No, I don't think that stepping back and saying "this allocation of resources stinks" is myopic. Not unless you have so much faith in our resource allocation system that you excuse it from the need to justify itself.
In fact, I think it's myopic to assume that a business has justified its existence solely on the basis that it has experienced success on the market. A method to make a well-to-do individual or company even more well-to-do, despite a 2x or 10x cost to the competition or to society, is a winning business proposition. "Create the problem, sell the cure" is a valid business model. Feeding the poor is not. Like most of us here, I believe that in total the market is a force for good, but let's please not pretend that market forces are self-justifying or beyond reproach. In an adversarial system, the solution to one person's "real problem" can be a real monster to the rest of us. We have to make the good/evil call on our own.
Most of us are familiar with the game-theoretic concept of Nash Equilibrium and how, with the right rules, you can drive a local optimization scheme* to a globally anti-optimal outcome (i.e. the prisoner's dilemma). Since our economy runs on a local optimization scheme, it's entirely reasonable to wonder if there are any market segments where the Nash Equilibrium is particularly objectionable.
The marketing industry is a great example. I've heard it claimed that its purpose in society is to convey information to the consumer. But that's not how it makes money. It makes money by attracting customers, and indeed the ads that you and I see every day are so acutely tuned to this goal, to the near total exclusion of all others, that I doubt there are many of us who believe that watching ads helps the average person make better business decisions.
"Captain Morgan has the best brand of rum!" and "Dawny makes the softest tissues" are not messages that are of any use to society. Just the opposite -- they're probably false or, at best, misleading. Both customers and manufacturers would benefit from cutting the advertisers out of the equation. But they can't, because that's not a Nash equilibrium, and so the arms race continues. It's not as expensive as the actual wars we are fighting, but it's not too far off either.
Look, you're right that the whole "all industry does is churn out socially worthless CRUD apps" criticism is unfair. Industry has solved (and will solve) an enormous number of practical problems. But it's not myopic to notice when a business empire is built on a strategy of dubious social value or to notice when the market is systematically undervaluing some kind of human activity. Those things happen, and it's reasonable to complain when a petty/artificial "real problem" gets enshrined while the most glaring "real problems" get swept under the rug.
The scientific and humane startups you mentioned sound like steps in the right direction. I just hope that they experience a nonzero success rate. Market forces have a long and ignominious history of serving those sectors poorly. I don't have any great answers (apart from the obvious "don't defund science or social nets"), but the only way we can hope to find better options is by identifying what's wasteful, calling it that, and trying to figure out new ways to address the problem.
* While I sincerely apologize to any game theorists who object to my inaccurate terminology, I must point out that it was you guys who decided to call this kind of optimization "greedy."
I agree 100% with your comment; I think you described the issue very nicely, as opposed to just reiterating the "best minds wasted on making apps" mantra (whether or not it's true, and I believe it is).
> It's not as expensive as the actual wars we are fighting, but it's not too far off either.
It's not that much different as people may think. What the real arms race and marketing have in common, is that they're at their essence a bare, exposed* positive feedback loop. Marketing done right seeks to cancel itself out; if two competing companies do their marketing in an optimal way, it will leave the customer in the same state as if no marketing effort ever occured (ok, maybe a little more tired from listening to all that crap, but otherwise his/her decisions will not be influenced). In doing so, it can in principle use up (i.e. waste) unbounded amount of resources. That's why I sincerely consider marketing to be a parasite and a plague of our times.
You know one other thing that work in the same way? Political campaigns. Each year each side hogs up more and more resources for their campaign, but done right, they just cancel each other out, ending up providing zero value for all the resources^ wasted.
So yes, I strongly believe we have a problem here.
* - think about looking at a bare, exposed core of a working nuclear reactor. Not fun.
^ - I keep using word "resources" instead of "money", because the latter invokes some weird brain failure modes in people, that make them think there's no problem here. Positive feedback loops like those don't waste abstract numbers, they waste energy, fuel, mined resources, paper, human time and human lives, and screw up our planet even more than it is already.
> if two competing companies do their marketing in an optimal way, it will leave the customer in the same state as if no marketing effort ever occured
Marketing covers more than this. It isn't just how the pie is divided up, it is also about increasing the size of the pie.
