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
Contributions for the week of April 3, 2023
Recognition Diplomacy
Contributions for the week of April 10, 2023
Transitive Reasoning
Contributions for the week of April 17, 2023
Identity Politics
Contributions for the week of April 24, 2023
- "What is going in Sudan is a practical demonstration that being a global power does not mean that everything going on in the world is secretly about you."
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Notes -
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?
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.
No, the entire point is that they don't. They benefit a tiny tiny bit from price discrimination. If the maximum someone is willing to pay for a product is $10, and it costs $9.99, then they benefit by $0.01. That is, they are barely coming off ahead at all, almost all of the benefit from that product they gain was lost to them in the $9.99 they spent and given to the producer. You can sell five times as much product to five times as many poor people and create five times as much benefit, but none of them are gaining much benefit at all because the products are just barely worth it.
If you have a crippling leg injury, and a doctor cures it but charges so much money that the debt cripples your life 99% as much as the leg injury did, you have benefited... but just barely.
From the producer's standpoint, this is great. Tons of value is being created by the increased number of exchanges. Lots of people are incentivized to become producers... which benefits the people who are in a position to become producers and able to (assuming the market isn't an oligopoly that crushes small competitors). And the increased trade does benefit customers... by like 1% because that's how much of this increased surplus they get to keep.
If the only two options are perfect price discrimination or unserved customers, then the price discrimination scenario is technically better for those particular customers. But my goal is to find a third option that's better, because the price discrimination scenario isn't very good for anyone except producers.
In a medical context, price discrimination means the difference between getting medical treatment and not getting medical treatment. If I can only afford to pay $1,000 at most for medical treatment, and I'm in serious pain or dying, and treatment costs $50,000 for everybody then I'm going to go without treatment, or go for treatment and be saddled with medical debt. If the doctor price discriminates, then I can get treatment for $1,000 which is better than going without and better than being saddled with $49,000 worth of debt.
Most doctors do this de-facto anyway, if someone owes a clinic $10,000 and they say they can't pay they'll usually cut a deal where they pay $500 and the doc writes off the rest. Very common. Because money in hand is worth more than money owed that you'll never collect on. Those who can afford to pay their bills pay them, those who can't pay what they can.
Now do food.
Suppose there is a food cartel that has gained sufficient market power that they could restrict output, raise prices, and profit according to standard monopoly theory. If you are in a position where you can't afford food, you're going to go without food or you're going to be saddled with food debt. If the food cartel perfectly price discriminates, then you can get food for exactly your willingness-to-pay (i.e., you have basically nothing left for any other aspect of the Good Life).
This is the threat that the cartel issues in order to get you to be willing to have the government come in and hand them the tools to price discriminate perfectly. But that's all it is. It's a threat. Blackmail. From their position of market power.
You're right that once we've gotten ourselves into such an abhorrent situation with the food cartel, maybe it's an appealing trade-off. But hot damn is the vastly better deal to break the food cartel, create a competitive market, watch the price of food fall to the marginal rate of production, and see everyone eat plenty of cheap food and have money left over for, like, flatscreen TVs or whatever.
This is sort of the point of my OP. We see this progression of reasoning happening over and over again in all these domains where the gov't comes in; they subsidize demand, restrict supply, create a de facto cartel, completely destroying the competitive market. Then, when your back is against the wall and all seems lost, they issue the threat. "Just let us take all the surplus now; it'll be epsilon better for the poorer part of the population." And they're right! It is epsilon better for the poorer population (and significantly worse for the richer part of the population).
The real problem is that you put yourself in such a vulnerable position to such a threat. That you let the gov't subsidize demand, restrict supply, and set up a de facto cartel. The first best solution is to undo all of that shit. The second best solution is to observe on the internet how the same dynamic that results in this threat seems to keep materializing over and over again. A distant third is to just give in to the threat, trading what's left of consumer surplus for the richer part of the population in exchange for an epsilon improvement for the poorer part of the population.
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