback effects, where value creators can become poor just because other value creators are poor etc.

To put it yet another way, in a PageRank-like system the utility will tend to clump together, leading to inequality and monopolies. That's more or less what the system does. The original PageRank had some nasty attractors after people started gaming it, which is why Google is tweaking it all the time. Someone on HN once made a cheeky comment saying "the end game of capitalism is one corporation selling everyone oxygen", and I can see how blindly trusting a recursive system to be fair can get you there.

Also, your St. Paul quote is a famous Soviet slogan, instantly familiar to anyone who was born in the USSR, so I chuckled a bit when you used it to defend free markets :-)

Comment author: entirelyuseless 19 May 2017 02:01:17PM 0 points [-]

I disagree with your first comment about the $100 and the loaves, as I said, because you are overly simplifying. For example, even aside from the things I already mentioned, you also ignore the fact that the person needs to spend money or goods in order to produce the loaves.

That said, you might be able to refine that example or come up with another; I certainly do not think that markets infallibly have the result of rewarding value creation. I agree that free markets leads to that kind of inequality and that this is a not particularly great aspect of it. However, it is not reasonable to say "this is a horrible process" if you cannot propose a better alternative. And I am not even saying there is not a better alternative. I am just saying that no one has found one yet.

The fact that the Soviets used the St. Paul quote is revealing in regard to what usually happens if you attempt to replace free markets with something else. The problem e.g. with a guaranteed basic income is this: either people have to work, or they don't. If they don't have to work, then there is the implicit assumption that wealth does not depend on work, which in our world is false. So if enough people decide not to work, the system will necessarily collapse. This does not of course prove that a basic income is impossible, since you could simply keep reducing the amount of the income until enough people are working to keep it going. But it does show a serious issue. And on the other hand, if they do have to work, then they are slaves. And so the way the Soviets were using the slogan, they were making people slaves.

The only alternative (to the the impossible option of wealth not depending on work or to slavery) is to admit that if people choose to do so, they do not have to work, but they will suffer the consequences. Europe has a better unemployment system than the USA, for example, but even in Europe (at least in general and if I understand it correctly, and obviously the details differ in various places), there needs to be at least a bit of ambiguity about why you are unemployed. If you openly say, "I am perfectly competent and well qualified for many jobs, and I know from experience that I could get one next week if I wanted. In fact I just received an offer, which I rejected. I do not WANT to work, and I won't," even Europe will not continue offering you support.

Comment author: Lumifer 18 May 2017 04:13:22PM 0 points [-]

Maximizing in the short term or in the long term?

Comment author: cousin_it 18 May 2017 05:07:01PM 0 points [-]

Across all time.

Comment author: Lumifer 18 May 2017 05:14:46PM 0 points [-]

What does that mean?

Comment author: Lumifer 18 May 2017 02:36:27PM 0 points [-]

If every website was a sentient creature that felt pain in case of low PageRank

tag: Shit LW says

Comment author: Dagon 18 May 2017 01:57:17PM 0 points [-]

Website owners certainly feel pain when they get lower traffic. Are you saying Google should flatten the distribution of browsing in order to better distribute happiness?

Comment author: Lumifer 18 May 2017 02:43:48PM 0 points [-]

It's only fair that everyone's PageRank be exactly the same :-/

Comment author: Viliam 19 May 2017 03:20:41PM 1 point [-]

It also happens when you have stuff to sell, but the folks who would normally buy it from you can't pay you enough to survive today, because they don't have anything to sell,

It seems unlikely that you would have a skillset which allows you to produce valuable stuff only for poor people, but you wouldn't be able to produce valuable stuff for anyone else.

Okay, thinking hard, I can make up some situations like that, for example that you are a skiled translator into some kind of indigenous language, where all speakers of the language are too poor to actually pay you for the translations (even if they would like reading them a lot). Or that your services are limited to your local area, e.g. you can provide accommodation for people, but there are only poor people living in that area, and zero tourists.

and the problem can start randomly and build on itself

Something like... million people living on an island, where most of them can provide some valuable service to their neighbors (but not to anyone outside the island), but some critical skill is missing on the whole island... like, all of them are genius teachers or movie producers, but none of them can grow food... so they are all going to starve, despite being so skilled that an average inhabitant of the island would be a rich person if they would be teleported into our society?

In short term, this certainly can happen, especially if the situation can change overnight. Like, yesterday, there were hundred specialized food producers, but by miracle, all of them were killed by a lightning during the night. To make it sound more likely, all of them were at the same place (the annual food-producer conference), and something exploded there and killed them all.

But... I don't see how any other economical system would deal with the fact that, no matter how you distribute the money, there is not going to be any food in the island anyway. With free market, at least now all professors and movie producers see the opportunity to become millionaires overnight if they succeed to reinvent e.g. the lost art of picking fruit. Even if they would be great movie producers, but quite lousy fruit pickers.

(Actually, such situation would be made worse by an unfree market, for example if the government of the island would insist that the wannabe professor-becoming-fruit-picker is legally not allowed to pick fruit because he doesn't have a diploma from Fruit Picking University; and any attempt to illegally do the job he is not qualified for would get him arrested.)