In fact, if it increases the number of potential consumers, marketing can be rational and profitable even if it reduces the market share of the marketing company (50% of 10 consumers is less profitable than 40% of 100 consumers). There is a real rising-tide-raises-all-ships effect, especially in discretionary goods (eg, jewelry, many electronics, financial services, the list goes on).
It's not really increasing the size of the pie: consumers only have so much time and mental energy. The growth of marketing just represents capital helping itself to a bigger share. As the number of consumer choices grows, the amount of effort demanded of them as utility-maximisers increases exponentially, as do the stakes.
> Marketing covers more than this. It isn't just how the pie is divided up, it is also about increasing the size of the pie.
Yes, but the size of pie is bounded, and at some point you hit the limit of customers you can reach (most companies service local population) and/or limit of the market (there are only so many people with enough discretionary income to afford whatever you're selling). Then you're back to fighting for division of pie.
> Marketing done right seeks to cancel itself out; if two competing companies do their marketing in an optimal way, it will leave the customer in the same state as if no marketing effort ever occured (ok, maybe a little more tired from listening to all that crap, but otherwise his/her decisions will not be influenced). In doing so, it can in principle use up (i.e. waste) unbounded amount of resources. That's why I sincerely consider marketing to be a parasite and a plague of our times.
I am wondering what would be the impact of a law to limit the advertising budget of companies. I will be hard to apply it, but the goal is to force companies to get out of the Nash non-optimal equilibrium that forces them to spend resources on marketing just because if they don't, the competition will.
> No, I don't think that stepping back and saying "this allocation of resources stinks" is myopic. Not unless you have so much faith in our resource allocation system that you excuse it from the need to justify itself.
While I would not excuse our resource allocation system from the list of things that should be justified... and notwithstanding that a key resource allocation component, the Government, is subject to a wild variety of inefficiencies...
I think that it ALSO takes a lot of hubris to tell the nation's 300 million people or so+ that you know better than they do, and that they should be sacrificing for the Noble Cause of putting people in space, instead of spending it on the things they feel like make their life better, even if it DOES happen to be the brand that spends more money on advertising instead of a similar-quality generic. (Also, for what it's worth, you should be aware that your interpretation of advertising is a pretty tendentious one.)
So there's that.
(+ I say the Nation to avoid extreme comparisons in living standards which may occur with a more global view, to say nothing of the diversity of economic systems.)
> I think that it ALSO takes a lot of hubris to tell the nation's 300 million people or so+ that you know better than they do,
Of course he knows better than they do, given that, as you said, the choices are based on "more money on advertising", and that there are no real choices available, but only those designed to cater to the most selfish and short-sighed instincts of humans (i.e. that can sell easiest). Groups of people this size are not a collection of thinking individuals, they're a dumb fluid following well-understood rules that are exploited by individuals who understand them. The choice is an illusion here.
> Government is subject to a wild variety of inefficiencies.
Of course. I'm not proposing a command economy. In fact, I wouldn't even propose to legislate away the industry I just maligned.
I do believe (in agreement with Adam Smith) that the market is not a suitable model for all kinds of human activity. Science, for instance. You can't determine the value of an experimental result until long after you have given it away for free, making it nearly impossible for scientific organizations to capture any of the value they create.
Next time the doctor tells you (or a dying relative) that you don't have any good options, reflect on the market's wisdom in spending only 2% of health care revenue on research. Does this figure represent some hidden insight or does it represent a boring fact about the way markets work that has nothing to do with optimality?
> A method to make a well-to-do individual or company even more well-to-do, despite a 2x or 10x cost to the competition or to society, is a winning business proposition.
A 10x cost to competitors is great (assuming no broken laws).
Yeah, I walked right into that one. I was thinking of a few specific examples and made a generally false statement. Cross out "competition." The spirit of the complaint is still valid.
You were wise to qualify with "assuming no broken laws" because the schemes I was thinking of weren't legal, just almost impossible to prosecute ;)
The "allocation of resources", while influenced by many factors I don't care to debate about in this comment (politics, lobbying, uber wealthy, all of those sticky topics), is largely determined by market forces and your statement that the market's allocation is a waste is shortsighted because an environment in which someone decided what people should or should not be working on is an environment I want no part in.
I also think, despite its many warts, our environment (that of the USA and the tech / startup industry) is an arena within which agents can operate competitively and towards their own ends.
Is what we are doing the right way to do it for everyone? I'm not sure and it's also not my place to make that sort of judgement. But I do know it is working exceedingly well for many of us, improving the quality of life and advancing the state of our society.
