
Money Out of Nowhere: How Internet Marketplaces Unlock Economic Wealth - gmishuris
http://abovethecrowd.com/2019/02/27/money-out-of-nowhere-how-internet-marketplaces-unlock-economic-wealth/
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deogeo
> "What Ricardo proved mathematically, is that if one country has simply a
> comparative advantage (not even an absolute one), it still is in everyone’s
> best interest to embrace specialization and free trade. [...] It is quite
> bizarre to see modern day politicians throw caution to the wind and ignore
> these fundamental tenants of economic science."

Good old mathematical proof with spherical cows in a frictionless vacuum.
Should be complemented with some empiricism. From
[https://en.wikipedia.org/wiki/Comparative_advantage#Criticis...](https://en.wikipedia.org/wiki/Comparative_advantage#Criticism):
"none of the world's most successful trading regions, including Japan, Korea,
Taiwan, and now mainland China, reached their current status by adopting
neoliberal trading rules."

~~~
harimau777
It seems like what's missing is that being in "everyone's" best interest isn't
the same as being in "every individual's" best interest. I don't know enough
to say about this situation specifically, but something that helps society as
a whole could still hurt a large segment of society.

~~~
blotter_paper
I think it's actually the other way around. Ricardo's models show that
individuals stand to gain from trading with individuals who have different
opportunity costs, and at least in simplified scenarios it seems to check out.
It's when you look at the bigger picture that things get tricky. Does country
A want to rely on country B for oil/food/weapons/whatever-else-they-need-to-
survive? That could cause issues. Are imports causing competition with a
fledgling segment of your economy that you want to become competitive on the
global stage, but which isn't yet? Maybe importing massive amounts of cheap
electronics today will prevent you from becoming a major exporter of
electronics in the future, because local investment of time and money will be
directed elsewhere; maybe this is fine, and maybe it isn't, depending on your
goals. There are reasons to block trade that don't have to do with immediate
efficiency. Absent of these reasons, Ricardo (sadly) seems to be mostly
correct.

Edit: "the other way around" isn't quite right, I thought you were making a
point besides the one you were actually making. Hurpadurpa.

~~~
devoply
If you want to ever have a chance to progress and develop your economy then
these criticisms are everything. On the other hand if you have a developed
economy and already lead in many sectors then you can follow these sorts of
rules and still be fine. The point of this as ideology is simply to try to
cement the "natural" order of things. It's failed mostly because of work of
heterodox economists from the countries effected negatively by such ideology
like South Korea.

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jondubois
>> The second, and less discussed, requirement is for the two parties that
should trade to be aware of one another’s goods or services.

>> Fortunately, the rise of the Internet, and specifically Internet
marketplace models, act as accelerants to the productivity benefits of the
division of labour AND comparative advantage by reducing information asymmetry
and increasing the likelihood of a perfect match with regard to the exchange
of goods or services.

That is false. Maybe it was the case at the beginning, but now with a small
number of big gatekeepers like Google, Amazon and Facebook, the internet
actually increases information asymmetry. Mostly by concentrating user
attention to a small number of companies/products and thereby encouraging herd
mentality and distracting users away from real value which would make their
lives better.

~~~
holoduke
They basically represent sperate countries. Without any anti monopoly rules
and other regulations we have constructed last 400 years to make the business
landscape a healthy one. It's sad to see these giants taking over entire
markets and collect insane cuts

~~~
edmundsauto
Another perspective is that they created those markets, so this is a way to
recoup that (heavily risky) investment. They survived and are collecting the
spoils of a million failed marketplaces.

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ip26
Does anyone else ever get the feeling that popular terms & phrases for this
subject, e.g. "unlock value", strike that perfect balance of vaguery and
reverence as to evoke a cargo cult?

