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Almost Every Market Transaction Is a Swindle

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Jason Kuznicki

Jason Kuznicki is a research fellow at the Cato Institute and contributor of Cato Unbound. He's on twitter as JasonKuznicki. His interests include political theory and history.

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  1. Avatar Robert Boyd
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    says:

    What about competition? If you are buying something for which there are lots of substitutes, won’t competition push down the price any individual seller can charge? This should mitigate the information imbalance to a certain extent. Obviously there are circumstances where this won’t work (buying a house, buying a used car, buying anything that is unique, like a work of art).

    Also, your explanation of the value of “buying local” strikes me as too speculative and psychological. I think a better reason for a local seller not to cheat a local buyer is that if the buyer finds out he has been cheated, he will 1) not buy from that seller again, and 2) maybe will hurt the reputation of the seller by telling his friends not to buy. A local business will be more sensitive to blows to its reputation than a big national chain.Report

    • Avatar Jason Kuznicki in reply to Robert Boyd
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      says:

      Competition is part of the solution to this riddle, but not nearly all of it.

      I’ll post a refutation tomorrow, if Prof. Hanley doesn’t give it in the comments.Report

      • Avatar James Hanley in reply to Jason Kuznicki
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        says:

        Not a full refutation, but I will critique this:

        Buyers of iron have to know about lots of other markets, too, and their attention is necessarily divided. Sellers just need to know iron

        I think clearly sellers need to know more than just iron, or the iron market, lest they get scooped by the aluminum market, carbon-fiber market, etc.  Pity the poor iron merchant with tons of iron he can’t sell because he wasn’t aware of the markets in substitute goods.Report

        • Avatar Jaybird in reply to James Hanley
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          says:

          I remember reading an anecdote about a guy who ran a small destination business in a little mini-mall. There were four units and they were empty excepting the one that he had. His lease was coming to an end and he was looking forward to signing a deal similar to the last one that he had.

          The landlord instead raised his rent. “I have to recoup my losses from those three!”, he told the guy.

          The small business owner moved. He finished his anecdote by pointing out that he drove past the location the other day and all four units were empty.

          Now, a question for opposite day: How much does the business owner owe the landlord for effectively stealing from him?Report

      • Avatar Chris in reply to Jason Kuznicki
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        says:

        Not to be pedantic (OK, entirely to be pedantic), but this isn’t really the argument as Montaigne gave it at all. He states more than argues (though he does give several examples) that any profit is at the expense of another, because the undertaker only makes money when people die, the physician when they are sick, and so on. The opportunity for profit only arises, in the essay (it’s more like an aphorism), when someone else suffers a loss (the old translations all call it “damage,” which is probably a more accurate way of saying it in this context: the opportunity for profit only arises when someone else suffers damage of some sort: physical, economic, whatever).

        It should be noted, of course, that Montaigne doesn’t give any prescription from this. What’s more, he says that this is just the way of nature.Report

        • Avatar Roger in reply to Chris
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          says:

          Chris
          If that is his argument then we solve it by passing a law against entropy. An anti-second law.Report

          • Avatar Jason Kuznicki in reply to Roger
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            says:

            I can think of lots of ways that we could, in the course of violating the Second Law of Thermodynamics, still leave us much worse off in material terms.

             Report

            • Avatar Roger in reply to Jason Kuznicki
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              says:

              Absent the second law I am not sure what “worse” means. It’s like down without gravity.Report

              • Avatar Jason Kuznicki in reply to Roger
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                says:

                Think of it this way.

                If, without using any energy at all, I were somehow able to convert all of the earth’s silicon to uranium, that would violate the second law, because uranium has a lot more potential energy stored up inside it.

                Entropically, it would be a step away from equilibrium.

                Economically, this wouldn’t be so great, because Armageddon never is.Report

              • Avatar Roger in reply to Jason Kuznicki
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                says:

                But absent the second law armagedden loses all meaning. Life is a local exception to universal entropy. Entropy is the problem that life and knowledge solve. Absent the problem there is no solution. Or is there?Report

              • Avatar Jason Kuznicki in reply to Roger
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                says:

                Life is a local exception to universal entropy.