> The "allocation of resources" is largely determined by market forces
Yes, I understand that. Sometimes this leads to a healthy, competitive environment with some seriously awesome features (the ability to replace incumbents, supply/demand matching, abundant opportunity, etc). But sometimes it doesn't. Sometimes it does crazy, stupid, wasteful things. Sometimes market forces are smarter than political forces in that they force people to deal rationally with unpleasant truths. Sometimes markets are dumb as bricks and create unpleasant truths all on their own.
My post did not propose any form of socialism. In fact, it didn't propose any solution at all. My post merely asked you to not pretend that the market's shit doesn't stink.
> your statement that the market's allocation is a waste is shortsighted because an environment in which someone decided what people should or should not be working on is an environment I want no part in.
I don't see how your desires relate to the shortsightedness of the plan I never proposed.
> I do know it is working exceedingly well
Is that a base rate fallacy or a "screw you, I have mine"? I can't tell.
> My post did not propose any form of socialism. In fact, it didn't propose any solution at all.
Looks like I read too much into your post I suppose and you're right that you didn't propose a solution. In that case I think I reacted to the idea I projected into your comment that the "solution" to the problem you're referencing was external resource allocation (rather than that determined by the market) - which is something I disagree with but maybe there's something there I should analyze about myself.
> I don't see how your desires relate to the shortsightedness of the plan I never proposed.
Again, you're correct here. It's obvious to me at this point that I was too emotionally involved in my interpretation of what you wrote.
> Is that a base rate fallacy ...
There was "screw you" content in there because I was projecting on to you something to resist and push against but I'm aware now of where my fault was. I'm intelligent enough to know that it is indeed a base rate fallacy so I have no excuse.
Thanks for taking the time to reply and thank you, also, for your candor.
In fact, I think it's myopic to assume that a business has justified its existence solely on the basis that it has experienced success on the market. A method to make a well-to-do individual or company even more well-to-do, despite a 2x or 10x cost to the competition or to society, is a winning business proposition. "Create the problem, sell the cure" is a valid business model. Feeding the poor is not. Like most of us here, I believe that in total the market is a force for good, but let's please not pretend that market forces are self-justifying or beyond reproach. In an adversarial system, the solution to one person's "real problem" can be a real monster to the rest of us. We have to make the good/evil call on our own.
Most of us are familiar with the game-theoretic concept of Nash Equilibrium and how, with the right rules, you can drive a local optimization scheme* to a globally anti-optimal outcome (i.e. the prisoner's dilemma). Since our economy runs on a local optimization scheme, it's entirely reasonable to wonder if there are any market segments where the Nash Equilibrium is particularly objectionable.
The marketing industry is a great example. I've heard it claimed that its purpose in society is to convey information to the consumer. But that's not how it makes money. It makes money by attracting customers, and indeed the ads that you and I see every day are so acutely tuned to this goal, to the near total exclusion of all others, that I doubt there are many of us who believe that watching ads helps the average person make better business decisions.
"Captain Morgan has the best brand of rum!" and "Dawny makes the softest tissues" are not messages that are of any use to society. Just the opposite -- they're probably false or, at best, misleading. Both customers and manufacturers would benefit from cutting the advertisers out of the equation. But they can't, because that's not a Nash equilibrium, and so the arms race continues. It's not as expensive as the actual wars we are fighting, but it's not too far off either.
Look, you're right that the whole "all industry does is churn out socially worthless CRUD apps" criticism is unfair. Industry has solved (and will solve) an enormous number of practical problems. But it's not myopic to notice when a business empire is built on a strategy of dubious social value or to notice when the market is systematically undervaluing some kind of human activity. Those things happen, and it's reasonable to complain when a petty/artificial "real problem" gets enshrined while the most glaring "real problems" get swept under the rug.
The scientific and humane startups you mentioned sound like steps in the right direction. I just hope that they experience a nonzero success rate. Market forces have a long and ignominious history of serving those sectors poorly. I don't have any great answers (apart from the obvious "don't defund science or social nets"), but the only way we can hope to find better options is by identifying what's wasteful, calling it that, and trying to figure out new ways to address the problem.
* While I sincerely apologize to any game theorists who object to my inaccurate terminology, I must point out that it was you guys who decided to call this kind of optimization "greedy."