It’s really easy to test how well somebody understands this story. Just ask them whether taxpayers should be allowed to choose where their taxes go. If they say no, then clearly they don’t understand that consumer choice has extremely beneficial consequences.
That’s exceedingly glib, because “taxpayers should be allowed to choose where their taxes go” doesn’t automatically follow from “consumer choice has extremely beneficial consequences”. For one thing, consumer choice has costs as well as benefits; for another, just because choice works well for everyday consumer goods doesn’t mean it’ll work equally well for goods & services provided by taxation. (What happens, for example, if tax choice is instituted and each taxpayer realizes that their marginal tax contribution has only a negligible effect on how well the nation’s army defends them personally, and each taxpayer therefore re-directs that share of their taxes to something else?)
It’s a non-sequitur? I don’t think so. It’s a non-sequitur when the supply of goods/services doesn’t follow from the preferences of consumers. To take a pacifist’s money and supply them with war is just as much a non-sequitur as it is to take a vegetarian’s money and supply them with a juicy steak.
If you’re so willing to assume that our country’s defense efforts do more good than harm… then why stop there? Why not assume that steak does more good than harm as well? Surely we’re not all that different?
In other words, if you’re so confident of the conclusion that you’re willing to leap to regarding people’s preferences for public goods… then isn’t it strange if that confidence suddenly disappears in terms of private goods?
If somebody is willing to forego a marginally greater supply of defense in order to gain a marginally greater supply of cancer research… then who am I to override their valuation? Am I sleeping next to them at night? Do I know what fear/concern/anxiety is most likely to rob them of sound slumber? In this case, then maybe, just maybe, it might not be exceedingly unreasonable for me to override their valuation. But anything outside of such an extremely personal and intimate knowledge of somebody else’s preferences… is fundamental hubris. The kind of hubris that results in the worst kind of misallocations of a nation’s most valuable resources.
Please be aware that, if you’re arguing that everybody’s going to be inclined to divest armies… then you’re arguing that pragmatarianism would produce world peace. If, on the other hand, you’re saying that some exceptional individuals would be inclined to invest in armies… are you saying that some country will have a monopoly on exceptional individuals? Or, are you saying that each country would have roughly the same percentage of exceptional individuals? Or, are you saying that no two countries would have the same exact percentage of exceptional individuals? If so, would exceptional individuals foot vote accordingly? Would they all want to flock together? And then there’d be a nation of exceptional individuals who would only invest in armies? If this is true, then just how much taxes would they be able to spend? A lot?
Imagine a baker who only spends his money on one ingredient. Do you think his singular strategy would have consumers lining up for miles?
In case you missed it… we’re all different. Economic growth and prosperity is a function of this difference. Blocking nearly all this difference from the public sector ensures that we get the balance of public ingredients/inputs really wrong.
If you’re interested in critiquing pragmatarianism… it might help to read the FAQ.
Most of that doesn’t seem very relevant to my specific objection. I’m not especially interested in criticizing pragmatarianism, whatever that is. I’m interested in refuting the specific idea that if someone disagrees with tax choice, they “clearly” “don’t understand that consumer choice has extremely beneficial consequences”. Because that idea strikes me as transparently wrong & over-confident.
It’s a non-sequitur? I don’t think so.
I think it is, because the premise “consumer choice has extremely beneficial consequences” has to be combined with extra premises before it generates the conclusion that tax choice is patently good — and your “test” leaves out those premises. One can’t take the lone premise and immediately get the conclusion, so inferring the conclusion from just the premise is a non sequitur.
I alluded to (two of) the necessary extra premises above. One is that consumer choice doesn’t have extremely costly consequences which outweigh the benefits for the good/service under consideration. Another is that choice works as well for taxation-funded goods & services as it does for ordinary consumer goods.
That last premise probably isn’t true in general, because certain taxation-funded goods & services generate positive externalities, introducing an obvious problem of free riding. National defence is a canonical example, hence my use of the army as an example. The point there is not “WHOOO! GO ARMY!” or “anyone who doesn’t value the army as much as I do is wrong or an idiot”, the point is “there is a systematic incentive to free ride here, which could predictably lead to under-provision, and there’s no indication that Xerographic has understood this”.
Please be aware that, if you’re arguing that everybody’s going to be inclined to divest armies… then you’re arguing that pragmatarianism would produce world peace. If, on the other hand, you’re saying [...] are you saying that [...] Or, are you saying that [...] are you saying that [...]
What I’m pointing at with the army example is free riding due to positive externalities from a public good. Searching the comments on your top-level post, I see someone else has mentioned the issue to you before but you didn’t seem to understand it. I could try to explain it myself but it would probably be quicker for both of us if you consult the sections of an economics textbook on externalities and public goods.
consumer choice has extremely beneficial consequences
we shouldn’t have consumer choice in the public sector
If somebody agrees with both #1 and #2… then they can’t truly understand why consumer choice has extremely beneficial consequences.
smoking is hazardous to your health
it’s ok to smoke indoors
If somebody agrees with both #1 and #2… then they can’t truly understand why smoking is hazardous to your health.
consumer choice has extremely beneficial consequences
Netflix shouldn’t allow people to allocate their monthly fees
If somebody agrees with both #1 and #2… then they can’t truly understand why consumer choice has extremely beneficial consequences.
Let’s say that Netflix allowed subscribers to allocate their monthly fees to their favorite content. Netflix would take its cut and pass the rest onto the creators of this content. Yay or nay?
According to you, this would be a bad idea. Why? Because nothing would prevent people from consuming content and not paying for it. You could watch every single episode of the Gilmore Girls but not allocate a single penny to the creators of the show. In case you missed it, this is the “issue” with externalities. This issue is ridiculous though because you’re allocating your monthly fees somewhere. Some content is getting your money. And if, on the chance that nobody allocates any of their fees to the Gilmore Girls… then all the resources being used by this show would be freed up for more valuable shows/movies/documentaries, etc. This is the process by which we derive more and more value from society’s limited resources.