                Not true, if I understand you correctly.  Your body doesn’t create energy.  It slowly transforms concentrated potential energy into heat just like everything else.  It gets that energy from plants, which get their energy from the sun, which is slowly dying just like we are and just like everything else is too.

                 Report

              • Avatar Roger in reply to Jason Kuznicki
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                says:

                If the sun cared about dying, I would agree. I operate under the assumption that the sun doesn’t care.

                3.8 billion years ago nothing on earth was alive. Now there is life everywhere. The universe has created life, meaning, value, love, knowledge and experience by exporting entropy. Entropy is the problem and life constantly solves it.

                Absent entropy, I am not sure what life would even mean.Report

              • Avatar Jason Kuznicki in reply to Jason Kuznicki
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                says:

                But life doesn’t solve the problem.  It just exports it to somewhere else, making it a little bit worse in the process.

                (I hasten to add that entropy is a silly problem to worry about, when other problems are so much nearer more easily defined.)Report

              • Avatar Roger in reply to Jason Kuznicki
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                says:

                But non living things don’t have problems. Thus the problem is solved.Report

        • Avatar Jason Kuznicki in reply to Chris
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          says:

          It’s a short passage, worth quoting in full:

          Demades the Athenian—[Seneca, De Beneficiis, vi. 38, whence nearly the whole of this chapter is taken.]—condemned one of his city, whose trade it was to sell the necessaries for funeral ceremonies, upon pretence that he demanded unreasonable profit, and that that profit could not accrue to him, but by the death of a great number of people. A judgment that appears to be ill grounded, forasmuch as no profit whatever can possibly be made but at the expense of another, and that by the same rule he should condemn all gain of what kind soever. The merchant only thrives by the debauchery of youth, the husband man by the dearness of grain, the architect by the ruin of buildings, lawyers and officers of justice by the suits and contentions of men: nay, even the honour and office of divines are derived from our death and vices. A physician takes no pleasure in the health even of his friends, says the ancient Greek comic writer, nor a soldier in the peace of his country, and so of the rest. And, which is yet worse, let every one but dive into his own bosom, and he will find his private wishes spring and his secret hopes grow up at another’s expense. Upon which consideration it comes into my head, that nature does not in this swerve from her general polity; for physicians hold, that the birth, nourishment, and increase of every thing is the dissolution and corruption of another.

          That all profit must be at the expense of another, if not by swindling, then by preying on vices or misfortunes, which is hardly more admirable.Report

          • Avatar Roger in reply to Jason Kuznicki
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            says:

            Oh!

            So he suffered from a combination of the zero sum and the objective value fallacies.Report

            • Avatar Jason Kuznicki in reply to Roger
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              says:

              Basically, yes.  Near the start of the post I stated it in the most sympathetic terms I could find:  “For any good or service, there is some socially just price…”

              The problem is that there isn’t a just price, not for anything, not even in a hypothetical perfectly free market.  Not with perfect information.  Not even with perfect competition in every other way.

              There isn’t a just price.  There is only what you would (or wouldn’t) pay, with varying degrees of happiness, in various states of need.  Talking about a just price is like talking about a green idea.Report

            • Avatar Chris in reply to Roger
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              says:

              I don’t think Montaigne is suffering from either. For one, the profit and the loss can be unequal, or at least nothing he says implies otherwise. When an undertaker makes a few bucks, but I die, are the profits and losses equal? Furthermore, he’s not saying that one person wins and another loses in the transaction. He’s saying that the very possibility of profit arises from a loss in another. This is something quite different than saying that every transaction has a winer and a loser, or that trades are zero sum. In fact, it’s quite clear that the transactions benefit both: the doctor profits and I, if he does his job well, get better: my loss, my damage, is lessened or eliminated altogether. What’s bad about the profit is that it needed the damage in the first place to be possible.

              I’m not sure what the “objective value” fallacy is, to be honest, and there’s no doubt that Montaigne thought that certain things have objective value, but I see no reason to believe that he’s suffering from any fallacy in that regard, at least not in this passage.Report

              • Avatar Jason Kuznicki in reply to Chris
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                says:

                <em>He’s saying that the very possibility of profit arises from a loss in another.</em>

                But is <em>that</em> true?

