
Anthropic Capitalism and the New Gimmick Economy - harshreality
https://www.edge.org/response-detail/26756
======
dnautics
"Price is nearly equal to value except in rare edge cases of market failure"

What does this even mean?

I'll give two thought examples.

1)Let's say I have a severe peanut allergy and peanuts are selling at
$5.00/lb. Does the price meet the value? I.e. would I have a tricky time
deciding if I would rather have the $5.00 or the pound of peanuts? Is this
even true across society as an "average"? Do we believe markets are that
rational, efficient and smooth?

2) over the course of the last year the price of gasoline in California has
fluctuated by nearly 40%. Is this variance truly reflective of the relative
value of gasoline to dollars over this time period, or is the "catastrophic
market failure". How Scotsman must such a failure be?

~~~
sbuttgereit
This. Of value to whom, for what purpose they might have, for a given time....
and given the "value" of currency at any given moment. The price at which a
market clears is a reasonable fixing of the value, given all of the variables.
Even then the assessment of value isn't the same for either side of a trade:
the consumer considers the product to be worth more than the money paid and
the producer considers the money worth more than the product: they don't agree
on the value of the product. If they do... one or the other is an idiot for
making the trade.

A Picasso can sell at a lot of money because not because of the labor put into
it, the materials it's made of, etc. It sells for a lot of money because to
someone believes it's worth it.

~~~
ArkyBeagle
No, because someone believes someone _else_ thinks it's worth it. There's a
mimetic component to market economics that gets no treatment in writing.

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stegosaurus
The criticism of economic metrics is sound but the rest of the article
reminded me of Politics and the English Language (the use of complex words
where simple ones would do).

On the topic of economic metrics - I believe that at this point, in the UK at
least, GDP, unemployment, median wage, inflation, and possibly more indicators
are irrelevant, and the focus on them misplaced, primarily because housing
(capital) costs have exploded whilst other (operational) costs have shrunk.

~~~
imtringued
Our current inflation metric only captures prices of consumer goods. All the
inflation that was intended to happen was actually absorbed by the financial
market.

~~~
ArkyBeagle
"All the inflation that was intended to happen was actually absorbed..." \- do
you have a source for this? That seems a whopper of an idea, and I'd like to
explore it at length.

~~~
stegosaurus
>> intended to happen

Not sure I can provide a source on this (it's a matter of inner workings of
Government).

>> inflation [...] was actually absorbed by the financial market

In the UK the CPI is made up mostly of operational costs. I deliberately use
the term 'operational' here as distinct from 'consumer goods' or something
because I am philosophically opposed to partitioning humans into 'consumers'
and 'producers'. A naive idealist. :)

I would like to produce a 'teardown' of the specification at some point, but
haven't motivated myself yet. I actually have a comment somewhere here on HN
that has gotten lost - that's a bit of a kick up the arse for me to produce
something a bit more structured like a blog.

Mortage payments, both interest and capital, and rent are dealt with very
badly by CPI. As I recall, they're basically not even included. I think legal
fees on home purchase, maintenance, and some other related expenses are in
there.

At the moment, for at least the median household and probably a large
percentage of them, some combination of rent, mortgage payments, or imputed
interest is the highest annual expense by a large margin.

In that context the CPI becomes a sort of analysis of 'inflation of items
purchased by discretionary income', because it fails to account for well over
half of the economy.

On the ground I think this is sort of obvious, which is why I've been
reluctant to produce write-ups with proper citations, because it feels a bit
like preaching to the converted.

(This is taking as axiomatic that housing costs are 'the financial market'.
I'm considering it 'obvious', because housing is essentially the only valuable
asset that the median, or even 75th percentile person owns. It functions as
capital.)

~~~
ArkyBeagle
I'd had basically the same thought, and I was more or less trying to reproduce
how I got to it, hopefully with some references.

I completely agree that it somehow seems self-evident, but that's sort of weak
tea.

If we've lost the ability to use inflation as a steering mechanism for the
economy ( and boy does it look like we have ) then I think that explains much
of our present pain and suffering. It is as if we've basically internalized
inflation bad" back to our limbic system and we only react in the one
direction now.

I don't know if this will help, but I read the rise of all the political ...
unpleasantness in the 1930s - leading to the deaths of 4% of all humans in the
1940s - as a manifestation of this same phenomenon.