You want me to look up “externalities” as if I’m arguing that we should kick education, or healthcare, or defense, or environmental protection or any other public good over to the private sector. But that’s really not what I’m arguing. As a pragmatarian, my argument is that consumer choice makes just as much sense in the public sector as it does in the private sector. If you want to convince me that we don’t need consumer choice in the public sector… then you just need to convince me that the government is good at accurately measuring the harm/benefit of externalities. And if you can convince me of that… then you’ve also convinced me that consumer choice in the private sector is unnecessary. If the government can accurately predict the distance at which a smoker will motivate me to bravely run away… then I’ll be happy giving congress all my money so that they can spend it for me. This way I won’t have to bother with the hassle of shopping.
[Three enthymemes about public sector choice, smoking, and Netflix.]
Right, each of these has at least one tacit extra premise. The smoking enthymeme relies on an implicit premise (we might label it “1b”) that it’s not OK to do things hazardous to your health. The Netflix enthymeme has an implicit “1b” premise, for example that consumer choice also has extremely costly consequences.
Let’s say that Netflix allowed subscribers to allocate their monthly fees to their favorite content. Netflix would take its cut and pass the rest onto the creators of this content. Yay or nay?
According to you, this would be a bad idea. Why? Because nothing would prevent people from consuming content and not paying for it. You could watch every single episode of the Gilmore Girls but not allocate a single penny to the creators of the show.
If I understand you, in this hypothetical Netflix subscribers would be able to watch everything in Netflix’s library, whether or not they allocated any of their fee to what they actually watched.
If so, yes, there are positive externalities, and in the absence of some opposing effect I’d expect your imagined change to Netflix’s policy to cause under-funding of potentially profitable programmes.
This issue is ridiculous though because you’re allocating your monthly fees somewhere. Some content is getting your money.
Some content is getting my money, but if I can free ride on your fees, and I’m allowed to direct my fees where I like, I can engage in tactical behaviour that causes economic inefficiency. So you haven’t actually shown the “issue is ridiculous”.
And if, on the chance that nobody allocates any of their fees to the Gilmore Girls… then all the resources being used by this show would be freed up for more valuable shows/movies/documentaries, etc. This is the process by which we derive more and more value from society’s limited resources.
Yes, I’ve taken economics classes and that process was covered pretty early on. And in subsequent lessons we covered a potential failure mode of that process: those externalities I keep going on about.
Let me run with the imaginary Netflix example.
For simplicity, suppose Netflix’s library has just three shows: Gilmore Girls, Arrested Development, and House of Cards. But that’s OK because the two of us are Netflix’s only subscribers. We both like GG, only I like AD, only you like HC, and all this is common knowledge.
I get an email from Netflix telling me I can choose which shows deserve my Netflix fees. I don’t care about HC, so I can safely allocate nothing to it. Only I like AD, so I have to allocate it some of my fees, otherwise it won’t get funded. But what about GG? I like it, so I’m willing to allocate some money to it, but I know you like it too — so why don’t I just hold out to see whether you fund it instead?
You get an email from Netflix telling you you can choose which shows deserve your Netflix fees. You don’t care about AD, so it’s easy to deny that your money. You’re the only one who likes HC, so of course you allocate that some of your fees. But what about GG? You like it, so you could direct some of your fees to it, but you know I like it too — so why not just hold out to see whether I fund it instead?
Next year, Netflix drops GG from its library because no one paid for it, even though it’s the only show we both like. Because it’s the only show we both like.
You want me to look up “externalities” as if I’m arguing that we should kick education, or healthcare, or defense, or environmental protection or any other public good over to the private sector. But that’s really not what I’m arguing.
I’m really not arguing that you’re really arguing that. I want you to peruse a textbook discussion of externalities and public goods simply because I don’t think you understand those two ideas well enough to recognize how & when to apply them. Whether you’re pro-privatization is a separate issue.
If you want to convince me that we don’t need consumer choice in the public sector… then you just need to convince me that the government is good at accurately measuring the harm/benefit of externalities. And if you can convince me of that… then you’ve also convinced me that consumer choice in the private sector is unnecessary.
That line of argument screams “Package-deal fallacy!” to me. I expect individual choice to be good for allocating some things, and bad for allocating others. Forcing ourselves into a general dichotomy of consumer-choice-is-necessary vs. consumer-choice-is-unnecessary is a bad idea, and economics gives us some mental tools for understanding why.
Do you even know how you’d allocate your monthly fees if given the chance?
At the top of my list would be The Man From Earth. Have you seen it? It’s wonderful. It turns me on intellectually. It really sucks that so few fictional content does so. I wonder why there’s such a shortage of fictional content that excites my mind? Oh wait, I know why! It’s because Netflix doesn’t know what really does it for me.
Sure, I gave it 5 stars… but… am I supposed to give only one thing on Netflix 5 stars? Because… I’ve given other things 5 stars as well.
Perhaps Netflix should add more stars? Like, I would be able to give [The Man From] Earth 100 stars? Then I’d give all my other 5 star content say… 90 stars?
Is there an abundance of fictional content on Netflix that excites your mind? If so, please share your list! Maybe you’ve found some Easter Eggs that I’ve overlooked!
Next year, Netflix drops GG from its library because no one paid for it, even though it’s the only show we both like. Because it’s the only show we both like.
Are you really sure that I liked it? Just because you’re allocating your time to me right now… does this necessarily indicate that you want to be facebook friends? Yes? pokepoke
Right now we’re consuming each other’s content. Therefore… what? This implies that we both agree that each other’s content is worth X amount of money? This implies we’ll always want to consume each other’s content? You + me = BFF?
Next year, Netflix drops GG from its library because no one paid for it, even though it’s the only show we both like. Because it’s the only show we both like.
That’s the end of your story? Lauren Graham and Alexis Bledel just vanished into thin air? What a terrible ending! If your story was a Netflix movie then I wouldn’t even allocate a penny to it. I’d boycott the heck out of it.
My story ended with Alexis Bledel playing the female lead in 50 Shades of Gray. I mean, acting in some movie that excites me even more than Earth does. Same thing with Lauren Graham.
Do you get my points?