                Suppose I have a few extra bucks, and I walk by an ice cream vendor on a warm, sunny day.  He charges a modest price, and I buy some ice cream.  In fact, lots of people do, and he earns a nice profit that day.

                Where was the loss again?Report

              • Avatar Jaybird in reply to Jason Kuznicki
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                says:

                Child Obesity, you monster.Report

              • Avatar Chris in reply to Jason Kuznicki
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                says:

                Montaigne mentions hunger, so he would say there is the loss. A better example might be an iPod. What the hell loss do I suffer that results in the possibility of iPod profits? A loss of pocket-sized music playing ability? Granted, leisure goods like iPods were a bit less common in Montaigne’s day.

                I’m not trying to defend Montaigne, only clarify his point (which, it appears, Mises got wrong too): he’s not making a point about the outcome of transactions, or about how their conducted, but about their origins.Report

              • Avatar Jason Kuznicki in reply to Chris
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                says:

                This is where, even in philosophers’ terms, I’d have to say that Montaigne definitely got it wrong.  A felt desire, not a loss, is the origin of every market transaction.

                Still I’d have to say I did not interpret him quite correctly when I first mentioned him.

                 Report

              • Avatar Chris in reply to Jason Kuznicki
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                says:

                If you were writing with an at least broadly Scholastic metaphysics, you’d view need as a sort of damage.

                Also, the Essays is one of my four favorite pieces of writing, so I had the advantage of multiple readings.Report

              • Avatar Jason Kuznicki in reply to Jason Kuznicki
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                says:

                If you were writing with an at least broadly Scholastic metaphysics, you’d view need as a sort of damage.

                I’d be tempted to agree, except that it seems so often the easiest way to “repair” that “damage” is not to fix the real-world problem, but only to resolve to care a whole lot less.

                For problems without a solution, this is as good as it gets.  But still.Report

              • Avatar Chris in reply to Jason Kuznicki
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                says:

                is not to fix the real-world problem, but only to resolve to care a whole lot less.

                Now your a Buddhist!Report

              • Avatar david in reply to Jason Kuznicki
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                says:

                It’s a loss compared to living in a world where scarcity and entropy did not exist, to be sure!Report

              • Avatar DensityDuck in reply to Chris
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                says:

                “What the hell loss do I suffer that results in the possibility of iPod profits?”

                Under some philosophies, the fact that you got so much enjoyment out of your iPod means that Apple was the party that got swindled.Report

              • Avatar Chris in reply to DensityDuck
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                says:

                Such philosophies are insane.Report

              • Avatar Chris in reply to Chris
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                says:

                 

                If profit is unjust because it arises from the suffering of others, then the only just price is one that leads to no profit (covers expenses, I guess).

                I don’t know that Montaigne held this view, and the fact that he says Demades made a mistake in his judgment implies that he may not have held it. If it’s just the natural way of things, then it is hard to argue that it is unjust. Is an earthquake unjust? A tsunami? Or is it just the way of nature to create here and destroy there, often with the creation depending on the destruction?Report

              • Avatar James Hanley in reply to Chris
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                says:

                If profit is unjust because it arises from the suffering of others, then the only just price is one that leads to no profit (covers expenses, I guess).

                In the theory of perfect markets, all profits are competed away until revenues just cover expenses.  So presumably in a perfect market prices would be just.Report

              • Avatar Chris in reply to James Hanley
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                says:

                I suppose that’s true: as long as there’s no profit, it would be just, assuming we argue that because profit arises from loss, it is unjust. Again, I’m not sure (in fact, I don’t think) Montaigne is making that point. But someone could make it starting from this essay.Report

              • Avatar Max Planck in reply to Chris
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                says:

                Who says profit is unjust? Without it, help would most definitely not be on he way to lessen the “suffering of others”. Do you think profit is unjust? It’s the most positive, productive, and helpful motive that exists, at least within the marketplace that we live in. Fame just doesn’t do it. Fame AND fortune? Now, you’re talking. Take away the profit motive and we’re still living in mud huts wearing bear skins and eating squirrels for breakfast.Report

              • Avatar Chris in reply to Max Planck
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                says:

                Max, I’m not arguing that profit is unjust, and I don’t think Montaigne is either (though I suppose he could be).

