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Comment by breadbreadbread | Hacker News Reader

"designer clothes, luxury watches, and fancy cars" all have understandable limits to production and have genuine scarcity (even if that scarcity is strictly controlled). NFTs have artificial scarcity... for little to no purpose other than monetary gain. Generally I am against the concept of artificial scarcity in any industry.

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Many fashion houses literally burn their unsold products to create this scarcity or create limited runs. DeBeers have a heavy control over the diamond industry. If an artist says they'll only create unique pieces (a 1/1 collection) then while they could create more in future, they'll still have a market determined value.

Fashion houses burning clothes to maintain image and Dabeers creating a diamond cartel are not good. Im not saying that artifical scarcity doesnt exist, im saying that its bad and we shouldnt build economies around it.

For digital art vs physical art, there is a clear difference between "there will only ever be one mona lisa" and "I am not going to press cntrl-c cntrl-v on this image license"

I’m all for artificial scarcity. Collectors are going to find rare things to collect. It would be better if they didn’t, but I think it’s probably a part of human nature to some degree.

Personally, id be ecstatic if collectors decide they can get their fix collecting rare jpegs and Pokémon cards instead of “truly scare” ivory, furs, or blood diamonds.

What’s the harm? What am I missing?

To me, TCGs are defensible because they are Games in which you are knowingly consenting to a system in which collection is a part of the experience. The manufacturers give a standard MSRP for cards during their printing period. Aftermarket cards are priced based on the utility given within a game system and that feeds into a collectors valuation. This is, I think, an acceptable outlet for the humanistic urge to collect things. I do think its exploitative but at least the messaging is clear and fair.

I take issue with systems which exploit gambling urges for profit. NFT's claim to be the future of DRM for independent artists, but they are exploited into becoming pump-and-dump schemes and wildly speculative markets. They use language used to defend artistic IP but ultimately function as a game with arbitrary rules.

If the only type of scarcity is artificial scarcity does it hold its value the way something that has true scarcity does?

> genuine scarcity (even if that scarcity is strictly controlled)

Scarcity can't be both genuine and artificially imposed.

Luxury sunglasses costing $3 to make are sold for $300.

Pricing a good above its production cost is not artificial scarcity.

Artificial scarcity is, however, a prerequisite for it, at least with that kind of margin. Otherwise you'll get competition bringing the price back down toward production cost + overhead.

Technically, I think that would be monopoly power, not artificial scarcity. The government grants a legal monopoly to producers to stamp their products with their brand name, which also prevents producers from using someone else's brand name on their products.

A legal monopoly is artificial scarcity. However, if the provenance of an item is important to the buyer then scarcity of items from that source would be natural, not artificial—even if goods which are otherwise physically identical down to the atomic scale (including branding) are available from other sellers. That has nothing to do with any monopoly granted by a government. The trademark rules which prohibit using someone else's brand are there to protect buyers from fraud, not to create scarcity. As long as the buyer is fully informed as to the actual origins of the item there shouldn't be any concerns over fraud regardless of how it's been marked. Using someone else's mark in a misleading way to sell your own product would be fraud, though, even in the absence of trademark laws.

In many cases the “limits to production” and “genuine scarcity” are functionally meaningless though, and surely have no measurable effect on the market price of the item. A cheap screen-printed t-shirt could be $7 if it’s printed with one design, and $100 if it’s printed with another design. It’s completely silly to point to “limits to production” and “genuine scarcity” as an explanation for this.

I don't think anybody is trying to explain the price difference between a $7 shirt and a $100 shirt as being the result of one having a larger supply than the other.

That’s the most charitable interpretation I can make of the original comment:

> "designer clothes, luxury watches, and fancy cars" all have understandable limits to production and have genuine scarcity (even if that scarcity is strictly controlled).

It doesn't say anything about prices... as far as I can see.

The entire thread is about buying and selling NFTs, so I think it’s fair to infer that we’re all talking about the merits of NFTs having a non-zero price.

I don't think we have to infer anything. The comment you replied to was making a point about artificial scarcity.

Yes, and their point was in the context of a thread debating the merits of NFTs having non-zero price. The comment was claiming that the supposed "genuine scarcity" justifies the buying and selling of those physical goods.

The claim was that they would rather not buy anything that is being made scarce artificially, which is a perfectly reasonable position. You don't have to agree with this principle. But, again, this is bears no relationship to the question of why a t-shirt is worth $10 and another t-shirt is worth $5.

A more apt explanation for this is Baudrillard's conception of sign value. (Veblen initially thought out parts of it through the concept of Veblen goods, but it was Baudrillard who took this idea to the extreme). The value is not created by any utility or scarcity, but is derived by the system of signs (prestige, class symbol, brand) created in consumerist societies. This system of signs is often self-reinforcing, since sign values themselves are "in association" with other sign values, rather than having cause-and-effect chains and physical processes. And it's "free-floating" just like the current monetary system of floating currencies are.

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