Anthropic Capitalism and the New Gimmick Economy
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What does this even mean?
I'll give two thought examples.
1)Let's say I have a severe peanut allergy and peanuts are selling at $5.00/lb. Does the price meet the value? I.e. would I have a tricky time deciding if I would rather have the $5.00 or the pound of peanuts? Is this even true across society as an "average"? Do we believe markets are that rational, efficient and smooth?
2) over the course of the last year the price of gasoline in California has fluctuated by nearly 40%. Is this variance truly reflective of the relative value of gasoline to dollars over this time period, or is the "catastrophic market failure". How Scotsman must such a failure be?
A Picasso can sell at a lot of money because not because of the labor put into it, the materials it's made of, etc. It sells for a lot of money because to someone believes it's worth it.
But this also illustrates that value is entirely subjective.
AIUI prices are generally determined by market clearing - matching supply with demand. This is not at all the same as there being some objective notion of value. At best you could get 'in general prices are slightly lower than the value sufficient consumers place upon a good to clear the market for that good', but that's a much less general statement.
Answer to 2) - Sure there are spikes, but like my analogy in #1 above, but the system rapidly compensates and settles on a price that implies a number of people value it at that price.
In general, value is also subjective. A retiree, and a young person starting a family place different values on different things. If they trade something, they both may feel like they gained value in a trade, say, nice golf clubs sold by the older person for extra cash, because they can no longer golf, and a young person who admires classic golf clubs.
I think this is not true. The system tries to settle on a price that implies a sufficient number of people value it at more than that price. Yet, the system ejects players (business failure) which means that the price/market was not accurately gauged (either too high or too low). And this process of ejection is very slow. Price discovery is not an efficient process, and I think Hayek's information problem applies to free markets "only slightly less than" it applies to governments.
In short, markets are not efficient, nor is there really much good evidence that they should be, just a belief.
> value is also subjective
Yes, it is. And that is exactly the reason why even your weak statement "a number of people value it at least that price" - is far far weaker than the OP's statement that markets approximate some representation of social value.
I'm personally a staunch defender of free markets, but my defense is not based on effectiveness of markets in organizing society, rather that centralized clearance of value backed by a state entity is an unacceptable and discriminatory marginalization of dissenting value opinions backed by the rod of state enforcement.
The second is - the difference in value of gasoline - as compared to the value of dollars - to different market players - over this time period. The variance is reflective of the changes in the difference in value between the 2 commodities to different people, over the time period.
2) Supply matters.
I trade you a bag of peanuts for $5 iif I value it at less than $5 and you value it at more than $5!!!
Even if a crazy/fetishist/more-money-than-sense random person is OK to pay $20,000 for a bag of peanuts, the statistically important majority will not (and in fact, you'd be hard pressed to find even 1 such crazy person for such a thing).
So, yes, valuations vary, but not that much. In fact the reality is closer to products having an inherent value -- only it's not based on themselves, but on the conditions (e.g. a bottle of water is worth $1 now, $1000 in a dessert, $10,000 if Marilyn Monroe once drank from it, etc).
And while conditions change, they don't change that fast, or that much.
"value" may be a confusing word here. Starting from "This has a $5 value". Compare to "I value this at $5". People have moral "values" too. It's confusing.
The point is that how much we value things is contextual.
https://en.wikipedia.org/wiki/Intrinsic_theory_of_value
Warren Buffett built his entire BRK empire around this concept.
The word "value" in some academic settings is used as a thing that is contextual and subjective, but in daily conversation, if I said the value of a bag of peanuts was a billion dollars people will think I'm crazy.
Due to that fact alone, one can assume that in typical conversation, employment of the word "value" refers to "intrinsic value" rather than the "subjective value"
On the topic of economic metrics - I believe that at this point, in the UK at least, GDP, unemployment, median wage, inflation, and possibly more indicators are irrelevant, and the focus on them misplaced, primarily because housing (capital) costs have exploded whilst other (operational) costs have shrunk.
Not sure I can provide a source on this (it's a matter of inner workings of Government).
>> inflation [...] was actually absorbed by the financial market
In the UK the CPI is made up mostly of operational costs. I deliberately use the term 'operational' here as distinct from 'consumer goods' or something because I am philosophically opposed to partitioning humans into 'consumers' and 'producers'. A naive idealist. :)
I would like to produce a 'teardown' of the specification at some point, but haven't motivated myself yet. I actually have a comment somewhere here on HN that has gotten lost - that's a bit of a kick up the arse for me to produce something a bit more structured like a blog.