                I’d argue that individual profit is unjust, though not from anything Montaigne writes, but it’s opposite day, so I can’t.Report

              • Avatar Max Planck in reply to Chris
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                says:

                Thanks so much for the reply, Chris.  Damn,  I forgot about it being Opposite Day here at the League. Boy, does this complicate things. That being the case, that probably means that replying to me was as Opposite of what you would normally do, or want to do, as is humanly possible! Not too long ago, I was reading that NC’s “universal grammar” has been seriously, universely, debunked. Is that true? I remember reading at one time (Chomsky), that children in just about every country or culture use the same sing-songingly way of teasing each other. You know, that, duh duh, duh duh, duhhhhhhhh duh. The variations of the words could be endless. I fail to see why this would be an example of universal grammar–seems to fit in the universal “music” grammar box, not the spoken word box. This was applied only to the structure of written and spoken words, not music. Now do the twain ever meet? Music “grammar” and Verbal grammar? One thing I have noticed, is that–at least with pianists–they frequently moved their lips and mouths when playing. Glenn Gould, probably being the best example, but there were many other components involved in his rather odd gesticulations. Perhaps there is a very strong connection between the area of the brain that processes both language and music. I know several pianists that find it impossible to play without having their mouths used as the 11th finger–it’s just impossible for them to play at the same level of skill with out moving their lips of mouths.Report

              • Avatar Roger in reply to Chris
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                says:

                Chris,

                It is eye opening to read this–  not just as a philosopher — but as a historian. To think that times were so bad once that he couldn’t see the potential for progress.

                I read somewhere recently that even Smith and Ricardo believed in objective value. Free enterprise doesn’t make much sense without it.

                 Report

              • Avatar Chris in reply to Roger
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                says:

                Roger, Montaigne was, famously, a pessimist. However, I don’t think he believed progress was impossible, just that it wasn’t going to be any better (and perhaps worse, in fact probably worse). Check out his essay “Of Cannibals” (essay #30 of the first book).Report

          • Avatar Chris in reply to Jason Kuznicki
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            says:

            It is a nice little passage. All of his passages are nice, though.

            And you’re right, it’s hardly more admirable, but what he’s doing here is a sort of metaphysics of profit: all gain comes from (the causal direction is important, I think) loss. In a sense, this was Montaigne formulating entropy as a principle of nature a few decades before Newton was born. So while we may not want to praise the doctor or undertaker or husband or whoever, we can’t really blame them, either. This is just the way things are. It’s not even clear we could do away with profit: things change, even in economics, and if they’re going to change, at least some of the time someone or something will benefit, which would mean that someone or something else will suffer.Report

            • Avatar James K in reply to Chris
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              says:

              Except that not all gain comes from loss.  There is such a thing as a Pareto improvement, though they are extremely rare.Report

              • Avatar James Hanley in reply to James K
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                says:

                But there is a surplus through trade, and the more I take of that surplus, the less you receive–you have a loss of the possible.  But the more I take, the less you receive–also a loss of the possible.  So although we both gain, we both lose, and the greater my gain, the greater your loss, and vice versa.  Only if there is no surplus to exchange, only if our trade provides no gain for either of us, can we avoid loss.Report

              • Avatar Roger in reply to James K
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                says:

                Humans can of course prosper despite entropy. Indeed life across the universe can progress. The key is to export entropy to non life. Humans and other living things have values. Dirt doesn’t.

