Hacker News Reader

Comment by Eisenstein | Hacker News Reader

Markets are efficient at extracting value from things, but what that value is needs to be determined before we blindly create a market for it. In the traffic light case you mention the value is money, when it should be safety. Traffic lights are installed to ensure traffic flow and safety, so getting a monetary return on a safety device should be non-sensical, but here we are.

We should not be involving private market players as partners in 'investments' with public organizations tasked with public good, or else we get misaligned incentives since the partners both expect different types of returns.

View on HN

How do you actually create aligned incentives though? Goodhard's law, cobra effects and generalized coordination problems really do seem pervasive.

I don't think it can be done without a sort of benevolent authoritarian which is sort of scary because of how much power and implicit trust is behind that. I wish we had a better signal to actually identify these people and elevate them into positions of power. They are readily identifiable in our own life ironically, I can think if plenty of people I know who I would say are trustworthy to do the right thing and not be blinded by profit. Just that for the subset of people who do want to make a buck on bad ideas saddled on top of people, incentives are very strong for them to get into influence, and there is no such mechanism to incentivize your good natured friend with no big profit seeking aspirations to that level. You need significant access to capital just to play in this league of getting elected or getting your company into the bidding process.

I think it comes down to the fact that we still don't have a meritocracy. It is still very much who you know from you getting a job to a company securing a contract with government, vs anything based on actual merit or ideas that are collectively beneficial vs selectively beneficial. Same old roman republic today: making favors to enrich the senators, making spectacles to distract the masses from the senators picking the public pocket. We haven't really changed the paradigm since it was established thousands of years ago with our first chieftans and shamans and their friends elevated above the rest of the tribe.

The core problem is that there are no single people who cannot be held legally responsible for the fraud. The responsibility is, by design, diffused across many actors.

This problem has already been solved in engineering domains, like electrical or civil. There is a single engineer who has to sign off on the design of an electric product or a bridge. If the bridge collapses and the problem was with the design, the engineer loses their license or may go to jail. Similarly, in EU, every company that deals with customer data needs a Data Protection Officer. Customer data leaks, the person is responsible.

This model has to be expanded to every other domain. Once people fear going to jail, a lot of fraud will go away.

Any efforts to veer the incentive of the market from profit towards vague things like safety or others (DEI, ESG) has been criticized and rolled so far. Can we really make the market prioritize anything other than profit?

Safety is not vague. You quantify difference before and after to determine if they are safer or not, same as if you end up with more or less money.

We can't make a market do anything. But we can at least not do stupid things tasking a private enterprise which has a duty to make profits for investors to be in charge of things which lose money if done correctly. The purpose of fines is to discourage bad behavior -- if fewer people do the bad behavior then that leads to lower income. Any profit motive for collecting fines leads to the opposite of the desired outcome.

Reply on news.ycombinator.com