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Comment by vetleen | Hacker News Reader

This is a fun experiment, but in real life transactions create wealth. If a buyer doesn’t feel that the widget she's been offered at a certain price is worth more than the price then she won't buy it. Similarily, if the seller feels the widget is worth more than the price, he won't sell. Therefore, a transaction means wealth wads created since both parties' wealth has increased after the transaction.

I’m pointing this out because it is quite a common misunderstanding that a certain amount of wealth exists in the world, and that it is a zero sum game, where someone has to loose every time someone wins.

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How does buying a can of pringles or a pack of cigarettes create wealth for the buyer?

Economists call it "increasing utility". When, in a free market with perfect information, you part with your money in exchange of a good it is assumed to be because the good has higher utility for you than the money it costs. A transaction increases utility for the two parts concerned, otherwise it will not happen.

> A transaction increases utility for the two parts concerned, otherwise it will not happen.

But it happens all the time, through manifactured desire and the exploitation of people's addictions. People are not "rational actors" even though economic theory attempts to dictate it. In fact, most of consumerism seems to be built on getting people to buy things that in turn does not help them to create even more value.

How do you distinguish between a "manufactured desire" and a real (/non-manufactured, whichever terminology you want to use) one?

If I saw a commercial for a pet rock, and decided that I wanted to buy one, what's to say that this desire is not real?

You start off fine by saying that in the context of addictions and other mental aberrations, people are not likely to act in their long term best interests. But then you say this:

> In fact, most of consumerism seems to be built on getting people to buy things that in turn does not help them to create even more value.

In this context, "creating wealth" is not about accumulating resources to create 'even more value' a la Capital. It seems like you're confounding wealth and capital, and they're very different things here. Here we're talking about wealth as meaning economic welfare. Society has more economic welfare--Wealth--when economic exchange happens because resources are allocated in a way that increases utility for everyone.

Life wouldn't be worth living if we worked for the sole purpose of creating lasting capital, in order to build more capital. Consumerism is necessary, so

>In fact, most of consumerism seems to be built on getting people to buy things that in turn does not help them to create even more value.

isn't really a bad thing.

So your first idea and your second idea are only marginally related, and combining them probably hurts your argument overall.

> But it happens all the time, through manifactured desire and the exploitation of people's addictions.

That's not a free market with perfect information, which is the economics equivalent of assuming away friction in Freshman physics exercises.

> People are not "rational actors" even though economic theory attempts to dictate it.

Economic theory doesn't "attempt to dictate" that people are rational actor, it uses the rational actor as a useful simplification that is broadly useful in describing large scale effects, and also one for which it is easy to identify specific difference between the model and reality and their effects, as well.

Admittedly, lots of people -- either through ignorance or because it suits what they are trying to sell -- treat the rational actor model or its implications for an idealized market as descriptions of real (or proposed) conditions when this is inappropriate given readily verifiable differences between the conditions that apply in the market and the explicit assumptions of the rational actor model, but that's more political salesmanship than economic theory.

How do you distinguish "manufactured desire and the exploitation of people's addictions" and "genuine" or "natural" desires? Similarly, how do you distinguish "fake happiness where the person just thinks they're happy but isn't really happy" and "genuine" or "natural" happiness?

There's something very cognitively tempting about "People are not entirely rational actors, therefore people are entirely irrational actors", but it's not true. The rational actor model is incorrect; this is beyond dispute. However, it is still largely correct, and it remains more correct than many of the naive models that people rush to substitute in. The economists of the past did not use that model because they were stupid; they used it because it is the most accurate tractable approximation that was available to them.

Also, economics is quite radically value-neutral; if you come to enjoy using deodorant, even if you've never heard of it before it was advertised at you, you are still obtaining utility and value from purchasing deodorant. There's no morality in the "value" that is used in economics, no decision about whether a person "really" gets value out of an item or not. It is also a very cognitively tempting idea, that one can declare oneself the arbiter of what is "true value", but if you actually try to use it in the math the model completely fails to match reality. You may feel free to create your own such definition; I unashamedly have one myself, we all do, really. But it's not what economics use, because it doesn't produce useful results.

You expect to be better off after the exchange (which is precisely it happens). You can however regret your decision so ex ante and ex post have to be differentiated.

You can try to improve that model, but I would bet that you will get rising inequality as well, it will just be masked by the growth ad infinitum. And unlike in the Norvig's model, in your model the inequality will not be bounded.

Of course, in the real world, people need upkeep (which could be modeled as a fixed amount subtracting from their wealth over time). So not all transactions are net positive, because at some point you have no choice as to whether or not to buy food. Which would even exacerbate the effects of inequality for low income people.

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