                The key to prosperity is positive sum value which is essentially infinite.Report

              • Avatar Chris in reply to James K
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                says:

                Argh, I’m sorry to have created this diversion. Ya’ll are thinking like economists, not philosophers. Montaigne was thinking like a philosopher. That is, he wasn’t making a point about what is gained or lost in the exchange. As I said above, the sick person, if the doctor does his job well, improves by the transaction. However, what made the transaction possible, what made the sick person visit the doctor in the first place, was the sickness. That is all Montaigne is saying. I go to the grocery store because I’m hungry, and I benefit from the visit, because I can now be sated; I go to the mechanic because my car isn’t running right, and I benefit from the transaction, because my car now runs well. In each case, I benefit from the transaction, and so does the grocer and the mechanic, but in each case the transaction is only possible because I am hungry, or my car isn’t working — in Montaigne’s language, because I have suffered damage.Report

              • Avatar James Hanley in reply to Chris
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                says:

                Ya’ll are thinking like economists, not philosophers.

                Thanks, how nice of you to say so.  *grin*Report

              • Avatar Chris in reply to James Hanley
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                says:

                Haha! I figured that would be the response. But it’s kind of interesting to see how thinking like an economist, and a 21st century economist at that, limits people’s ability to interpret Montaigne’s little essay on the fly (I mean, I doubt people are giving this hours of thought). These are the default schema that ya’ll go to, and it’s not easy for you to get past them. As a cognitive psychologist, I’m enjoying it.Report

              • Avatar Jason Kuznicki in reply to Chris
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                says:

                Admittedly, I’d read it quite a few years ago.Report

              • Avatar James Hanley in reply to Chris
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                says:

                As a cognitive psychologist, do you think a philosopher would be limited in ability to interpret, say, Hayek on the fly?Report

              • Avatar Chris in reply to Chris
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                says:

                James, oh, of course. I don’t mean to imply that economists are unique. We all work with schemas, or templates, or whatever you want to call them (we tend to call them schemas or scripts, depending on the context), and they limit us. When I read Hayek, I read The Sensory Order anyway.Report

              • Avatar Jaybird in reply to Chris
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                says:

                in Montaigne’s language, because I have suffered damage

                The Buddha talks about this.Report

              • Avatar Chris in reply to Jaybird
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                says:

                So do the peripatetics. Something tells me this is the context.Report

        • Avatar Max Planck in reply to Chris
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          says:

          Can the Laws of Thermodynamics, Hinduism/Karma,  and Newton’s Laws of Motions be applied here? Yes. Thank you. As we all know from 8th grade physics, energy can only be manifested and changed in different forms–it CAN NOT be either created or destroyed. The amount of all the energy in the entire universe remains constant and never changes. Find a big enough scale and weigh the universe at the moment of the Big Bang–it will be precisely the exact same weight as the universe today. And what about entropy? Good question, class. Entropy exists and happens when no additional force field acts on an object so that energy transfers or exchanges that occur will always have less potential energy than it had prior to the energy change. I’m saying “potential” energy meaning that it’s energy that hasn’t been activated or put in motion—kinetic energy is actualized energy that is being actively used. As far as I’m concerned, until someone can prove that energy CAN be created or destroyed, God exists and He exists outside of time, person, place. Hate to break the news to the atheists–we’ve been around, in one form or another, forever. If you don’t like this, give a shout-out to the Big Fella. One of the very biggest errors in thought and reason we humans make is the assumption that God operates by the exact same logic as us. We want God to be this nice little tidy, anal retentive, organized, reasonable, rational Being who would never just let all this suffering and pain, injustice, wars, famines, happen. How and why did we come to such a conclusion? It has absolutely NO theological basis in any facts whatsoever. We’ve made the entire narrative up to comport with our anthropomorphic, cubical logic. Now how this all ties into this discussion, we have mankind’s greatest genius, Sir Issac Newton, to thank. It was he, (should “he” be capitalized?) okay, it was HE who came up with the laws of motion which are basically the laws of inertia, acceleration, and action/reaction. Let’s concetrate on #3–that for every action, there is an equal and opposite reaction. This is precisely what the laws of Karma and the physics of thermodynamics are, and all at once. It has the same ramifications for bodies in motion as for moral consequences both good and bad. If I’m not mistaken, the universe at its essence is a universe of perfect balance–from the deepest molecular level to the most grandiose of galaxies. Good and evil are real, cosmic, measurable forces. And Chris was entirely correct when he stated that when one suffers a financial loss, it creates an opportunity for financial gain and profit for someone else. What’s that saying…When God closes a door, somewhere He opens a window. I don’t know the exact words, but it’s something like that.Report

          • Avatar Roger in reply to Max Planck
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            says:

            There are some sad, delusional fools who believe the lord is so weak that he must close a door to open a window. Luckily the true lord ensures we can open windows all day long! Praise be to him!

