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naraburns  nihil supernum  11mo ago (text post)   5252 thread views

Quality Contributions Report for April 2023

This is the Quality Contributions Roundup. It showcases interesting and well-written comments and posts from the period covered. If you want to get an idea of what this community is about or how we want you to participate, look no further (except the rules maybe--those might be important too).

As a reminder, you can nominate Quality Contributions by hitting the report button and selecting the "Actually A Quality Contribution!" option. Additionally, links to all of the roundups can be found in the wiki of /r/theThread which can be found here. For a list of other great community content, see here.

These are mostly chronologically ordered, but I have in some cases tried to cluster comments by topic so if there is something you are looking for (or trying to avoid), this might be helpful. Here we go:

Quality Contributions to the Main Motte

@ymeskhout:

@gattsuru:

@johnfabian:

Contributions for the week of April 3, 2023

@Soriek:

@FiveHourMarathon:

@grendel-khan:

@ymeskhout:

Recognition Diplomacy

@naraburns:

@07mk:

@FiveHourMarathon:

Contributions for the week of April 10, 2023

@HlynkaCG:

@TracingWoodgrains:

@FlyingLionWithABook:

@Soriek:

@RandomRanger:

Transitive Reasoning

@Lewyn:

@self_made_human:

@roystgnr:

@RandomRanger:

@TracingWoodgrains:

Contributions for the week of April 17, 2023

@gattsuru:

@ControlsFreak:

@faul_sname:

Identity Politics

@throwawaygendertheorist:

@RenOS:

@SophisticatedHillbilly:

@FCfromSSC:

Contributions for the week of April 24, 2023

@naraburns:

@faul_sname:

@Dean:

@self_made_human:

Discriminating Taste

@RenOS:

@Unsaying:

@Esperanza:

@FCfromSSC:

@MonkeyWithAMachinegun:

@laxam:

@DaseindustriesLtd:

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Holy crap. That @ControlsFreak post on personalized pricing just blew my mind. I hadn't seen it when it was first posted, but I'm very glad that I did because it just changed my perspective on the whole financial assistance thing.

Thanks for such positive feedback! It's really nice to hear that it resonated with people; when I first wrote it, I got no responses, so I actually figured that it had just fallen flat with the audience.

If you look, it got more upvotes than the post it was responding to, so most likely people who saw with it agreed but didn't have anything of their own to add in response.

I don't know about everyone else, but I don't dig into the responses on every top level post, only ones I find interesting. And often miss responses if they happen after I've already read the top level post, as I usually don't go back and find new responses. So that's why I missed this one, because I do read every top level post, but I didn't care about this one.

I also more frequently respond to people I disagree with than people I agree with, because people I agree with already said half of my thoughts. So that's a bias towards non-response which was probably relevant here given how insightful your post was.

So I guess as a followup here:

Is there a solution? I think we'd both agree that this scenario is generally bad for society if businesses capture all of the gains, because that screws over the customers. Economic surplus is created by the economic trade between producers and customers, and thus both are partially responsible for it, so both deserve some of the surplus. Not necessarily exactly 50-50, but some reasonable fraction. So if producers capture 99% of surplus by near-perfect price discrimination and leave just a tiny scrap of surplus to customers to push them over the edge of indifference, then customers are being deprived of surplus that is rightfully theirs.

On the other hand, price discrimination is often more economically efficient than a flat rate.

Suppose we have 10 consumers who value a good with utility 1,2,3...10. And a producer who can produce the good with cost 2.

1: With a flat price for all customers, the producer maximizes profits by setting their price at 7 - ε, in which case they sell to 4 consumers. The total surplus is 26, of which 20 - 4ε is captured by the producer and 6+4ε is captured by consumers.

2: With perfect knowledge and price discrimination, the producer sells to each person with value greater than 2, at a cost ε less than their valuation. They sell to 8 consumers, the total surplus is 36, 36-8ε is captured by the producer, and 8ε is captured by consumers.

