The following line of timeless consumer economics occurred to me. Please poke holes in it —
I shouldn’t assume that my decision-making process is a lot better than everyone else’s. I don’t have unusual levels of access to the facts. If I believe a stock will go down, my belief is based on publicly-available facts which other traders have. Therefore, I should not expect to make a windfall on the basis of my belief, because my belief is not unusually accurate.
However, the same general rule applies to consumer choices. I shouldn’t assume that my consumer choices are unique to me, either. If I decide to stop buying product X, it’s probably for publicly-available reasons that other consumers also possess. So I should not expect that I am the only one quitting X or switching to Y.
(This doesn’t mean that nobody is switching in the other direction, of course, although it may mean I possess no positive evidence of that proposition.)
Therefore, in cases where I am personally involved, as opposed to cases where I’m considering an abstract market I’m not involved in, I should expect that my own decisions indicate more than just my own decisions.
However, the same general rule applies to consumer choices.
Not quite, because the metric is different.
Everyone buys and sells stocks for a single reason—to make money. The profit from a trade, expressed in dollars, is the universal target of optimization. However with consumer choices there is no such single and universal target. Alice, Bob, Charlie, and Dick all buy different cereals—not because they are irrational, but because they have different tastes and preferences.
I should expect that my own decisions indicate more than just my own decisions.
Yes, you should expect that there are more people like you. But that does NOT necessarily imply that the majority of the consumers in this case are like you.
I wrote: “I should not expect that I am the only one quitting X or switching to Y.”
I didn’t write: “I should expect that everyone else is quitting X or switching to Y.”
Your response generalizes back to the stock market, too—any time the market clears, the number of shares bought equals the number sold. So everyone intends to make money, but any time a nonzero number of people act on their belief “I should buy!” there is also a nonzero number of people acting on “I should sell!”. (Not necessarily the same number, of course; nor does the market always clear.) This isn’t necessarily because they have different preferences, but because they have different beliefs.
Indeed, for the market to clear, there have to be people with different beliefs or preferences. If literally everyone believes a stock is going to go to $0, nobody will buy it at any price. But if everyone thinks that it will monotonically rise, some people will at various points want to cash out due to their preferences — to buy a house or something.
The following line of timeless consumer economics occurred to me. Please poke holes in it —
I shouldn’t assume that my decision-making process is a lot better than everyone else’s. I don’t have unusual levels of access to the facts. If I believe a stock will go down, my belief is based on publicly-available facts which other traders have. Therefore, I should not expect to make a windfall on the basis of my belief, because my belief is not unusually accurate.
However, the same general rule applies to consumer choices. I shouldn’t assume that my consumer choices are unique to me, either. If I decide to stop buying product X, it’s probably for publicly-available reasons that other consumers also possess. So I should not expect that I am the only one quitting X or switching to Y.
(This doesn’t mean that nobody is switching in the other direction, of course, although it may mean I possess no positive evidence of that proposition.)
Therefore, in cases where I am personally involved, as opposed to cases where I’m considering an abstract market I’m not involved in, I should expect that my own decisions indicate more than just my own decisions.
Broadly: You are not the marginal consumer.
Not quite, because the metric is different.
Everyone buys and sells stocks for a single reason—to make money. The profit from a trade, expressed in dollars, is the universal target of optimization. However with consumer choices there is no such single and universal target. Alice, Bob, Charlie, and Dick all buy different cereals—not because they are irrational, but because they have different tastes and preferences.
Yes, you should expect that there are more people like you. But that does NOT necessarily imply that the majority of the consumers in this case are like you.
I wrote: “I should not expect that I am the only one quitting X or switching to Y.”
I didn’t write: “I should expect that everyone else is quitting X or switching to Y.”
Your response generalizes back to the stock market, too—any time the market clears, the number of shares bought equals the number sold. So everyone intends to make money, but any time a nonzero number of people act on their belief “I should buy!” there is also a nonzero number of people acting on “I should sell!”. (Not necessarily the same number, of course; nor does the market always clear.) This isn’t necessarily because they have different preferences, but because they have different beliefs.
Indeed, for the market to clear, there have to be people with different beliefs or preferences. If literally everyone believes a stock is going to go to $0, nobody will buy it at any price. But if everyone thinks that it will monotonically rise, some people will at various points want to cash out due to their preferences — to buy a house or something.
If you want to treat this literally, this is just a “well, duh” sentence. What’s the deeper point behind it?