Point 1. You don’t know what I value… and neither does Netflix. Which means that neither do the content creators. I’m the only one who knows how many GGs I’d sacrifice for more Earths. For some reason you don’t think that content creators need to have access to this information. Either you think the star rating system communicates more than it actually does… or you think Netflix is omniscient… or… you don’t truly understand how or why consumer choice has extremely beneficial consequences.
Point 2. The thought of you playing chicken with all the other Netflix users is very humorous. Are you going to call me up and we’ll have a Princess Bridian battle of wits?
satt: Have you ever heard of Plato, Aristotle, Socrates?
xero: Yes?
satt: Morons!
xero: Truly you have a dizzying intellect. You win! Your prisoners’ dilemma is so good! I’ll allocate my monthly Netflix fees to any content that you want!
Are you going to have every single Netflix user on your speed dial? Errr… when are you going to have the time to watch any of the content that you’re tricking everybody into funding?
Point 3. If Netflix gave me the option to be a free-rider… then, if there weren’t any strings attached, I’d choose this option. Most people would. The logical conclusion is that the content that we truly value would be undersupplied. So Netflix doesn’t give us the option to free-ride. We have to pay a monthly fee. This solves the free-rider problem but it doesn’t solve the problem of deriving people’s priorities. This preference ranking problem can be easily solved simply by giving us the option to directly allocate our monthly fees. Why would consumer choice solve the priority problem? Because of opportunity cost.
Point 4. I uploaded this just for you… The Assumption Of Omniscience And Benevolence. Because… if you want to consume what I’m writing here… then you should want to consume what I write anywhere.
You really don’t like HC? [...] At the top of my list would be The Man From Earth. Have you seen it?
Oh, I was using HC only as an example. I’ve never seen it! Ditto The Man from Earth.
Perhaps Netflix should add more stars?
That might help, though people rate online videos in a very polarized way. YouTube used to have a 5-star rating system but switched to thumbs up vs. thumbs down because almost all the ratings were 1 or 5.
Is there an abundance of fictional content on Netflix that excites your mind?
No idea, I don’t have a Netflix account. Thinking about TV fiction in general...yeah, it’s got a poor hit rate for tickling my smart parts.
Right now we’re consuming each other’s content. Therefore… what? This implies that we both agree that each other’s content is worth X amount of money? This implies we’ll always want to consume each other’s content? You + me = BFF?
Now you make me think about it, I would be willing to pay someone I trusted a token bit of money to correct your LW comments for me. But until then, I have to roll up my own sleeves. On to your points.
Point 1. You don’t know what I value… and neither does Netflix. Which means that neither do the content creators. [...] For some reason you don’t think that content creators need to have access to this information. Either you think the star rating system communicates more than it actually does… or you think Netflix is omniscient… or… you don’t truly understand how or why consumer choice has extremely beneficial consequences.
False trichotomy. I take door number 4: your hypothetical mechanism to communicate your preferences to TV producers won’t work (unless you have some counteracting mechanism up your sleeve to cancel out free riding). Now, that doesn’t necessarily mean your proposal is worse than the status quo, but I’ve used a toy example to illustrate why your proposal risks the paradox of directing less money to more popular shows. If your policy were implemented, Netflix and TV producers most likely still wouldn’t know what you (or Netflix subscribers in general) valued, because you’d be incentivized to distort your monetary representation of your preferences.
(We are of course making the simplifying assumption that TV studios get their information about TV viewers’ preferences via Netflix, but the real world is obviously more complicated. Whatever Netflix does, TV studios also have focus groups, viewing statistics and critics’ reviews to garner information about what viewers like. Hell, you yourself could even post cheques directly to TV studios...although private companies tend to be squeamish about accepting donations.)
Point 2. The thought of you playing chicken with all the other Netflix users is very humorous. Are you going to call me up and we’ll have a Princess Bridian battle of wits?
Notice that in my two-subscriber Netflix example there wasn’t any communication between us.
Even if there had been, well, that would’ve just turned things into a bargaining game. I don’t think it’d be a bargaining game as those games are usually modelled, because there’d be no enforcement mechanism backing whatever we’d agree on the telephone. So I expect something like the no-communication equilibrium would still happen.
Point 3. If Netflix gave me the option to be a free-rider… then, if there weren’t any strings attached, I’d choose this option. Most people would. The logical conclusion is that the content that we truly value would be undersupplied.
Yup.
So Netflix doesn’t give us the option to free-ride. We have to pay a monthly fee. This solves the free-rider problem but it doesn’t solve the problem of deriving people’s priorities.
That’s true...
This preference ranking problem can be easily solved simply by giving us the option to directly allocate our monthly fees. Why would consumer choice solve the priority problem? Because of opportunity cost.
...but that doesn’t follow, because introducing choice would hand subscribers a way to free ride. Hence the “choice” Netflix observed wouldn’t match subscribers’ true preference rankings. The preference ranking problem would therefore remain unsolved.
I don’t understand the relevance. As far as I can tell I’m neither citing Paul Samuelson, nor assuming omniscient & benevolent government planners. The didactic example I used here involved a private company and TV producers!
Thinking about TV fiction in general...yeah, it’s got a poor hit rate for tickling my smart parts
You’re in this boat, and I’m in this boat, and Robin Hanson is in this boat. How many other people are in this boat? You’d figure that smarter people have more money to spend on content than dumber people do… yet, for some reason there’s a shortage of smarter content. Shall we call this “satt’s paradox”? Ok!
Your reply failed in all types of ways. Let’s wipe the board clean.
Right now the US has a non-profit sector. It contains organizations like the NRA and PETA. Donations to the non-profit organizations are entirely voluntarily. And, given that people can benefit from what many non-profits supply without having to chip in, it stands to reason that the free-rider problem is applicable. Yet, in 2012 non-profits received $1.65 trillion in total revenues. Most of it wasn’t from the government so we can conclude that the free-rider problem clearly doesn’t entirely exclude the possibility of voluntary contributions to collective goods.