Mortage payments, both interest and capital, and rent are dealt with very badly by CPI. As I recall, they're basically not even included. I think legal fees on home purchase, maintenance, and some other related expenses are in there.
At the moment, for at least the median household and probably a large percentage of them, some combination of rent, mortgage payments, or imputed interest is the highest annual expense by a large margin.
In that context the CPI becomes a sort of analysis of 'inflation of items purchased by discretionary income', because it fails to account for well over half of the economy.
On the ground I think this is sort of obvious, which is why I've been reluctant to produce write-ups with proper citations, because it feels a bit like preaching to the converted.
(This is taking as axiomatic that housing costs are 'the financial market'. I'm considering it 'obvious', because housing is essentially the only valuable asset that the median, or even 75th percentile person owns. It functions as capital.)
I completely agree that it somehow seems self-evident, but that's sort of weak tea.
If we've lost the ability to use inflation as a steering mechanism for the economy ( and boy does it look like we have ) then I think that explains much of our present pain and suffering. It is as if we've basically internalized inflation bad" back to our limbic system and we only react in the one direction now.
I don't know if this will help, but I read the rise of all the political ... unpleasantness in the 1930s - leading to the deaths of 4% of all humans in the 1940s - as a manifestation of this same phenomenon.
I've pondered similar diagnoses of various economic metrics. But what is his constructive outlook for what comes next?
Without one, the only approach is to cling to the outgoing paradigm, because being in a better position in the old one is not likely to put one in a worse position in whatever the new one may be.
That said, I did enjoy this article.
Honestly how is this entire article not an exercise in historical materialism as proposed by Marx?
From Wikipedia:
"Historical materialism is a methodological approach to the study of human societies and their development over time and was first articulated by Karl Marx (1818–1883) as the materialist conception of history. It is principally a theory of history according to which the material conditions of a society's mode of production (its way of producing and reproducing the means of human existence—in Marxist terms, the union of its productive capacity and social relations of production) fundamentally determine its organisation and development.
Historical materialism looks for the causes of developments and changes in human society in the means by which humans collectively produce the necessities of life. Social classes and the relationship between them, along with the political structures and ways of thinking in society, are founded on and reflect contemporary economic activity."
> In the first place, we should expect that because there is as yet no known alternative to market capitalism...
I can't even.
Taiwan and South Korea were both authoritarian within my lifetime. Now both are clearly dynamic democracies. Not perfect ones by any means, but dramatically transformed in a single generation.
Some will change faster than others, and who can say when any given country will pass the tipping point? But can't you really authoritatively say that it's never going to happen?
China/Singapore/Taiwan are not just unspeakably evil places - that's the system they got by walking their path
Perhaps this hope is in vain. But I still hold to it.
Yap. And I think on the other side is the realization that people are not willing to trade progress, jobs, health insurance, peace, stability for democracy.
Bits are made of atoms. Computing requires work in the Newtonian sense. So things aren't becoming free, they're becoming orders-of-magnitude cheaper. Big difference: in the former case money is worthless and society is unavoidably egalitarian. In the latter, one person can still be a million times richer than another.
It could be, it just depends on who owns the web service. Could be a corporation, could be a social-minded B corp, or could be a non-profit.
https://letsencrypt.org/ is run by a non-profit, and would be considered a public service. Consider how much "profit" they're removing from the economy by offering the service for free, and yet one could argue the value of every site able to obtain an SSL cert to receive free TLS support is greater than that profit.
TL;DR Things are complicated. We keep trying to find physical world analogies for the digital space, and that just isn't going to work well.
Clean air and national securty also cost money to maintain, but have no user fees.
It won't happen tomorrow, or a year from now, but it'll happen in our lifetime.
Essentially, humanity is freed from 'work'
Edit: I'll give you am example that might fit the definition: DNS
It costs nothing to produce one more unit of a digital good (or add one more customer to a digital service). Prices in economics are affected by supply, and supply is limited by the marginal cost of production. If there's no marginal cost, then there's no limits on supply, and price tends to zero.