             Report

            • Avatar Max Planck in reply to Roger
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              says:

              Roger, I was merely using the abstraction of that metaphor to illustrate the interconnectedness all forces in nature. Yin/Yang, Tao, Chi, God/Devil, light/darkness something/nothing etc. Nothing could possibly exist without its perfect, opposite, existing as well. No wonder quantum mechanics almost drove Einstein mad. He wasn’t a Vegas kind of guy as in “God doesn’t play dice with the Universe!” Did you know that Einstein passionately loved Jesus Christ?Report

              • Avatar wardsmith in reply to Max Planck
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                says:

                Umm, wasn’t Einstein Jewish?Report

              • Avatar Max Planck in reply to wardsmith
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                Yes, absolutely. But hardy a practicing Jew.   It didn’t at all take away his fascination and love of Christ.  Jesus was “his” guy and he frequently came to defend and stick-up for JC.  Do you know that 74% of all scientists believe in God? I have no doubt that if a poll was taken of the Founders of this Nation, the figure would be in the high 90s percentile. In both cases, scientists and the Founders, I equate theism and belief in God as one and the same. Lord knows the Founders bickered themselves to death about the tiniest little Theistic incongruity–that hardly puts them in the agnostic camp. Agnostic is such an unnecessary and meaningless word. Of course, on some level, everyone is an agnostic–no one knows what happens after death, or how the universe was created, or if God really exists. I just find it much more fun to believe there is a reason and purpose to our existence than mere, random asteroids and dinosaurs playing havoc with planetary life cycles.Report

  2. Avatar david
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    says:

    Don’t lemon theorems result in no-trade equilibria rather than high-priced equilibria? The market drives toward the low-price low-quality outcome.

    Regardless, if everyone marks up their prices, nobody gets ahead 😀Report

    • Avatar Jason Kuznicki in reply to david
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      says:

      I’m giving this argument more or less as Montaigne gave it.  Ludwig von Mises went as far as to call this the “Montaigne fallacy,” though it hardly seems fair to single him out for what was, in his day, such a common view.Report

      • Avatar david in reply to Jason Kuznicki
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        says:

        Well, modern neoclassical economics has no shortage of imperfect-information results, lemons and revelation principles and folk theorems and all.

        Would you, in a non-opposite sense, view these as more relevant or insightful than the narrative you outlined above? During the 80s there was a brief fad of asking whether game-theoretic quirks dominated Walrasian auctioneering but this seems to have faded.

        To be sure, prior to the era of Arrow, Samuelson, and their contemporaries, economics certainly loved to engage in a rather careless reasoning of the kind outlined above.Report

        • Avatar Jason Kuznicki in reply to david
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          says:

          Well, modern neoclassical economics has no shortage of imperfect-information results, lemons and revelation principles and folk theorems and all.

          Would you, in a non-opposite sense, view these as more relevant or insightful than the narrative you outlined above?

          I would certainly regard them as both relevant and insightful.

          Opposite day is tricky, but my purpose here is not at all to deny the reality of asymmetrical information.  I would instead affirm that good-enough exchanges can and do happen in the large majority of consumer transactions even despite asymmetrical information.Report

          • Avatar James Hanley in reply to Jason Kuznicki
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            says:

            good-enough exchanges can and do happen

            But why should we be satisfied with “good enough”?  Who gets to declare that they’re good enough anyway?  If they’re only good enough there is room for improvement, and the state needs to step in and ensure a Pareto-superior outcome to merely “good enough.”Report

          • Avatar david in reply to Jason Kuznicki
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            says:

            Your narrative doesn’t contradict that, either. It just claims that the transactions do not occur justly, presumably meaning that surplus is unjustly shifted from consumer to producer. But clearly consumer surplus must be non-negative, since the consumer remains in the market. Any theorem implying a negative return from trade would entail a no-trade equilibrium…