------
mindslight
TSLH - too short, left hanging.

I've pondered similar diagnoses of various economic metrics. But what is his
constructive outlook for what comes next?

Without one, the only approach is to cling to the outgoing paradigm, because
being in a better position in the old one is not likely to put one in a worse
position in whatever the new one may be.

~~~
SpeakMouthWords
I've noticed this repeatedly in these vast, sweeping future-of-the-economy
outlook pieces. The writer is keen to point out everything that means that the
current paradigm is bound to shift, but they never take the time to stick
their neck out and postulate what it's shifting into.

That said, I did enjoy this article.

------
danharaj
> Capitalism and Communism which briefly resembled victor and vanquished,
> increasingly look more like Thelma and Louise; a tragic couple sent over the
> edge by forces beyond their control. What comes next is anyone’s guess and
> the world hangs in the balance.

Honestly how is this entire article not an exercise in historical materialism
as proposed by Marx?

From Wikipedia:

"Historical materialism is a methodological approach to the study of human
societies and their development over time and was first articulated by Karl
Marx (1818–1883) as the materialist conception of history. It is principally a
theory of history according to which the material conditions of a society's
mode of production (its way of producing and reproducing the means of human
existence—in Marxist terms, the union of its productive capacity and social
relations of production) fundamentally determine its organisation and
development.

Historical materialism looks for the causes of developments and changes in
human society in the means by which humans collectively produce the
necessities of life. Social classes and the relationship between them, along
with the political structures and ways of thinking in society, are founded on
and reflect contemporary economic activity."

> In the first place, we should expect that because there is as yet no known
> alternative to market capitalism...

I can't even.

------
rdtsc
The most interesting part is that up until recently Capitalism and Democracy
were considered (at least for propaganda purposes) to go hand in hand. That
was often sold to third world countries as a package deal. "It's ok if there
is a bit of brutality and less freedoms, as long as the capital revolves,
because democracy will come in time, it has to, right...". But it is
interesting that in cases of countries like China, Singapore, Taiwan? maybe
other Asian countries have shown the two don't have to go hand in hand.

~~~
simonh
For how long though? China has had a market economy, in some sectors on its
economy only, for a couple of decades. The UK has been struggling with
democracy since Cromwell. You can't expect them to converge in a time scale
measured in less than generations.

Taiwan and South Korea were both authoritarian within my lifetime. Now both
are clearly dynamic democracies. Not perfect ones by any means, but
dramatically transformed in a single generation.

Some will change faster than others, and who can say when any given country
will pass the tipping point? But can't you really authoritatively say that
it's never going to happen?

~~~
rdtsc
But I don't see them converging. In other words even if takes a long time, you
can estimate a bit by looking at current trends. I

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daxfohl
> things made of atoms ... are being replaced by things made of bits

Bits are made of atoms. Computing requires work in the Newtonian sense. So
things aren't becoming free, they're becoming orders-of-magnitude cheaper. Big
difference: in the former case money is worthless and society is unavoidably
egalitarian. In the latter, one person can still be a million times richer
than another.

------
seibelj
His comparisons of computer files to public goods are meaningless. Think of a
web service. It is the same as any other type of service, physical or virtual.
It does a job. It costs money to maintain. It charges money to users.
Competitors can create competing services. No where in here is the web service
a public good.

~~~
marcus_holmes
I don't like the comparison either. Because the problem with conventional
economics and digital goods isn't the "public good" thing, it's the marginal
cost of production.

It costs nothing to produce one more unit of a digital good (or add one more
customer to a digital service). Prices in economics are affected by supply,
and supply is limited by the marginal cost of production. If there's no
marginal cost, then there's no limits on supply, and price tends to zero.

Startup economics agrees with this. If the cost of acquiring a customer via
paid advertising is $9.99 and the lifetime value of a customer is $10, then
the smart thing to do is to spend every single dollar you can raise on paid
advertising (I exaggerate slightly). The value we place on the actual
production of that service for each new customer is zero.

This completely messes up traditional economic models.

~~~
WalterBright
> It costs nothing to produce one more unit of a digital good (or add one more
> customer to a digital service).

Having sold digital goods for years, I can attest that this is not true. For
example, customers have questions, which consumes one's time. They do returns.
Fraud costs. Accounting costs. Taxes on transactions. Bandwidth costs. Hosting
costs. Transaction fees from your merchant service account. Etc.