Startup economics agrees with this. If the cost of acquiring a customer via paid advertising is $9.99 and the lifetime value of a customer is $10, then the smart thing to do is to spend every single dollar you can raise on paid advertising (I exaggerate slightly). The value we place on the actual production of that service for each new customer is zero.
This completely messes up traditional economic models.
Having sold digital goods for years, I can attest that this is not true. For example, customers have questions, which consumes one's time. They do returns. Fraud costs. Accounting costs. Taxes on transactions. Bandwidth costs. Hosting costs. Transaction fees from your merchant service account. Etc.
I guess it would be more accurate to refer to the cost of producing one more month of service rather than one more customer. Even then there are costs, but they're tiny compared to the costs of providing a physical service.
Contrast the costs of running Netflix now vs Netflix when it was distributing DVD's in the post (or the costs that Blockbuster had). Adding one more customer to Netflix costs so little now that it's effectively zero, compared to the direct costs of sending out DVD's in the old days.
Ever notice that online companies hide from their customers? As in, no phone number, no email address, no way to contact support, they just direct you to a FAQ. This is because customer service is very expensive to provide.
Loops which repeat with small variations. Rube Goldberg like processes which happen once."
What in the? Any serious analysis could not possibly result from such guffaw-inducing oversimplifications.
An analysis only requires as much detail as is necessary for its purposes.
The same way that you don't go into registers when you try to teach functions, or binary representation of numbers if you teach people to use a calculator.
>"Economic theory, like the physics on which it is based, is in essence an extended exercise in perturbation theory. Solvable and simplified frictionless markets are populated by rational agents which are then all subjected to perturbations in an effort to recover economic realism. Thus while it is false that economists believe idealized models to be exactly accurate as outsiders contend, it is fair to say that they implicitly assume deviations from the ideal are manageably small."
When Smith wrote "The Wealth of Nations", he had no such theory of frictionless markets populated by rational actors."The Wealth of Nations" was written based on what Smith observed in the world around him, not some thought experiment, and most of the examples in the book were based on real markets and policies, such as the corn laws. Smith had in fact written another book which made it clear that he believed humans were complex moral and emotional beings.
Throughout the history of economics, many (if not most) of the notable contributions were made by people addressing the situations they found themselves in, such as Bastiat responding to protectionism he saw in the French national assembly.
>"Even die-hard proponents of market capitalism will cede that this public sector represents “market failure” where price and value become disconnected. Why should one elect to pay for an army when he will equally benefit from free riding on the payments of others? Thus in a traditional market economy, payment must be secured by threat of force in the form of compulsory taxes."
This is another example of the author's complete misapprehension of economics. I have never heard any economist argue that all externalities should be compensated or penalized, because everything has externalities. Many have come to different conclusions based on the abundance of externalities; there are Marxists who believe the government must control everything to properly allocate resources, and there are anarcho-capitalists who believe that externalities should either be paid for voluntarily (perhaps after social pressures) or not at all.
I could go on to list many of the rest of the egregious errors in this post, but wouldn't want to further tax your patience.
Theory of Moral Sentiments, right?
[1] https://en.wikipedia.org/wiki/General_equilibrium_theory, http://www.tandfonline.com/doi/abs/10.1080/09672560600708011
But unless you believe that technology is an evolving lifeform that has its own parasitic political agenda - always possible, but hard to support without evidence - the problems of capitalism and technology are about opportunity distribution, not about whether software runs in a loop.
There's no invisible silicon hand at work. It's still all about some people making decisions, and about other people who are excluded from that process.
Then by analogy, he's saying that more and more things are moving into some weird place where they're more like public goods than what they replaced used to be. I don't see a call for treating them as public good in the article, though.
And your rebuttal by someone who should check their ego and judgement of people with nothing to go on.
>ERIC R. WEINSTEIN is a managing director of Thiel Capital in San Francisco. He is also a research fellow at the Mathematical Institute of Oxford University. Weinstein speaks and publishes on a variety of topics including, gauge theory, immigration, the market for elite labor, management of financial risk and the incentivizing of risk taking in science.
As far as I can see this man is infinitely more qualified than you in economics, that is until you provide credentials.
And by all that I do not mean I agree entirely with Weinstein, just that your reply is so typical of internet discourse.
>I could go on to list many of the rest of the egregious errors in this post, but wouldn't want to further tax your patience.
Please do, this is Hacker News not Reddit or Facebook. Expend and source.