~~~
wutbrodo
Is it vague? I've always taken it to refer to a Kaldor-Hicks improvement, ie
positive-sum, which is very well-defined (though of course, as with everything
utility-related difficult to measure). It never even occurred to me that it
would mean something else.

~~~
ip26
I understand there's real economics in the background, and plenty of earnest &
legitimate economists. But sometimes when I read the pundits, I can't help but
hear Jack D. Ripper in my head.

 _A foreign substance is introduced into our precious bodily fluids without
the knowledge of the individual, and certainly without any choice. That 's the
way your hard-core Commie works. I first became aware of it, Mandrake, during
the physical act of love... Yes, a profound sense of fatigue, a feeling of
emptiness followed. Luckily I — I was able to interpret these feelings
correctly. Loss of essence. I can assure you it has not recurred, Mandrake.
Women, er, women sense my power, and they seek the life essence._

(Dr. Strangelove)

I realize the above has nothing to do with economics, but it strikes me as the
same mystical thinking, specific-yet-vague phrases, and reverence.
Exaggerated, yes, but it's satire.

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clairity
the "money from nowhere" phrase is a bit disingenious. in many cases, money is
being redirected from an old industry into the new marketplace--from taxis to
uber, from hotels to airbnb, from recruiters to indeed, etc. sure, there is
some incremental added value that's "new money", but unless it also generates
new jobs to employ the un-/under-employed, that money is being funneled from
another part of the economy (like being extracted from family savings or
materialized through loans). and information asymmetries aren't being
destroyed, so much as concentrated in the marketplace to extract rents (e.g.,
uber's opaque pricing).

and while free trade "works" in a homogenous steady-state global economy,
we're not there yet. there are a lot of dynamics (i.e., economic, social and
political disparities) to work through before that happens.

~~~
forrestthewoods
Wealth isn’t zero-sum. The world is radically richer compared to 30 years ago.

~~~
moosey
Wealth is zero-sum. We've just been ignoring the ecological impacts of our
economy since the industrial revolution. I think that the true mark of wealth
is the amount of high density energy you can use: Those private jets, huge
homes, yachts, etc. require massive quantities of energy to use.

Should the human race decide to fight climate change, for real, then it will
be one of the greatest wealth equalizers of all time: we'll all end up a good
deal 'poorer' than we were before.

~~~
matt4077
You're describing something, but it isn't "wealth". Or, if it is, it's
useless.

And if wealth is zero-sum, how can we "all end up a good deal 'poorer' than we
were before."? NB: that whole sentence seems to be missing an odd number of
negations.

But here's an indicator you'll like: "Energy Intensity" is, basically,
production / energy usage. This was surprisingly stable over most of the 20th
century, lending some support to the gist of your objection. But, two good
news: (1) it's now on a definitive downward trend, proving that thinking does
produce value (yeah!). And (2) renewable energy is rising, meaning that energy
usage is now decoupling from the harms you allude to (CO_2 et al).

~~~
moosey
The main problem with that energy usage is energy density.

While electric vehicles will be about, I think that personal transport, as one
example, will become quite rare.

Does that make us poorer? I don't actually think so. I sincerely believe that
it will enrich our lives.

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carapace
Here's one that I'd like to do but lack the time/commitment:

Movie theaters, movies, moviegoers... Connect them on a platform that accepts
data about customers' available movie nights and preferences, and then
allocates movies and moviegoers to available theaters. As a user, you'd enter
the dates and times you want to see a movie, the theaters you prefer, and
which movies you want to see, and the system presents you with a menu of
options.

Theater owners would get full(er) houses; movie studios could get feedback
about audience preferences; and it would make it much easier to go see the
movies you want. Neat, eh?

~~~
elliekelly
That is (perhaps was?) the premise behind MoviePass's long-term business plan.

~~~
carapace
..oh, der.

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zackmorris
Since it's Friday, how about a little devil's advocate. Does anyone here ever
think about alternative economic systems similar to getting rid of money, like
what the Federation does on Star Trek? Why hasn't an online group (similar to
a utopia) formed where members contribute a portion of their incomes and
receive a UBI? A single unicorn could pay everyone to work on unrelated
projects and solve real global problems.

I'm not really driven by money. I work more for the betterment of society, to
help important projects that could change the world, to help others start
their careers, and for self-actualization, or to not have to work someday,
things like that. If I had solar panels on my roof and a little robotic
hydroponic garden in my backyard, there's not a whole lot else I would need
from the world. I might consider putting the bulk of my income into a pool for
everyone if it meant that I could finally be left alone to research and invent
on my own and make a larger contribution to society than the narrow goals that
capitalism has for my skills.