~~~
marcus_holmes
I rolled all of that up into the cost of customer acquisition. The operating
costs (bandwidth, hosting, customer service, fraud insurance) are tiny when
spread across the entire customer base.

I guess it would be more accurate to refer to the cost of producing one more
month of service rather than one more customer. Even then there are costs, but
they're tiny compared to the costs of providing a physical service.

Contrast the costs of running Netflix now vs Netflix when it was distributing
DVD's in the post (or the costs that Blockbuster had). Adding one more
customer to Netflix costs so little now that it's effectively zero, compared
to the direct costs of sending out DVD's in the old days.

~~~
WalterBright
Just running someone's credit card costs you 3%. This is why gas stations
offer discounts for cash.

Ever notice that online companies hide from their customers? As in, no phone
number, no email address, no way to contact support, they just direct you to a
FAQ. This is because customer service is very expensive to provide.

------
titzer
"Computer programs, like life itself, can be decomposed into two types of
components:

Loops which repeat with small variations. Rube Goldberg like processes which
happen once."

What in the? Any serious analysis could not possibly result from such guffaw-
inducing oversimplifications.

~~~
coldtea
Serious analysis can result from even more drastic simplifications.

An analysis only requires as much detail as is necessary for its purposes.

The same way that you don't go into registers when you try to teach functions,
or binary representation of numbers if you teach people to use a calculator.

------
nickff
This article is based on a set of false assumptions, and is obviously written
by someone ignorant of the history of economics.

> _" Economic theory, like the physics on which it is based, is in essence an
> extended exercise in perturbation theory. Solvable and simplified
> frictionless markets are populated by rational agents which are then all
> subjected to perturbations in an effort to recover economic realism. Thus
> while it is false that economists believe idealized models to be exactly
> accurate as outsiders contend, it is fair to say that they implicitly assume
> deviations from the ideal are manageably small."_

When Smith wrote "The Wealth of Nations", he had no such theory of
frictionless markets populated by rational actors."The Wealth of Nations" was
written based on what Smith observed in the world around him, not some thought
experiment, and most of the examples in the book were based on real markets
and policies, such as the corn laws. Smith had in fact written another book
which made it clear that he believed humans were complex moral and emotional
beings.

Throughout the history of economics, many (if not most) of the notable
contributions were made by people addressing the situations they found
themselves in, such as Bastiat responding to protectionism he saw in the
French national assembly.

> _" Even die-hard proponents of market capitalism will cede that this public
> sector represents “market failure” where price and value become
> disconnected. Why should one elect to pay for an army when he will equally
> benefit from free riding on the payments of others? Thus in a traditional
> market economy, payment must be secured by threat of force in the form of
> compulsory taxes."_

This is another example of the author's complete misapprehension of economics.
I have never heard any economist argue that all externalities should be
compensated or penalized, because everything has externalities. Many have come
to different conclusions based on the abundance of externalities; there are
Marxists who believe the government must control everything to properly
allocate resources, and there are anarcho-capitalists who believe that
externalities should either be paid for voluntarily (perhaps after social
pressures) or not at all.

I could go on to list many of the rest of the egregious errors in this post,
but wouldn't want to further tax your patience.

~~~
TheOtherHobbes
It's an informative example of social signalling masquerading as analysis.
There's a TED-ish evangelical enthusiasm for drawing analogies between ideas
that aren't really analogous, an appeal to authority (science[tm]), some
drastic oversimplifications of complex ideas, and a zinger at the end.

But unless you believe that technology is an evolving lifeform that has its
own parasitic political agenda - always possible, but hard to support without
evidence - the problems of capitalism and technology are about opportunity
distribution, not about whether software runs in a loop.

There's no invisible silicon hand at work. It's still all about some people
making decisions, and about other people who are excluded from that process.

~~~
fghrthtb
I agree it definitely has that quality. However the analysis also 'feels'
right to me, the proposed model fits elegantly. My money is on him being
correct in many ways.

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samirillian
well i liked it!

~~~
knieveltech
I liked it as well but you have to expect a bunch of blowback in comments when
you're posting material that's basically "software is eating the world".