But what if we made contribution to the non-profit sector mandatory? Maybe everybody would have to chip in at least 10% of their income… but they could choose which non-profits they gave their donations to. Would this improve the outcome? Well… there would still be the free-rider problem… right?
So let’s take it a step further. Everybody would have to chip in… and we’d elect 500 representatives to choose how to divvy up the pool of funds among the various non-profits. Would this improve the outcome more… or less?
Which non-profit system would create the most value?
The current system
The minimum contribution + consumer choice system
The minimum contribution + representative choice system
There’s still some room on the board!
This website uses thumbs up/down to valuate the articles. What if we all had a website bank account (WBA) that we could make a deposit to using paypal? This would allow us to valuate the articles with actual money rather than thumbs. There would still be the free-rider problem right?
So what if everybody had to contribute say a minimum of $2/month to their WBA? But they would be able to choose which articles they allocated their money to. There would still be the free-rider problem right?
So what if we still have the minimum contribution… but we elect 5 representatives to allocate the money for us?
Which website system would create the most value?
The current thumbs up/down system
The voluntary contribution + consumer choice system
The minimum contribution + consumer choice system
The minimum contribution + representative choice system
You’d figure that smarter people have more money to spend on content than dumber people do… yet, for some reason there’s a shortage of smarter content.
Dropping the economists for a moment and turning to a writer: “Television is the way it is simply because people tend to be extremely similar in their vulgar and prurient and dumb interests and wildly different in their refined and aesthetic and noble interests”.
More mundanely, smarter people are probably better at pirating what they like than dumb people, too.
Your reply failed in all types of ways. Let’s wipe the board clean.
You don’t describe any of the ways my reply “failed”, so that appears to be an evasion.
Which non-profit system would create the most value?
Not sure. I’d need more information.
The current system presumably gives less money to non-profits than your two alternatives. But maybe under your system 2 the extra money would go to existing ineffective charities and not improve on the status quo. That seems unlikely to be a big enough effect to outweigh the benefit of more non-profit revenue, though. But then again, maybe under system 2 and/or system 3 people would start setting up spurious non-profits to enrich themselves, and how much of a problem that’d be would depend on the precise regulation imposed on non-profits in your counterfactual systems. You don’t specify.
Which website system would create the most value?
Probably the current thumbs up/down system. Options 3 & 4 involve involuntary contributions, and the effect of that driving people away from Less Wrong would probably swamp any benefit from the contributions. Under option 2 the vast majority of users wouldn’t bother to use the system, and I wouldn’t expect the minority who did use it to be representative of LW, so option 2 would likely lead to a distorted representation of how much the overall userbase liked posts. And then there’s the risk that introducing monetary payments adds more incentives for people to post crowd-pleasing stuff instead of the stuff I’d say adds value! (And don’t we already have technologies for throwing money at people who write stuff one likes on the Internet? Does option 2 bring much new to the table?)
Please explain your answers.
Done. But your questions don’t clearly address the specific points I made before, and arguing with people who don’t address the specific points I’m making is unproductive. Don’t expect me to answer any more tangential essay questions.
If you zig some times… and zag other times… and you’re failing to explain your zig vs zag rules… then perhaps if you answer enough essay questions we’ll be able to elucidate/illuminate whether your rules are so good or no good (incoherent).
My rule is simple. Consumer choice is always better than representative choice. Your rule isn’t so simple. Some times you believe that consumer choice is better… and other times you don’t.
Your rule isn’t so simple. Some times you believe that consumer choice is better… and other times you don’t.
My sole defence is that reality is complicated. I do think it’s a pretty good defence; it also explains why sometimes when I get sick I think it’s better to take antibiotics than not to, and other times I don’t. For example.
perhaps if you answer enough essay questions we’ll be able to elucidate/illuminate whether your rules are so good or no good (incoherent)
Hmm, something that would take no small amount of time, and have a dubious & uncertain benefit. Unpromising. And I reckon I’ve made my original point adequately, so I’m going to call this a wrap.
This claims that movies, books, etc. can’t have different prices like cars do because higher-priced movies could be cheaply pirated.
The world did exist before the Internet became popular. Your explanation may explain why we don’t have the movie equivalent of million dollar cars today, but it fails at explaining this back in the day when it was impossible to pirate a movie reasonably.
First, it’s important to note that my “failure” doesn’t change the fact that linvoids aren’t rivalrous). In other words, my “failure” has absolutely no bearing on the validity of my verdict.
Second, markets don’t mean that every Easter Egg (EE) will be spotted. With markets you have a lot more people participating in the search process so it increases the chances that an EE will be found. Plus, finders reap the rewards of finding EEs… so there’s more incentive to find them. My point is that just because nobody has spotted an EE doesn’t mean that it doesn’t exist.
Thirdly, it’s not necessarily clear how back in the day a movie producer would have been able to charge more for a superior product. Perhaps in a big city like Los Angeles you could have filled a theater with people willing to pay $1500 for the opportunity to see a smarter movie? Right now people are willing to pay around $5000 for the opportunity to attend TED talks. There’s no reason that the contents of TED talks can’t be served in a movie format.
Fourthly, if we did shift linvoids over to the public sector and give taxpayers the freedom to choose where their taxes go… taxes wouldn’t be paying for the opportunity to consume the linvoid… they would be paying for the production of the linvoid.
With the current system, we buy a movie if it’s worth it to do so. It’s binary.… yes or no. A DVD either is, or it isn’t, worth $15. In reality though… there’s a continuum of valuations that range from $0.00 all the way to thousands of dollars. A pricing system only captures the tip of the tip of this iceberg. A pragmatarian system would capture the entire iceberg. If a movie is only worth $1 to you… then that’s how much you could allocate to it. If its worth $1000 to me… then that’s how much I’d allocate to it. As a result, the supply would far more accurately reflect demand.
How many other people are in this boat? You’d figure that smarter people have more money to spend on content than dumber people do… yet, for some reason there’s a shortage of smarter content.
Television actually has gotten noticeably smarter over the last century, with institutions like HBO occupying the ‘smart and rich’ niche. But you’ll note that HBO still targets a low enough degree of intelligence that it can sell lots and lots of subscriptions, because that’s the profit-maximizing thing to do.