So even though the consumers are better off in the flat price scenario, the total economic surplus created with price discrimination is higher. If we could somehow detect these scenarios and redistribute the surplus back to the consumers in a way that didn't distort the economic incentives of the producers or consumers, the price discrimination scenario is better. I will note that there's also a third scenario with comparable surplus:

3: If the producer is altruistic/non-profit, they can set a flat price equal to 2+ε, they sell to 8 people, the total surplus is 36, but now 36-8ε is captured by consumers and 8ε is captured by the producer.

So if the balance of power tips too far in either direction, one of the groups will snatch all of the surplus. I think a fair equilibrium would maximize surplus while splitting the distribution somewhere in the middle. Not necessarily 50-50, but somewhere in the ballpark. But how do you do that here? Taxes and explicit forms of redistribution usually distort incentives, but maybe there's something clever I'm not aware of?

So if producers capture 99% of surplus by near-perfect price discrimination and leave just a tiny scrap of surplus to customers to push them over the edge of indifference, then customers are being deprived of surplus that is rightfully theirs.

I know you're probably speaking casually, but customers do not have a "right" to anything here (other than a right to the product or service they paid for). We can say that we prefer it when gains from trade are divided as evenly as possible, but there is nothing morally wrong about selling something for a price that a customer is willing to freely pay.

And as we see in your own example, total surplus can be greater when price discriminating. In fact, we often see price discrimination as laudable in medical context: if a doctor charges clients based on what they can afford to pay, we see that as a good thing. Perfect price discrimination is just charging people exactly what they can afford to pay: that is, the most they'd be willing to pay for the good or service you're providing.

This means poor people benefit greatly from price discrimination: they get goods or services they want at a price they are willing to pay when otherwise they wouldn't be able to afford it.

EDIT: One further thought. If we had to choose between producer and consumer getting the majority of the surplus, favoring the producer has the benefit of incentivizing more people to become producers. Which benefits everyone.

We can say that we prefer it when gains from trade are divided as evenly as possible, but there is nothing morally wrong about selling something for a price that a customer is willing to freely pay.

I'm quite skeptical of this statement, at least at the margins. Trade is pretty clearly give-and-take negotiation, and it's not obvious to me why the economics which emerge from such interactions should set their roots all the way down to the level of fundamental moral axioms. If I'm dying of thirst in a desert, and someone offers to sell me a bottle of water for 90% of all my future earnings, and I have a handgun, I am going to get water and they are maybe going to get dead. They didn't care much for my life, after all, so why should I care much for theirs?

The fact that negotiated trade works well in low-pressure environments doesn't mean that it's infallible. It works because it's so much easier and better than the alternatives that there's not much contest, not because it's one of the basic building-blocks of the universe. Deform conditions to the point that it's not easier and better than the alternatives, and people will switch. Expecting otherwise is simply foolish.

All this is to say that trades can be imbalanced, and there are levels of imbalance that undermine confidence in the win-win nature of trading. This isn't much of an issue under normal conditions, but rampant AI isn't normal conditions.

Trade is pretty clearly give-and-take negotiation, and it's not obvious to me why the economics which emerge from such interactions should set their roots all the way down to the level of fundamental moral axioms.

That was kind of my point. Saying that someone has a right to an even share of the gains from trade is making a moral statement. It's saying that anything other than an even share is morally wrong, a violation of someone's rights. It's not.

All this is to say that trades can be imbalanced, and there are levels of imbalance that undermine confidence in the win-win nature of trading.

If its not win-win, then don't make the trade. Like your bottle of water example: given I have a gun, I wouldn't make that trade. Would you make that trade? Certainly not. My point is, if you willingly take a trade (and no fraud is involved, you know what you're trading for and you get what you expect) then the person trading with you has not done anything wrong.

The difference is in monopoly scenarios, which is kind of the root of the problem. If the desert man engineered the situation in which you are dying of thirst then I'd say they did something wrong. The reason someone isn't already selling the product at marginal cost is monopoly power, so when the monopolist comes around and only demands 5000% of the marginal cost instead of 10000% it's maybe not as generous as it seems.

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