I don’t claim here that all trades you get to do are bad. I claim that they’re worse than they might naively seem without accounting for adverse selection, i.e. for the fact that your opportunity to get something depends on nobody else wanting it (as in the case of the subway seat or the parking spot) or somebody else actively wanting the other side of the trade (as in the case of the zero-sum bedroom selection or the juggling contest).
I’m surprised that these are exotic scenarios to you. I regularly take the subway. I might not be understanding the relevance of subways as an example of “government failure,” but I’ll rephrase the example without needing to invoke a government resource:
1. The Restaurant Seat: You’re in a food court at dinnertime. Almost all of the restaurants are full to the brim, and don’t have any tables available, but you notice one that is entirely empty. You’ll be able to get a table! You enter the restaurant, order your food, and take a bite. The food is mediocre.
Bad restaurants are more likely to have open tables than good restaurants. Alice’s Restaurant and Bob’s Burgers might look identical to you from the outside, but if all the tables at Alice’s Restaurant are full and the tables at Bob’s Burgers are open, that’s evidence that Alice’s Restaurant is better quality—and you’d rather eat there. Unfortunately for you, all the tables there are full, so you can’t. The trades you get to do (eating at Bob’s) are worse than the ones you don’t (eating at Alice’s).
That doesn’t mean that eating at Bob’s is worse than going hungry. It might still be worth buying food there instead of not at all. But, if a week ago you had had the opportunity to make a reservation at either one (before Alice’s filled up), you would have been better off flipping a coin and reserving one at random than waiting to slot into whichever is available.
Does this help clarify the confusion? If so, I’ll edit in this example, so as to not have the government goods degrading element distract from the core idea.
Bad restaurants are more likely to have open tables than good restaurants.
That seems dependent on it being difficult to scale the specific skill that went into putting together the experience at the good restaurant. Things that are more scalable, like small consumer products, can be selected to be especially good trades (the bad ones don’t get popular and inexpensive).
I agree. Another way to say that is that if there’s competition for the good you want (because it’s in some way or other in limited supply—seats in the subway, shares in a specific company, pieces of candy of the flavor you like, …— and you win the competition too easily, you have to check you aren’t being screwed. But if the good is mass-produced to the point where you‘re not clearly competing with others for it, then there’s no reason to wonder why others are letting you win?
I don’t claim here that all trades you get to do are bad. I claim that they’re worse than they might naively seem without accounting for adverse selection, i.e. for the fact that your opportunity to get something depends on nobody else wanting it (as in the case of the subway seat or the parking spot) or somebody else actively wanting the other side of the trade (as in the case of the zero-sum bedroom selection or the juggling contest).
I’m surprised that these are exotic scenarios to you. I regularly take the subway. I might not be understanding the relevance of subways as an example of “government failure,” but I’ll rephrase the example without needing to invoke a government resource:
Bad restaurants are more likely to have open tables than good restaurants. Alice’s Restaurant and Bob’s Burgers might look identical to you from the outside, but if all the tables at Alice’s Restaurant are full and the tables at Bob’s Burgers are open, that’s evidence that Alice’s Restaurant is better quality—and you’d rather eat there. Unfortunately for you, all the tables there are full, so you can’t. The trades you get to do (eating at Bob’s) are worse than the ones you don’t (eating at Alice’s).
That doesn’t mean that eating at Bob’s is worse than going hungry. It might still be worth buying food there instead of not at all. But, if a week ago you had had the opportunity to make a reservation at either one (before Alice’s filled up), you would have been better off flipping a coin and reserving one at random than waiting to slot into whichever is available.
Does this help clarify the confusion? If so, I’ll edit in this example, so as to not have the government goods degrading element distract from the core idea.
That seems dependent on it being difficult to scale the specific skill that went into putting together the experience at the good restaurant. Things that are more scalable, like small consumer products, can be selected to be especially good trades (the bad ones don’t get popular and inexpensive).
I agree. Another way to say that is that if there’s competition for the good you want (because it’s in some way or other in limited supply—seats in the subway, shares in a specific company, pieces of candy of the flavor you like, …— and you win the competition too easily, you have to check you aren’t being screwed. But if the good is mass-produced to the point where you‘re not clearly competing with others for it, then there’s no reason to wonder why others are letting you win?