Now, let's assume that the island actually is okay, able to grow its own food, etc. It's just that the money flow happens to be hopelessly unidirectional. No one outside the island wants to buy anything from the island. (Let's suppose they are not interested in your stuff, and you can't gain customers even for trying to sell really cheaply, because the costs of ship fuel will still make everything more expensive than anyone is willing to pay for.) On the other hand, people on the island sometimes buy something from the outside, e.g. because they cannot produce their own iPhones. Thus, money only ever goes out of the island, but never in. The island is constantly losing its global PageRank, ahem, money reserve. What happens now?

If I understand it correctly, the standard market outcome will be that -- assuming the island uses its own currency -- the exchange rate will gradually approach "1 out-of-island currency = infinity island currency". The people on the island will stop being able to buy stuff from outside, because it will become astronomically expensive for them.

Yet, within the island, people will be able to sell to each other, because both sides will pay using island currency. And there will be things to sell, for example the locally grown food. No one will be able to buy iPhones anymore, and that sucks, but the island will still be not worse than if the rest of the world would simply stop existing.

And if someone comes from the outside, and uses their infinitely valuable out-of-island money to buy the local food, then the assumption of unidirectional flow of money is no longer true; we now have money flow in both directions.

Etc, economics 101.

However, one possible solution for "people who have nothing to sell" is generally known as Basic Income. Not universally accepted, of course, but it is a way to make sure everyone can buy stuff, at the cost of doing relatively small damage to the economy. By relatively small I mean, of course entrepreneurs will complain about higher tax rate, but as far as I know, they usually complain much more about regulation, bureaucracy, or unpredictability; and Basic Income doesn't create a lot of these compared with the usual government interventions.

Essentially, Basic Income + market profit seems like a plausible approximation of our model of terminal + instrumental value, when we assign approximately the same terminal value to each human (expressed as Basic Income), and more instrumental value to people doing useful stuff to others (express as the market profit).

Comment author: Lumifer 19 May 2017 04:09:45PM *  0 points [-]

one possible solution for "people who have nothing to sell" is generally known as Basic Income

A solution for "people who have nothing to sell" is generally known as welfare. It exists in all the developed world and consumes large fractions of government budgets.

Basic income is more of a solution for people who are capable of, but don't want to make something to sell.

Comment author: g_pepper 18 May 2017 01:51:08AM 1 point [-]

But the situation is not as bad as you make it out. Most people do have something they can sell (even if they have little or no wealth) - their labor - i.e. they can get a job. In fact, the majority of people (in the US, anyway) get by mostly by their salary or wages - they sell their labor to their employer. So, a person with no wealth today need not be a person with no wealth tomorrow.

Comment author: cousin_it 18 May 2017 11:14:25AM *  1 point [-]

When it becomes harder to get jobs, people will just try harder, because the alternative is bad. So employment isn't a good indicator, it might be stable until a point and then break down completely. A better indicator is how much people have to pay for jobs, and that's rising fast, as you can see from requirements on college degrees etc.

Comment author: Lumifer 17 May 2017 09:25:13PM *  1 point [-]

I guess my point was that "sucks to be you" situations don't just happen when you have nothing of value to sell, as libertarian-minded folks (like Lumifer in this thread) seem to believe.

To quote myself:

But, of course, that's not the only way to be poor.

.

It feels like this horrible recursive process that doesn't approach anything good except by accident.

To quote myself:

Reality check: fail.

Given that ALL developed countries got to be rich and developed through market-based economies, I don't understand what you are talking about.

Comment author: Dagon 20 May 2017 11:45:24PM 0 points [-]

I think you have to back up a step in your idea of "value". What makes the loaf worth $1 if you sell it for $0.99? Why isn't it worth $1M (to a theoretical starving rich person) and you're giving away HUGE amounts? Why isn't it worth $0.10 and the buyers gave you $890 in charity?

A thing's value is relative - different to every participant. And the relative values are only known (actually, not - they're bounded above by the seller and below by the buyer) by the transaction.

Comment author: Good_Burning_Plastic 19 May 2017 09:23:28AM 0 points [-]

If you make 100 loaves and sell them for 99 cents each, you've provided 1 dollar of value to society, but made 100 dollars for yourself.

Total, $101. (Society also includes you.)

If you make 100 loaves and give them away to those who can't afford it, you've provided 100 dollars of value to society, but made zero for yourself.

Total, $100.

Comment author: philh 19 May 2017 10:05:21AM 1 point [-]

Total $100 in both cases, because you only earn $99 in the first case.

Comment author: Zubon 17 May 2017 11:35:02AM 0 points [-]

You should be very surprised if you think you have found a new counterexample to a centuries-old discipline that comes from a millennia-old example. Odds are there is an existing literature addressing exactly that question.

Comment author: WalterL 16 May 2017 05:39:26PM 0 points [-]

An easy way to think of it is to just look at the physical stuff. What do you mean by 'provide value'. Like, not terminology games or whatever, but what do you think of when you say that? Do those people get paid? That's an easier question than whether 'the market rewards' them.