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I've sifted through 80% of the comments here, and I couldn't find a mention about the unintended consequences of this technology. Ethical vs. Unethical, Pro-Pr

I've sifted through 80% of the comments here, and I couldn't find a mention about the unintended consequences of this technology. Ethical vs. Unethical, Pro-Privacy vs. Against Privacy are the two common discussion points. I, however, think the bigger problem here is that there's a very non-zero probability that this technology may cause unintended consequences simply by relying on false/inaccurate data. For one, I work in analytics (loaded catch-all occupation) and I work with people who would marry their "data skills" if they could. In my industry, false positives of 80% is acceptable, and openly admitted errors in "machine-learning" logic (quoted to highlight my company's buzz-word usage, but practically non-existent) are made daily. People create algorithms, and people make errors. Let's let our imagination run wild here for a second: It's 2030, and this technology becomes ubiquitous to the point where no one objects. Businesses take all the data from sentiments, gender, age...etc. to optimize for their target demographic, and price accordingly. In other words, let's assume this tech is used for perfect price discrimination. Economic theory dictates this is a win-win for everyone since everyone starts paying their willingness to pay. But, let's assume there's a catastrophe and medicine is in dire need. Price discrimination works fine assuming perfect competition, and is a useful framework, but it breaks down empirically where we live in a society that doesn't behave so rationally. Who survives? Those willing to pay the most, and the algorithm worked flawlessly here. But it was not intended to dictate who survives. What I'm trying to say is that we should be cognizant of the fact that we don't live in a perfect bubble, and technology like this should be scrutinized for it's effects exhaustively- including any unintended consequences. We live in a society (duh), and as a society, it is up to us, with the help of policy makers, to determine the fate of this technology.

ctdonath 9y ago
"Hello Mr. Yakamoto and welcome back to the GAP!" - Minority Report, after protagonist (Tom Cruise, clearly not Asian) buys black-market replacement eyeballs to avoid retina-based security
- antisthenes 9y ago
  The future is beginning to look a lot like the worst parts of Ghost in the Shell, Minority Report and Brave New World combined. But I would love to come back to this post in 2050 and be proven completely wrong!
spangry 9y ago
IMHO, perfect price discrimination is not usually a good thing. It's often discussed more in the context of monopolies. Under simple market models (e.g. no externalities, downward sloping demand curve etc.), a profit-maximising monopolist will set prices above the market clearing prince, resulting in dead-weight loss (market inefficiency). However, there is one situation where monopolies achieve market-efficiency: when the monopolist can perfectly price-discriminate. This eliminates the dead-weight loss. But, crucially, this also means that all of the gains from trade accrue entirely to the monopolist, as consumers are all paying their own individual 'indifference' prices. It's a value judgement, but I don't see this as a socially optimal outcome even if it is the market efficient one.
- treyfitty 9y ago
  Yes, I agree that it's not the optimal outcome. (I should have not used "win-win" and instead used "win-win for some consumers.") I was trying to emphasize the individual consumer only having to pay what they were willing to pay- not making a judgement call on what is optimal. Furthermore, The scenario you highlight is price discrimination to the first degree, where the monopolist captures all the "surplus." Economists generally claim this outcome to be "unrealistic" but it helps us understand the more traditional outcome: https://courses.byui.edu/econ_150/econ_150_old_site/images/8-2_Price_Discrimination_01.jpg https://courses.byui.edu/econ_150/econ_150_old_site/images/8... As you can see, there is still consumer surplus from a monopoly price discriminating, but at the cost of a deadweight loss.
  - spangry 9y ago
    Fair enough, I agree that we could be here all day if we opened the value-judgement can of worms (though I do wish we did this when discussing public economic policy). Economists generally claim this outcome to be "unrealistic" but it helps us understand the more traditional outcome I agree with this. Just to add, pretty much every simplified market model you would find in an undergraduate-level textbook won't correspond to any market in reality. As you suggest, they're just very simplified models designed to 'kinda point you in the right direction', rather than be taken as a description of reality. The most dangerous people tend to be those who took micro 101 but were never told the latter :)

ctdonath 9y ago

"Hello Mr. Yakamoto and welcome back to the GAP!" - Minority Report, after protagonist (Tom Cruise, clearly not Asian) buys black-market replacement eyeballs to avoid retina-based security

antisthenes 9y ago
The future is beginning to look a lot like the worst parts of Ghost in the Shell, Minority Report and Brave New World combined. But I would love to come back to this post in 2050 and be proven completely wrong!

spangry 9y ago

IMHO, perfect price discrimination is not usually a good thing. It's often discussed more in the context of monopolies. Under simple market models (e.g. no externalities, downward sloping demand curve etc.), a profit-maximising monopolist will set prices above the market clearing prince, resulting in dead-weight loss (market inefficiency). However, there is one situation where monopolies achieve market-efficiency: when the monopolist can perfectly price-discriminate. This eliminates the dead-weight loss. But, crucially, this also means that all of the gains from trade accrue entirely to the monopolist, as consumers are all paying their own individual 'indifference' prices. It's a value judgement, but I don't see this as a socially optimal outcome even if it is the market efficient one.

treyfitty 9y ago
Yes, I agree that it's not the optimal outcome. (I should have not used "win-win" and instead used "win-win for some consumers.") I was trying to emphasize the individual consumer only having to pay what they were willing to pay- not making a judgement call on what is optimal. Furthermore, The scenario you highlight is price discrimination to the first degree, where the monopolist captures all the "surplus." Economists generally claim this outcome to be "unrealistic" but it helps us understand the more traditional outcome: https://courses.byui.edu/econ_150/econ_150_old_site/images/8-2_Price_Discrimination_01.jpg https://courses.byui.edu/econ_150/econ_150_old_site/images/8... As you can see, there is still consumer surplus from a monopoly price discriminating, but at the cost of a deadweight loss.
- spangry 9y ago
  Fair enough, I agree that we could be here all day if we opened the value-judgement can of worms (though I do wish we did this when discussing public economic policy). Economists generally claim this outcome to be "unrealistic" but it helps us understand the more traditional outcome I agree with this. Just to add, pretty much every simplified market model you would find in an undergraduate-level textbook won't correspond to any market in reality. As you suggest, they're just very simplified models designed to 'kinda point you in the right direction', rather than be taken as a description of reality. The most dangerous people tend to be those who took micro 101 but were never told the latter :)