>> And, by the way, who appointed Christoph McCann arbiter of what it good and valuable in this world?
This is such an important point, and why free markets work best. If people derive value out of Yo, then terrific. If they don't, it goes away. Don't need a moral crusader to decide what is worthy.
> This is such an important point, and why free markets work best.
Free markets don't work best, popularity is not best; free markets cater to what people want, not what they need and certainly not what's best. Absolute belief in the free market is a religion, not a fact supported by history.
Market driven economies are wonderful for producing loads of crap and me too-ware and woefully inadequate for solving really hard and necessary yet not immediately profitable problems. Quite simply, market driven economies optimize the making of money, not the solving of problems in the best way.
There's also a "market" of ideas and opinions. The OP expressed one.
The OP isn't a jack-booted right-thinking enforcer. The OP isn't even a "moral crusader", as you put it. In a free society, it is perfectly reasonable to gently mock people you believe are engaging in stupid and/or pointless pursuits. As the OP did. Of course the people doing the dumb stuff are free to scoff and ignore them. As you are.
Anyway, I think the OP has a perfectly valid point. Just because there is some market demand for an app like Yo, doesn't mean that we are predestined to make building it our life's mission. Some of us, if we slow down and reflect, might opt to be remembered for doing something other than: "Invented an app that no consumer was willing to pay for, and which solved no meaningful problems for anyone, but which some investment bankers managed to persuade some big company had strategory value. RIP".
That's fine if all y'all want that on your tombstone (the other kind of tombstone), but it's also fine to at least reflect on whether that's really what you want.
Of course. However in the marketplace of ideas, it's important that as a society we don't embrace the trappings of a command&control economy. I am merely reacting to the OPs (albeit extremely benign in this case) view that an individual or group of individuals can decide what is OK for others.
>This is such an important point, and why free markets work best.
Well, there's a subtlety there.
It's not that "free markets work best". It's that the efficient market hypothesis claims that a market with perfect information dissemination consisting of uniformly rational agents will deliver Pareto-optimal resource allocations.
There's a lot to disagree with in that sentence; market agents collude, people are demonstrably irrational/rely on cognitive heuristics and just because something is Pareto efficient doesn't mean it's fair or equitable.
All three are valid critiques, and the case in point in TFA - the market allocated money to Yo, but that doesn't mean a priori that funding Yo is a worthy and moral choice.
So, if we have markets that routinely deliver inequitable outcomes it's perfectly reasonable to ask - why is this happening?
Having studied with the originators of the efficient market hypothesis (Fama), I regret to inform you that what you describe is not a feature of EMH but is rather frequently attributed to it in an attempt to discredit it. There is nothing that rationally follows EMH that leads to Pareto-optimal outcomes in society.
EMH means that well informed markets make sound decisions on the pricing of assets. This means that based on the current information available, markets are excellent at understanding the probability-weighted value of an asset. It doesn't mean that the outcome ends up being right, it means that it's fairly priced based on the information at hand. Nothing guaranteeing Pareto-optimal outcomes from that.
Furthermore, an investor giving 1.2M to a company is not an efficient market under any circumstance.
The efficient markets hypothesis (EMH) requires neither "perfect information dissemination" or "uniformly rational agents".
Here is one well stated version of the EMH:
"The Efficient Market Hypothesis (EMH) essentially says that all known information about investment securities, such as stocks, is already factored into the prices of those securities. Therefore no amount of analysis can give an investor an edge over other investors. EMH does not require that investors be rational; it says that individual investors will act randomly but, as a whole, the market is always "right." In simple terms, "efficient" implies "normal." For example, an unusual reaction to unusual information is normal."[1]
Also, I'd venture a guess that if you sum up the total cost that has gone into Facebook's Poke feature (development, maintenance, deciding whether or not to turn it off), it would dramatically eclipse the 1.2M that everyone is so up in arms about. No one is losing their marbles over that stuff.
Look, I agree it's a ridiculous app.. but if people use it and derive value from it, good! Utility created!
I think you could just stop at "people use it". What kind of value they derive from it (if any) is another inquiry, and can't be discerned from merely observing the fact that they use it. At least, not without some really strong assumptions to the effect that people always correctly make positive-utility choices. It's possible people use it, but derive negative utility from it, and mistakenly use it nonetheless.
There are some very popular things (tobacco, say) that in most reasonable analyses produce negative utility over the long run! The problem is that people are not very good at utility-maximization, especially when the analysis involves more than one factor, some uncertainty, different time scales, etc. People are generally not good at almost any vaguely arithmetically complex operation (e.g. correctly using conditional-probability information in their decision-making, even when known).
That's one reason neoclassical economics prefers to talk about simply "price", rather than the classical discussion of both "price" and "value". Modern economics is the empirical study of pricing and economic behavior, and is agnostic about value.
Your points are all very valid of course. While utility theory has largely been superseded by prospect theory, like Newtonian physics, it can still be useful for back-of-the-envelop thought.
Furthermore I'll be a devil's advocate however and just make the point that one could rationally defend tobacco use as utility deriving. Just because a (in my view) sane person would see all the horrible effects of tobacco as trumping any positive attributes, someone else may disagree. Depending on one's own discount rate, tobacco use at any point in time in fact be net positive in enriching their life. Even if you argue that some of the positives are created by advertising cigarettes as cool (Joe Camel, etc.), so what? Someone spending $50,000 on a fancy watch is also making the same sort of determination. If the user derives the benefit, regardless of whether it's endogenous or exogenous to the product itself, that isn't obviously inherently bad.