I go back into time and try and persuade Adam Smith to include a section on pragmatarianism in his Wealth of Nations.
“Hey Adam Smith… if your invisible hand is good enough for the private sector… then why isn’t it good enough for the public sector?”
The story is pretty simple… but the topic is smarter.
I’d be willing to pay a lot more for this story than pretty much all the stories mentioned in that article you shared. The problem is that there isn’t a mechanism for me to do so. So the question is… how could we create such a mechanism?
Right now we have a private sector (for-profit sector + non-profit sector) and a public sector. Imagine if we created an entertainment sector. Everybody would have to contribute 10% of their income to this sector… but they could choose which content they paid for. This would create a mechanism by which the supply of smarter content would come to more accurately reflect the true demand for smarter content.
But why 10%? Why not 5% or 25%? Clearly we’re really screwed if we have to spend too much money on entertainment! We wouldn’t have enough money left over for more important things. But if we spend too little on entertainment then we’ll all be kinda sad.
The solution? We simply label “entertainment” a public good and move it into the public sector. Then we allow taxpayers to choose where their taxes go. This way we can ensure a more optimal proportion/balance.
A car is a private good because it’s rivalrous and excludable. There are expensive cars and cheap cars. A movie isn’t rivalrous but clearly we’ve figured out how to make it excludable. You have to buy a ticket to watch it in a theater. You have to buy the DVD to watch it at home. Or pay for Netflix. But these mechanisms all fight against the movie’s true nature. As a result, movies all cost consumers pretty much the same amount of money and we end up with a huge disparity between supply and demand. We could eliminate this disparity simply by...
acknowledging the true nature of movies/songs/books
That’s exceedingly glib, because “taxpayers should be allowed to choose where their taxes go” doesn’t automatically follow from “consumer choice has extremely beneficial consequences”. For one thing, consumer choice has costs as well as benefits; for another, just because choice works well for everyday consumer goods doesn’t mean it’ll work equally well for goods & services provided by taxation. (What happens, for example, if tax choice is instituted and each taxpayer realizes that their marginal tax contribution has only a negligible effect on how well the nation’s army defends them personally, and each taxpayer therefore re-directs that share of their taxes to something else?)
It’s a non-sequitur? I don’t think so. It’s a non-sequitur when the supply of goods/services doesn’t follow from the preferences of consumers. To take a pacifist’s money and supply them with war is just as much a non-sequitur as it is to take a vegetarian’s money and supply them with a juicy steak.
If you’re so willing to assume that our country’s defense efforts do more good than harm… then why stop there? Why not assume that steak does more good than harm as well? Surely we’re not all that different?
In other words, if you’re so confident of the conclusion that you’re willing to leap to regarding people’s preferences for public goods… then isn’t it strange if that confidence suddenly disappears in terms of private goods?
If somebody is willing to forego a marginally greater supply of defense in order to gain a marginally greater supply of cancer research… then who am I to override their valuation? Am I sleeping next to them at night? Do I know what fear/concern/anxiety is most likely to rob them of sound slumber? In this case, then maybe, just maybe, it might not be exceedingly unreasonable for me to override their valuation. But anything outside of such an extremely personal and intimate knowledge of somebody else’s preferences… is fundamental hubris. The kind of hubris that results in the worst kind of misallocations of a nation’s most valuable resources.
Please be aware that, if you’re arguing that everybody’s going to be inclined to divest armies… then you’re arguing that pragmatarianism would produce world peace. If, on the other hand, you’re saying that some exceptional individuals would be inclined to invest in armies… are you saying that some country will have a monopoly on exceptional individuals? Or, are you saying that each country would have roughly the same percentage of exceptional individuals? Or, are you saying that no two countries would have the same exact percentage of exceptional individuals? If so, would exceptional individuals foot vote accordingly? Would they all want to flock together? And then there’d be a nation of exceptional individuals who would only invest in armies? If this is true, then just how much taxes would they be able to spend? A lot?
Imagine a baker who only spends his money on one ingredient. Do you think his singular strategy would have consumers lining up for miles?
In case you missed it… we’re all different. Economic growth and prosperity is a function of this difference. Blocking nearly all this difference from the public sector ensures that we get the balance of public ingredients/inputs really wrong.
If you’re interested in critiquing pragmatarianism… it might help to read the FAQ.
Most of that doesn’t seem very relevant to my specific objection. I’m not especially interested in criticizing pragmatarianism, whatever that is. I’m interested in refuting the specific idea that if someone disagrees with tax choice, they “clearly” “don’t understand that consumer choice has extremely beneficial consequences”. Because that idea strikes me as transparently wrong & over-confident.
I think it is, because the premise “consumer choice has extremely beneficial consequences” has to be combined with extra premises before it generates the conclusion that tax choice is patently good — and your “test” leaves out those premises. One can’t take the lone premise and immediately get the conclusion, so inferring the conclusion from just the premise is a non sequitur.
I alluded to (two of) the necessary extra premises above. One is that consumer choice doesn’t have extremely costly consequences which outweigh the benefits for the good/service under consideration. Another is that choice works as well for taxation-funded goods & services as it does for ordinary consumer goods.
That last premise probably isn’t true in general, because certain taxation-funded goods & services generate positive externalities, introducing an obvious problem of free riding. National defence is a canonical example, hence my use of the army as an example. The point there is not “WHOOO! GO ARMY!” or “anyone who doesn’t value the army as much as I do is wrong or an idiot”, the point is “there is a systematic incentive to free ride here, which could predictably lead to under-provision, and there’s no indication that Xerographic has understood this”.
What I’m pointing at with the army example is free riding due to positive externalities from a public good. Searching the comments on your top-level post, I see someone else has mentioned the issue to you before but you didn’t seem to understand it. I could try to explain it myself but it would probably be quicker for both of us if you consult the sections of an economics textbook on externalities and public goods.
consumer choice has extremely beneficial consequences
we shouldn’t have consumer choice in the public sector
If somebody agrees with both #1 and #2… then they can’t truly understand why consumer choice has extremely beneficial consequences.
smoking is hazardous to your health
it’s ok to smoke indoors
If somebody agrees with both #1 and #2… then they can’t truly understand why smoking is hazardous to your health.
consumer choice has extremely beneficial consequences
Netflix shouldn’t allow people to allocate their monthly fees
If somebody agrees with both #1 and #2… then they can’t truly understand why consumer choice has extremely beneficial consequences.
