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Comment by wpietri | Hacker News Reader

> The whole point of finance is maximizing profits; I think that people need to understand and accept this for us to have a meaningful discussion.

Former finance person here. I understand but don't accept. The individual's point may be maximizing profits. The societal point of what we reward, permit, hinder, or ban? That is definitely not maximizing profits.

One way to look at it is to compare it with video games. An individual player's proximate goal might be to maximize points scored. But the game designer's goal is broader. The society's goal is broader still. One could even look at the evolutionary purpose of play itself.

For those interested in this sort of distinction, I strongly recommend James Carse's "Finite and Infinite Games": https://www.amazon.com/dp/B004W3FM4A/

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A game designers goal is (most of the time) to maximize his own profits.

But society's goal of maximizing the benefit (profit) to society from the Finance industry is not the same as a Finance company's goal of maximizing profit for themselves.

In both cases the goals are complimentary in some ways but conflict in others and one is purely monetary while the other might be progress towards many different societal goals.

But society's goal of maximizing the benefit (profit) to society from the Finance industry is not the same as a Finance company's goal of maximizing profit for themselves.

Well it is if you tax those profits, obv closing loopholes.

Societies work when all the participants interests are aligned. If farmers can get rich growing crops, there will never be a famine.

> If farmers can get rich growing crops, there will never be a famine.

You're not considering that food has a limited shelf life, seasonal, difficult to distribute efficiently and the customers have highly variable purchasing powers. Also local production is incredibly sensitive to local environmental variation. We already produce enough food to feed nearly twice the global population, and yet plenty of people are malnourished.

I would personally suggest that the best way to prevent famines is to improve food storage and distribution methods, and have robust systems for environmental or conflict induced local famines. Though the unbalanced nature of consumer wealth is also important - it makes sense to waste 50% of your crop selling it in Europe if you can sell it for 3x as much than locally. So maybe the best thing is simply to raise the wealth of poorest people in the world?

I think perhaps you are missing the wider point I am making :-)

I'm not sure, I kind of disagreed with both statements you were making, and decided to pick holes in the latter, since it was providing support for the former.

If I'm missing a "wider point", can you elucidate?

You disagree that societies work best when the interests of all the participants are aligned? This seems obvious to me, so I am curious as to what you object to. If people are rewarded for doing thing X, X will be more likely to happen, and if they are punished for Y, then Y will be less likely to happen. Clearly there will be outliers, but why would you construct a society that actively penalises things that it wants?

Truly aligned incentives are almost impossible to achieve - in a lot of situations, "mostly aligned most of the time" is the best we can hope for.

For example, if my startup is renting servers from AWS our incentives are aligned in the sense that we'll buy more from AWS as we get more users; but unaligned in the sense that if we're using more resources than we need to AWS wouldn't profit from pointing that out. Indeed, even an externality-free positive-sum deal between two parties brings with it a zero-sum deal in deciding how to distribute the benefits.

How do you define what a society wants? There is not an implicit goal when a society exists, there is just a collective of individuals who happen to have some interaction. So essentially, this is the function of politicians in a democracy: to reconcile the irreconcilable views of individuals. However, as with all compromises, often no one is left happy...

I'm not explaining things well I think, hope you can make sense of that!

Care to clarify on the points you are trying to put across??

> If farmers can get rich growing crops, there will never be a famine.

Tell that the Irish, they were exporting food while suffering from the Great Famine. The farmers and landowners had no reason to help during the famine as it was more profitable to export.

Even today we throw away food for the simple reason that a shorter fake shelf life has been shown to increase profits over the actual shelf life. There is simply no profit to be made from redistributing the over abundance of food to people in need, worse it would cost money making a profit oriented person just shudder at the thought.

You could have followed this:

> Societies work when all the participants interests are aligned.

with:

Regulation ensures that people don't work against the greater good for their own narrow profit and we all lose out.

But you went with people "getting rich".

Some would argue that if some people are getting rich, and there's no competitors entering to bid down their profits, by providing more of what is desired at lower costs, then economic interests are not aligned properly.

Taxing proceeds of a crime doesn't necessarily compensate for the damage of the crime. The same applies to some of the greyer areas of finance. An individual can gain millions and pay fair tax on them whilst wiping out billions in value for others. Especially when it comes to insider trading where it's much easier to induce an artificial fall in a share price than an increase.

Sure, there is a certain strand of right-wing economist that has got the wrong end of Coase's argument about transaction costs would argue that virtually all forms of financial shenanigans could, in theory be solved by investor consortiums that stand to lose billions paying the bad actors more than the millions they could earn through malicious activity to desist. But I don't think any sane person believes that shareholders agreeing to overcompensate executives even more to avoid them seeking to profit from insider information at their expense actually is a more efficient solution than aligning those incentives through the legal system.

wpietri's point was that the player's primary goal was different than the game designer's goal, just as the individual trader's goal might be different than society's goals in setting up the trading arena.

In the indie world you can tell if that was the goal by looking at how crappy the game is.

It works in general too - if there's a difference in quality when people focus on the thing they're making vs. money it's supposed to bring in.

I would rather make a game a million people play for free than making a game that nets a million that only one person plays

I guess we must know pretty different game designers. That's definitely not what the ones I know focus on.

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