“It’s hard to beat signaling equilibria—because they’re “multi-factor markets”—which are special cases of coordination problems that create “inferior Nash equilibria”—which are so stuck in place that market controllers can seek rent on the value generated by captive participants.”
It’s things like this that makes me puzzled why the author is yet libertarian, even in spite of this perfectly succint description of the Awful state of affairs arrived at in the wild west, when a Leviathan could try to transcend/straddle these fruits/niches and force them upward into a more Pareto optimal condition, maybe even into the non-Nash E. states if we’re extra lucky. Or is Regulatory Capture and the Law of Unintended Consequences generally so strong that any attempt can be assumed futile, and we’ll always achieve more harm than good in some lateral unexpected way as the market circumvents our efforts? (The Germans have a wonderful word—Verschlimmbessern! When you try to help/improve something, with good intentions but end up breaking it worse) Is it only thus today because all regulators also come with the undesideratum of human error? Would an AI too be doomed & unable to remedy these inferior equilibria? Or does the libertarian view only apply pragmatically now at the human era.
“I’m not aware of a standard term for this situation, so I’ll call it an inferior equilibrium”
Lock In! I think what you’re describing is called Lock In. Classic example being the qwerty keyboard. Or not using the metric system yet. Path-dependence of arriving at a particular convention, where other better alternatives exist and are known and available, but there are costs of switching.