Let’s say that Netflix allowed subscribers to allocate their monthly fees to their favorite content. Netflix would take its cut and pass the rest onto the creators of this content. Yay or nay?
According to you, this would be a bad idea. Why? Because nothing would prevent people from consuming content and not paying for it. You could watch every single episode of the Gilmore Girls but not allocate a single penny to the creators of the show. In case you missed it, this is the “issue” with externalities. This issue is ridiculous though because you’re allocating your monthly fees somewhere. Some content is getting your money. And if, on the chance that nobody allocates any of their fees to the Gilmore Girls… then all the resources being used by this show would be freed up for more valuable shows/movies/documentaries, etc. This is the process by which we derive more and more value from society’s limited resources.
You want me to look up “externalities” as if I’m arguing that we should kick education, or healthcare, or defense, or environmental protection or any other public good over to the private sector. But that’s really not what I’m arguing. As a pragmatarian, my argument is that consumer choice makes just as much sense in the public sector as it does in the private sector. If you want to convince me that we don’t need consumer choice in the public sector… then you just need to convince me that the government is good at accurately measuring the harm/benefit of externalities. And if you can convince me of that… then you’ve also convinced me that consumer choice in the private sector is unnecessary. If the government can accurately predict the distance at which a smoker will motivate me to bravely run away… then I’ll be happy giving congress all my money so that they can spend it for me. This way I won’t have to bother with the hassle of shopping.
Right, each of these has at least one tacit extra premise. The smoking enthymeme relies on an implicit premise (we might label it “1b”) that it’s not OK to do things hazardous to your health. The Netflix enthymeme has an implicit “1b” premise, for example that consumer choice also has extremely costly consequences.
If I understand you, in this hypothetical Netflix subscribers would be able to watch everything in Netflix’s library, whether or not they allocated any of their fee to what they actually watched.
If so, yes, there are positive externalities, and in the absence of some opposing effect I’d expect your imagined change to Netflix’s policy to cause under-funding of potentially profitable programmes.
Some content is getting my money, but if I can free ride on your fees, and I’m allowed to direct my fees where I like, I can engage in tactical behaviour that causes economic inefficiency. So you haven’t actually shown the “issue is ridiculous”.
Yes, I’ve taken economics classes and that process was covered pretty early on. And in subsequent lessons we covered a potential failure mode of that process: those externalities I keep going on about.
Let me run with the imaginary Netflix example.
For simplicity, suppose Netflix’s library has just three shows: Gilmore Girls, Arrested Development, and House of Cards. But that’s OK because the two of us are Netflix’s only subscribers. We both like GG, only I like AD, only you like HC, and all this is common knowledge.
I get an email from Netflix telling me I can choose which shows deserve my Netflix fees. I don’t care about HC, so I can safely allocate nothing to it. Only I like AD, so I have to allocate it some of my fees, otherwise it won’t get funded. But what about GG? I like it, so I’m willing to allocate some money to it, but I know you like it too — so why don’t I just hold out to see whether you fund it instead?
You get an email from Netflix telling you you can choose which shows deserve your Netflix fees. You don’t care about AD, so it’s easy to deny that your money. You’re the only one who likes HC, so of course you allocate that some of your fees. But what about GG? You like it, so you could direct some of your fees to it, but you know I like it too — so why not just hold out to see whether I fund it instead?
Next year, Netflix drops GG from its library because no one paid for it, even though it’s the only show we both like. Because it’s the only show we both like.
I’m really not arguing that you’re really arguing that. I want you to peruse a textbook discussion of externalities and public goods simply because I don’t think you understand those two ideas well enough to recognize how & when to apply them. Whether you’re pro-privatization is a separate issue.
That line of argument screams “Package-deal fallacy!” to me. I expect individual choice to be good for allocating some things, and bad for allocating others. Forcing ourselves into a general dichotomy of consumer-choice-is-necessary vs. consumer-choice-is-unnecessary is a bad idea, and economics gives us some mental tools for understanding why.
I like you. Can we be facebook friends?
You really don’t like HC?
Do you even know how you’d allocate your monthly fees if given the chance?
At the top of my list would be The Man From Earth. Have you seen it? It’s wonderful. It turns me on intellectually. It really sucks that so few fictional content does so. I wonder why there’s such a shortage of fictional content that excites my mind? Oh wait, I know why! It’s because Netflix doesn’t know what really does it for me.
Sure, I gave it 5 stars… but… am I supposed to give only one thing on Netflix 5 stars? Because… I’ve given other things 5 stars as well.
Perhaps Netflix should add more stars? Like, I would be able to give [The Man From] Earth 100 stars? Then I’d give all my other 5 star content say… 90 stars?
Is there an abundance of fictional content on Netflix that excites your mind? If so, please share your list! Maybe you’ve found some Easter Eggs that I’ve overlooked!
Are you really sure that I liked it? Just because you’re allocating your time to me right now… does this necessarily indicate that you want to be facebook friends? Yes? poke poke
Right now we’re consuming each other’s content. Therefore… what? This implies that we both agree that each other’s content is worth X amount of money? This implies we’ll always want to consume each other’s content? You + me = BFF?
That’s the end of your story? Lauren Graham and Alexis Bledel just vanished into thin air? What a terrible ending! If your story was a Netflix movie then I wouldn’t even allocate a penny to it. I’d boycott the heck out of it.
My story ended with Alexis Bledel playing the female lead in 50 Shades of Gray. I mean, acting in some movie that excites me even more than Earth does. Same thing with Lauren Graham.
Do you get my points?
