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>>Two things, one: why does everything need to be perfectly optimized? Any sub-optimization is wages, quality-of-life, scientific funding, etc that is being fo

>>Two things, one: why does everything need to be perfectly optimized? Any sub-optimization is wages, quality-of-life, scientific funding, etc that is being foregone. >>Sure, tear down everything that protects people from quacks and charlatans - that's the American Dream, after all. Reputation markets are extremely effective at protecting people from quacks. In any case, to some extent, people have to take responsibility for their own consumer choices. They shouldn't have market choices taken away from them for their own good, by a paternalistic government/voting-base. That's not how a healthy/free society is governed. The reason why paternalistic centralization isn't functional is that those very same quacks can exploit the public through licensing. They can make false appeals to safety and claims of benefits to argue for highly restrictive licensing rules that cost society far more than they provide in the way of safety, just so that they can enjoy wages inflated from suppressing competition. Then fighting quacks becomes a political process requiring an election win, and that is all-or-nothing (either you get the quack's representative voted out, or you don't), and doesn't allow the incremental, parallel improvement possible through a decentralized market consisting of millions of consumers making independent consumer choices not subordinate to a single regulatory agency wielding monopoly power.

mcguire 8y ago
"Reputation markets are extremely effective at protecting people from quacks." You mean like vote totals on Reddit, or StackOverflow points?
- CryptoPunk 8y ago
  I believe, based on the contexts I've seen the term used in, that a reputation market just means the competition created between market providers to gain a better reputation than each other, due to the competitive advantage that having a superior reputation provides. There doesn't have to be explicit quantification of reputation, like Reddit/StackOverFlow points, to qualify as a reputation market. Reputation obviously has a huge impact on market success, and this effect leads to high quality providers dominating the market overtime. Probably the best example of this dynamic is eBay. The vast majority of trades are not fraudulent, because consumers rely on the seller ratings as indicators of reliability. Most top sellers have something like 99% positive ratings. The market is pretty much totally unregulated, yet very reliable.
  - tryptophan 8y ago
    That works for ebay because it is very simple to determine if you got the result you wanted. Case A: You get the correct product, it is working. Case B: Didn't get product, doesn't work, etc... A gets +1, B gets -1. Simple to judge for 99% of people. More complex things, like medicine or law or even wiring electrics in a house, the consumer is completely incapable of determining if the service they got is good, because they don't understand it well enough to judge. This is why reputation systems won't work for anything more complex than ebay. Studies already show doctors get judged mostly by how nice they are. Sure, a reputation system might help you find the nicest doctor, but that isn't whats important right?
    - CryptoPunk 8y ago
      This is a common argument for having government take over, but it's unsubstantiated in my opinion. For example, an automobile is an extremely complex product where the outcome of a purchase takes years to materialize, and yet we have highly developed market-based mechanisms for ascertaining the quality of automobiles. Bottom-up decentralized processes disseminate correct information very efficiently. Wikipedia would be a good example of that. Anyone can quickly find a reasonably good answer on almost any issue, of any level of complexity, using a Google search to return the top Wikipedia page on it. >>Studies already show doctors get judged mostly by how nice they are. That doesn't tell us much. The quality of doctors may already be assured by the overly stringent licensing process, and price is made a non-factor by insurance/government coverage, so consumers look for signs of empathy, as its the only other relevant variable and the only one that they control. While there's no indication that reputation markets don't work, there's plenty of evidence that government take-over of industries turns out just as classical economic theory would predict: disastrously. One major case is healthcare: in every developed country over the last 50 years, government regulation and control of healthcare has massively increased, and this as corresponded with substantial increases in healthcare expenditure as a percentage of GDP. In the US for example, the number of hospital administrators increased 3,200% between 1975 and 2010, compared to a 150% increase in physicians, and this increasing inefficiency is due to an increasing number of regulations: https://www.athenahealth.com/insight/expert-forum-rise-and-rise-healthcare-administrator https://www.athenahealth.com/insight/expert-forum-rise-and-r...

mcguire 8y ago

"Reputation markets are extremely effective at protecting people from quacks." You mean like vote totals on Reddit, or StackOverflow points?

CryptoPunk 8y ago
I believe, based on the contexts I've seen the term used in, that a reputation market just means the competition created between market providers to gain a better reputation than each other, due to the competitive advantage that having a superior reputation provides. There doesn't have to be explicit quantification of reputation, like Reddit/StackOverFlow points, to qualify as a reputation market. Reputation obviously has a huge impact on market success, and this effect leads to high quality providers dominating the market overtime. Probably the best example of this dynamic is eBay. The vast majority of trades are not fraudulent, because consumers rely on the seller ratings as indicators of reliability. Most top sellers have something like 99% positive ratings. The market is pretty much totally unregulated, yet very reliable.
- tryptophan 8y ago
  That works for ebay because it is very simple to determine if you got the result you wanted. Case A: You get the correct product, it is working. Case B: Didn't get product, doesn't work, etc... A gets +1, B gets -1. Simple to judge for 99% of people. More complex things, like medicine or law or even wiring electrics in a house, the consumer is completely incapable of determining if the service they got is good, because they don't understand it well enough to judge. This is why reputation systems won't work for anything more complex than ebay. Studies already show doctors get judged mostly by how nice they are. Sure, a reputation system might help you find the nicest doctor, but that isn't whats important right?
  - CryptoPunk 8y ago
    This is a common argument for having government take over, but it's unsubstantiated in my opinion. For example, an automobile is an extremely complex product where the outcome of a purchase takes years to materialize, and yet we have highly developed market-based mechanisms for ascertaining the quality of automobiles. Bottom-up decentralized processes disseminate correct information very efficiently. Wikipedia would be a good example of that. Anyone can quickly find a reasonably good answer on almost any issue, of any level of complexity, using a Google search to return the top Wikipedia page on it. >>Studies already show doctors get judged mostly by how nice they are. That doesn't tell us much. The quality of doctors may already be assured by the overly stringent licensing process, and price is made a non-factor by insurance/government coverage, so consumers look for signs of empathy, as its the only other relevant variable and the only one that they control. While there's no indication that reputation markets don't work, there's plenty of evidence that government take-over of industries turns out just as classical economic theory would predict: disastrously. One major case is healthcare: in every developed country over the last 50 years, government regulation and control of healthcare has massively increased, and this as corresponded with substantial increases in healthcare expenditure as a percentage of GDP. In the US for example, the number of hospital administrators increased 3,200% between 1975 and 2010, compared to a 150% increase in physicians, and this increasing inefficiency is due to an increasing number of regulations: https://www.athenahealth.com/insight/expert-forum-rise-and-rise-healthcare-administrator https://www.athenahealth.com/insight/expert-forum-rise-and-r...