~~~
dlg
There's a (relatively new) book, Radical Markets[0] by Eric Posner and Glen
Weyl that looks at how mechanisms for this might actually work in practice.

Core to their argument is that most things we care about in society have
increasing returns to scale so that under our current system we systematically
under-allocate and mis-allocate to public goods.

While I disagree with a lot of it in practice, I highly recommend reading it
if you're thinking the way the parent comment of this comment does.

[0] [https://www.amazon.com/Radical-Markets-Uprooting-
Capitalism-...](https://www.amazon.com/Radical-Markets-Uprooting-Capitalism-
Democracy/dp/0691177503)

~~~
selimthegrim
Was this the Eric Posner who was suggesting adopting immigrants?

~~~
matt4077
That does sound like him.

Posner is probably best known for (a) suggesting an open market for babies,
and (b) being one of the smartest humans of our era.

He's a Chicago School market-mechanisms fetishist, but a reasonable one
believing in the necessity of regulations to tackle externalities and anti-
trust.

His writings sit in that perfect spot where I instantly notice the author is
way smarter than me, but can still understand the jokes.

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cryoshon
i agree with the general trend that new platforms drive new growth, which is
great. but they don't necessarily work out for the participants in the
platforms, and in fact the very platforms themselves can be highly
exploitative depending on how people engage with them.

example: uber is a marketplace for transferring illiquid wealth assets from
drivers to uber itself, along with a fraction of the revenues from each ride.
put differently, uber may be making its drivers poorer in an abstract way
which they may not understand because they are being paid for the labor
required to extract value from their vehicle.

another example: freelancing platforms. everyone knows that these platforms
depress wages for the freelancers and are a race to the bottom. businesses can
grow more because labor costs less on the platform than off of the platform,
and they can expect the platform to handle the infrastructure of paying and
managing the labor to an extent. but freelancers on the platform could almost
certainly make more money if they weren't on the platform because then they
wouldn't be competing with as many others for a given opportunity. sure, some
people make it work. but on average, people earn far less and expectations are
much higher.

~~~
wutbrodo
> uber is a marketplace for transferring illiquid wealth assets from drivers
> to uber itself, along with a fraction of the revenues from each ride.

I feel like I'm of two minds about this, as all of the pieces from rags like
the NYT use analyses that assign 100% of the depreciation of the car to
driving, which is obviously absurd: your car loses something like half it's
value the minute you drive it off the lot. For some reason, none of the
analyses I've seen attempt to address this (in fairness, it's probably pretty
difficult).

The upshot is the difference between unlocking wealth that was going to be
unlocked anyway, and unlocking wealth that was going to be wasted. A person's
car is a criminally underutilized asset (from both a personal finance and a
societal perspective), and increasing its utilization so you get more value
out of it during its trip from full value to $0 is a concrete gain for both
society and the Uber driver (and along the way, passengers and Uber itself).

The dynamic you describe is certainly a factor too; It seems to me to be an
open question how big a component of an Uber ride's value each of these is. At
any rate, I don't think your confident assertion that being an Uber driver is
simply giving up your liquid asset value is warranted.

~~~
UncleEntity
Realistically, the things I've seen focus on the trade-in value of said car --
_ceteris paribus_ a car with 80k miles is simply not worth as much as one with
200k miles. Plus the increased maintenance associated with all the extra
miles. I'm also pretty sure the used car market is penalizing people for their
ride share activities.

So they may be "unlocking wealth" today but in the long run who really knows
how much of that "wealth" they're really benefiting from if any at all.

~~~
wutbrodo
Would you happen to have a link to any of these analyses? As I mentioned, I've
been unable to find and and would appreciate seeing one that calculates asset
depreciation reasonably like this.

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maehwasu
Heuristic: if your premise contains the phrase "Ricardo proved
mathematically", your conclusion is likely fucked.