Point 1. You don’t know what I value… and neither does Netflix. Which means that neither do the content creators. I’m the only one who knows how many GGs I’d sacrifice for more Earths. For some reason you don’t think that content creators need to have access to this information. Either you think the star rating system communicates more than it actually does… or you think Netflix is omniscient… or… you don’t truly understand how or why consumer choice has extremely beneficial consequences.
Point 2. The thought of you playing chicken with all the other Netflix users is very humorous. Are you going to call me up and we’ll have a Princess Bridian battle of wits?
satt: Have you ever heard of Plato, Aristotle, Socrates?
xero: Yes?
satt: Morons!
xero: Truly you have a dizzying intellect. You win! Your prisoners’ dilemma is so good! I’ll allocate my monthly Netflix fees to any content that you want!
Are you going to have every single Netflix user on your speed dial? Errr… when are you going to have the time to watch any of the content that you’re tricking everybody into funding?
Point 3. If Netflix gave me the option to be a free-rider… then, if there weren’t any strings attached, I’d choose this option. Most people would. The logical conclusion is that the content that we truly value would be undersupplied. So Netflix doesn’t give us the option to free-ride. We have to pay a monthly fee. This solves the free-rider problem but it doesn’t solve the problem of deriving people’s priorities. This preference ranking problem can be easily solved simply by giving us the option to directly allocate our monthly fees. Why would consumer choice solve the priority problem? Because of opportunity cost.
Point 4. I uploaded this just for you… The Assumption Of Omniscience And Benevolence. Because… if you want to consume what I’m writing here… then you should want to consume what I write anywhere.
Afraid not, I don’t use Facebook.
Oh, I was using HC only as an example. I’ve never seen it! Ditto The Man from Earth.
That might help, though people rate online videos in a very polarized way. YouTube used to have a 5-star rating system but switched to thumbs up vs. thumbs down because almost all the ratings were 1 or 5.
No idea, I don’t have a Netflix account. Thinking about TV fiction in general...yeah, it’s got a poor hit rate for tickling my smart parts.
Now you make me think about it, I would be willing to pay someone I trusted a token bit of money to correct your LW comments for me. But until then, I have to roll up my own sleeves. On to your points.
False trichotomy. I take door number 4: your hypothetical mechanism to communicate your preferences to TV producers won’t work (unless you have some counteracting mechanism up your sleeve to cancel out free riding). Now, that doesn’t necessarily mean your proposal is worse than the status quo, but I’ve used a toy example to illustrate why your proposal risks the paradox of directing less money to more popular shows. If your policy were implemented, Netflix and TV producers most likely still wouldn’t know what you (or Netflix subscribers in general) valued, because you’d be incentivized to distort your monetary representation of your preferences.
(We are of course making the simplifying assumption that TV studios get their information about TV viewers’ preferences via Netflix, but the real world is obviously more complicated. Whatever Netflix does, TV studios also have focus groups, viewing statistics and critics’ reviews to garner information about what viewers like. Hell, you yourself could even post cheques directly to TV studios...although private companies tend to be squeamish about accepting donations.)
Notice that in my two-subscriber Netflix example there wasn’t any communication between us.
Even if there had been, well, that would’ve just turned things into a bargaining game. I don’t think it’d be a bargaining game as those games are usually modelled, because there’d be no enforcement mechanism backing whatever we’d agree on the telephone. So I expect something like the no-communication equilibrium would still happen.
Yup.
That’s true...
...but that doesn’t follow, because introducing choice would hand subscribers a way to free ride. Hence the “choice” Netflix observed wouldn’t match subscribers’ true preference rankings. The preference ranking problem would therefore remain unsolved.
I don’t understand the relevance. As far as I can tell I’m neither citing Paul Samuelson, nor assuming omniscient & benevolent government planners. The didactic example I used here involved a private company and TV producers!
You’re in this boat, and I’m in this boat, and Robin Hanson is in this boat. How many other people are in this boat? You’d figure that smarter people have more money to spend on content than dumber people do… yet, for some reason there’s a shortage of smarter content. Shall we call this “satt’s paradox”? Ok!
Your reply failed in all types of ways. Let’s wipe the board clean.
Right now the US has a non-profit sector. It contains organizations like the NRA and PETA. Donations to the non-profit organizations are entirely voluntarily. And, given that people can benefit from what many non-profits supply without having to chip in, it stands to reason that the free-rider problem is applicable. Yet, in 2012 non-profits received $1.65 trillion in total revenues. Most of it wasn’t from the government so we can conclude that the free-rider problem clearly doesn’t entirely exclude the possibility of voluntary contributions to collective goods.
But what if we made contribution to the non-profit sector mandatory? Maybe everybody would have to chip in at least 10% of their income… but they could choose which non-profits they gave their donations to. Would this improve the outcome? Well… there would still be the free-rider problem… right?
So let’s take it a step further. Everybody would have to chip in… and we’d elect 500 representatives to choose how to divvy up the pool of funds among the various non-profits. Would this improve the outcome more… or less?
Which non-profit system would create the most value?
The current system
The minimum contribution + consumer choice system
The minimum contribution + representative choice system
There’s still some room on the board!
This website uses thumbs up/down to valuate the articles. What if we all had a website bank account (WBA) that we could make a deposit to using paypal? This would allow us to valuate the articles with actual money rather than thumbs. There would still be the free-rider problem right?
So what if everybody had to contribute say a minimum of $2/month to their WBA? But they would be able to choose which articles they allocated their money to. There would still be the free-rider problem right?
So what if we still have the minimum contribution… but we elect 5 representatives to allocate the money for us?
Which website system would create the most value?
The current thumbs up/down system
The voluntary contribution + consumer choice system
The minimum contribution + consumer choice system
The minimum contribution + representative choice system
Please explain your answers.
Dropping the economists for a moment and turning to a writer: “Television is the way it is simply because people tend to be extremely similar in their vulgar and prurient and dumb interests and wildly different in their refined and aesthetic and noble interests”.
More mundanely, smarter people are probably better at pirating what they like than dumb people, too.
You don’t describe any of the ways my reply “failed”, so that appears to be an evasion.
Not sure. I’d need more information.