Now, of course, smoking has it's own set of problems because it negatively affects others... but again, it's not so clear that one can't attribute rational decision making to even a smoker.
If you told someone a top 10 app with over 300,000 users raised $1.2 million they probably wouldn't bat much of an eye. That's what Yo is now. It probably wont last, but that doesn't mean its creator can't take advantage of its success right now.
Well, except there's all kinds of economic theories about how this isn't true: the tragedy of the commons, negative externalities. There's also a lot of evidence that rational actor theory isn't as true as pure economics would suggest. And of course market inefficiencies will distort price signals. And truly free markets have a hard time remaining such in face of large incentives for rational actors to instead engage in rent seeking or other anti-competitive behavior.
But yes, if you ignore all the problems both theoretical and practical with free markets, free markets work best.
Go back and read again. He's not saying anything that free markets are an imperfect way of delivering what people want, but they're better than anything else we've come up with. He's saying that free markets tell us what people want, and if you disagree with the "free market" (which is an abstraction, I don't think most things people refer to as free markets actually are the "free markets" of economic textbooks), you're disagreeing with what people actually want. That makes free markets right by tautology; the best is what people want, and what people want is what they buy on free markets. Which is fine if you want to short-circuit debate, but it doesn't actually let us ask the important questions.
> He's saying that free markets tell us what people want, and if you disagree with the "free market" (which is an abstraction, I don't think most things people refer to as free markets actually are the "free markets" of economic textbooks), you're disagreeing with what people actually want.
And while that's a common argument, the obvious problem with it is that free markets weight preferences by existing wealth. $ as a proxy for utils isn't really a valid assumption when people don't have the same quantity of $.
And yet we still have successful socialism-based projects in the US. The reality is that capitalism isn't a one-size-fits-all solution to solving all problems. We can stand outside of economic systems as moral beings and decide what ends we want to accomplish as a society, and find the best means to get to those ends.
To sacrifice the role of morals and ethics in forming societies at the altar of capitalism denies us one of the things that makes us human. If capitalism gives us "Yo's", then we may want to question why, not defer the morality of "Yo's" to capitalism and shut our brains off.
(And no, I am not making a moral statement about economic systems. I'm capitalist as fuck, but even I think if the Yo story is what it seems to be on the surface, something seems wrong.)
> If people derive value out of Yo, then terrific. If they don't, it goes away. Don't need a moral crusader to decide what is worthy.
Then you wind up with things like Fox "News" (actually Entertainment, NOT news) being popular, because they found that entertainment is much better at making money than actual news. If you let "making money" be the decider, lots of valuable things fade away.
The answer is that those things are not valuable. People don't want news. This is not a bad thing. This means that people aren't like the elitist ideal of what you want in your socialist utopia.
Real people happen to like Facebook and Fox News and Snapchat and Yo. And that's fine. To say that those desires are somehow immoral because they aren't lofty enough is elitist, condescending, and anti-humanist.
I'm not sure it's entirely correct to claim that the set of "things that people want" is equivalent to the set of "things that add value to people's lives".
I'm also unsure as to how arguing that such a distinction might exist could be construed as elitist, condescending, or anti-humanist. And I've no idea at all how you got the idea that it might imply that the desires, of people, for things which do not add value to their lives, are immoral.
(That is, that the desires are immoral, not the people. Crikey that last sentence is hard to parse. Sorry.)
>If you let "making money" be the decider, lots of valuable things fade away.
20th century was spent exploring the alternatives to such a decider. As the result we do know that "making money" is the most efficient and effective decider that humanity has so far been able to come up with. Basically the humanity is just too stupid to use anything else at the moment.
I find it so strange when people make this argument, that a century was "spent" exploring these alternatives. I don't disagree that "making money" is our best heuristic so far, but it's not like the entire 20th century was devoted solely to exploring these options. There are various other concerns intertwined with the economic strategies that competed. Fascism could have won, Stalinist communism could have won, and it would not be accurate to say that any one economic strategy is the "best we've got" just because they came out, geopolitically/militarily, on top.
There are things like Public Goods[1] that can have very high value to society but no individual has any incentive to invest in pay for them. E.g. most of the "big problems" the author is talking about. Free markets severely misallocate resources because of this. There are also things like normal wealth inequality. A poor person can't pay for the drug that will save his life. Then there are things that are very long term.
Kind of a blanket statement, free market works best. It works adequately in many cases, at best. Completely ignores non-transaction, external participants, like the environment.
Attempting moral persuasion ("moral crusading" seems an extreme interpretation) is essential for society to progress. Not much of a future if value is only determined by some business-genius decision maker deciding that, "Hey, I can make a million bucks off this. Must be worthwhile!"
That's a facile argument. There's money to be made in a wide variety of pointless or even deleterious services. You can get rich hydrofracking or producing TV shows about how aliens built the pyramids. You woukd get paid relatively little and certainly get no ownership stake working for a government program like the NHS or Medicare. Doesn't mean people don't need them.
You confuse Pareto efficient with beneficial. Indeed, markets could just as easily result in a planet wide Easter Island while still being pareto efficient at every step.
This is such an important point, and why free markets work best. If people derive value out of Yo, then terrific. If they don't, it goes away. Don't need a moral crusader to decide what is worthy.