            Of course, we could be living in a world where right now we are missing out on millions of trades which don’t happen due to imperfect information and the Montaigne narrative applies for the whole possibility space of trades. Would you know if we weren’t? 😉Report

            • Avatar Jason Kuznicki in reply to david
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              says:

              You really are thinking much more like an economist than what I was aiming at.  There are about four or five concepts in this one comment that all depend on what the refutation really is, as I see it, though so far you have (admirably) avoided stating it.Report

              • Avatar david in reply to Jason Kuznicki
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                says:

                I suspect you too are thinking much more like an economist than Montaigne would have preferred; like Chris above, I think you and von Mises have missed his point. Your narrative does sketch an interesting point about trade, albeit a different (and rather uncharitable) one.Report

          • Avatar david in reply to Jason Kuznicki
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            says:

            On pre-emptive reflection, if tomorrow’s refutation turns out to be “consumers remain in the market; ipso facto the exchanges that occur must be good enough”, I’m going to have to express grave disappointment… one can be swindled by not having received one’s due, not only by having a received a negative return.

            But I trust Kuznicki has a more ingenious argument up his sleeve 🙂Report

  3. Avatar Roger
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    says:

    One word response….

    Brands.

    If a producer wants to sell to more than one person or make more than one sale they need to compete with other producers. This drives the system to better quality, price and service.Report

  4. Avatar DensityDuck
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    says:

    Iron is just fancy dirt.  There’s nothing special about dirt.  Therefore the price of iron should be exactly the same as the price of dirt.Report

  5. Avatar ThatPirateGuy
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    says:

    I am not sure if Jason or I hate seeing this strain of thought in the wild.

    I like the effects of markets, I don’t like the side effects.

    Losing in the market place shouldn’t mean destitution. External costs shouldn’t be ignored.Report

  6. Avatar dufus
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    says:

    Of course, most sellers don’t know exactly how much each consumer wants an item. If they did, then the consumer would be really in trouble.Report

  7. Avatar DensityDuck
    Ignored
    says:

    Of course, you could say (as I did above) that buyers can certainly cheat the seller.  To you it’s a ton of iron, but to me it’s a bridge that I can build and then charge everyone a dime to drive over.  I pay you for that ton of iron one time, but I make money from it forever.Report

  8. Avatar Randy Harris
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    says:

    Making everything yourself nixes specialization and economies of scale, resulting in a much lower level on production.Report

  9. Avatar Nathan
    Ignored
    says:

    Jason, I know you don’t actually believe what you wrote, but that is one of the stupidest things I have ever read.Report

    • Avatar Chris in reply to Nathan
      Ignored
      says:

      I don’t know if it’s stupid, but it is unlike any argument I’ve ever heard anyone make.Report

      • Avatar Jason Kuznicki in reply to Chris
        Ignored
        says:

        Are you kidding? The first two premises are everywhere.

        After that, all that’s missing is the courage of one’s convictions.Report

        • Avatar James Hanley in reply to Jason Kuznicki
          Ignored
          says:

          I have to agree with Jason here.  The two premises, just price and information asymmetries, are very common.

          Most people don’t use the term “just price” anymore, but it’s a concept that is irrevocably fixed in any discussion about people being paid “what they’re worth,” whenever the standard for “what they’re worth” is something other than what an employer is willing to pay and what they’re willing to accept.   And it’s lurking around any time someone argues a price is unfair, or doesn’t accurately reflect the “real” value of something (“It can’t cost that much to make a widget; they shouldn’t be charging that much for it”).  When approaching these issues from a moral point of view, I would think it’s a bit hard to avoid some implicit concepts of just price.

          Information asymmetries are agreed upon by economists, with J. Stiglitz, M. Spence, and G. Akerlof sharing the Nobel Prize for their research in it (Akerlof’s “The Market for Lemons” is a classic piece in this field).  It’s a concept that has been seized upon by market critics as providing a very serious critique of the efficiency of markets (and they’re not entirely wrong, either).

          So, yeah, these premises are pretty much everywhere.Report

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