The current system presumably gives less money to non-profits than your two alternatives. But maybe under your system 2 the extra money would go to existing ineffective charities and not improve on the status quo. That seems unlikely to be a big enough effect to outweigh the benefit of more non-profit revenue, though. But then again, maybe under system 2 and/or system 3 people would start setting up spurious non-profits to enrich themselves, and how much of a problem that’d be would depend on the precise regulation imposed on non-profits in your counterfactual systems. You don’t specify.
Probably the current thumbs up/down system. Options 3 & 4 involve involuntary contributions, and the effect of that driving people away from Less Wrong would probably swamp any benefit from the contributions. Under option 2 the vast majority of users wouldn’t bother to use the system, and I wouldn’t expect the minority who did use it to be representative of LW, so option 2 would likely lead to a distorted representation of how much the overall userbase liked posts. And then there’s the risk that introducing monetary payments adds more incentives for people to post crowd-pleasing stuff instead of the stuff I’d say adds value! (And don’t we already have technologies for throwing money at people who write stuff one likes on the Internet? Does option 2 bring much new to the table?)
Done. But your questions don’t clearly address the specific points I made before, and arguing with people who don’t address the specific points I’m making is unproductive. Don’t expect me to answer any more tangential essay questions.
If you zig some times… and zag other times… and you’re failing to explain your zig vs zag rules… then perhaps if you answer enough essay questions we’ll be able to elucidate/illuminate whether your rules are so good or no good (incoherent).
The Satt
Satt’s Paradox
My rule is simple. Consumer choice is always better than representative choice. Your rule isn’t so simple. Some times you believe that consumer choice is better… and other times you don’t.
My sole defence is that reality is complicated. I do think it’s a pretty good defence; it also explains why sometimes when I get sick I think it’s better to take antibiotics than not to, and other times I don’t. For example.
Hmm, something that would take no small amount of time, and have a dubious & uncertain benefit. Unpromising. And I reckon I’ve made my original point adequately, so I’m going to call this a wrap.
This claims that movies, books, etc. can’t have different prices like cars do because higher-priced movies could be cheaply pirated.
The world did exist before the Internet became popular. Your explanation may explain why we don’t have the movie equivalent of million dollar cars today, but it fails at explaining this back in the day when it was impossible to pirate a movie reasonably.
First, it’s important to note that my “failure” doesn’t change the fact that linvoids aren’t rivalrous). In other words, my “failure” has absolutely no bearing on the validity of my verdict.
Second, markets don’t mean that every Easter Egg (EE) will be spotted. With markets you have a lot more people participating in the search process so it increases the chances that an EE will be found. Plus, finders reap the rewards of finding EEs… so there’s more incentive to find them. My point is that just because nobody has spotted an EE doesn’t mean that it doesn’t exist.
Thirdly, it’s not necessarily clear how back in the day a movie producer would have been able to charge more for a superior product. Perhaps in a big city like Los Angeles you could have filled a theater with people willing to pay $1500 for the opportunity to see a smarter movie? Right now people are willing to pay around $5000 for the opportunity to attend TED talks. There’s no reason that the contents of TED talks can’t be served in a movie format.
Fourthly, if we did shift linvoids over to the public sector and give taxpayers the freedom to choose where their taxes go… taxes wouldn’t be paying for the opportunity to consume the linvoid… they would be paying for the production of the linvoid.
With the current system, we buy a movie if it’s worth it to do so. It’s binary.… yes or no. A DVD either is, or it isn’t, worth $15. In reality though… there’s a continuum of valuations that range from $0.00 all the way to thousands of dollars. A pricing system only captures the tip of the tip of this iceberg. A pragmatarian system would capture the entire iceberg. If a movie is only worth $1 to you… then that’s how much you could allocate to it. If its worth $1000 to me… then that’s how much I’d allocate to it. As a result, the supply would far more accurately reflect demand.
Television actually has gotten noticeably smarter over the last century, with institutions like HBO occupying the ‘smart and rich’ niche. But you’ll note that HBO still targets a low enough degree of intelligence that it can sell lots and lots of subscriptions, because that’s the profit-maximizing thing to do.
While that may be true, I feel that the TV got noticeably dumber over the last decade or so as the “smart and rich” decamped for the internet.
Very possibly—I, for one, watch very little in the way of new television, and what I do watch I watch over the internet.
What’s HBO producing that’s smarter?
This states roughly the argument I had in mind.
Complexity = smarter?
I go back into time and try and persuade Adam Smith to include a section on pragmatarianism in his Wealth of Nations.
“Hey Adam Smith… if your invisible hand is good enough for the private sector… then why isn’t it good enough for the public sector?”
The story is pretty simple… but the topic is smarter.
I’d be willing to pay a lot more for this story than pretty much all the stories mentioned in that article you shared. The problem is that there isn’t a mechanism for me to do so. So the question is… how could we create such a mechanism?
Right now we have a private sector (for-profit sector + non-profit sector) and a public sector. Imagine if we created an entertainment sector. Everybody would have to contribute 10% of their income to this sector… but they could choose which content they paid for. This would create a mechanism by which the supply of smarter content would come to more accurately reflect the true demand for smarter content.
But why 10%? Why not 5% or 25%? Clearly we’re really screwed if we have to spend too much money on entertainment! We wouldn’t have enough money left over for more important things. But if we spend too little on entertainment then we’ll all be kinda sad.
The solution? We simply label “entertainment” a public good and move it into the public sector. Then we allow taxpayers to choose where their taxes go. This way we can ensure a more optimal proportion/balance.
A car is a private good because it’s rivalrous and excludable. There are expensive cars and cheap cars. A movie isn’t rivalrous but clearly we’ve figured out how to make it excludable. You have to buy a ticket to watch it in a theater. You have to buy the DVD to watch it at home. Or pay for Netflix. But these mechanisms all fight against the movie’s true nature. As a result, movies all cost consumers pretty much the same amount of money and we end up with a huge disparity between supply and demand. We could eliminate this disparity simply by...
acknowledging the true nature of movies/songs/books
moving them over to the public sector
allowing people to choose where their taxes go