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Your general point IMO is sound, but orderly markets tend to have the almost magical property of making incentives legible. Non-market systems hide incentives u

Your general point IMO is sound, but orderly markets tend to have the almost magical property of making incentives legible. Non-market systems hide incentives under opaque covers and increase the potential for catastrophic failure. This doesn't mean that free unregulated markets are a solution to everything. But they're a great first step on a road of progressive [in a technical sense, not the commonly associated political sense of the word] refinement.

acituan 6y ago
> almost magical property of making incentives legible. Perfect information symmetry is a precondition for the theoretical free market construct, but by no means a magical, inherent property to markets. In fact, there are many instances in which information flow has to be legislated in order to help the market operate; from nutrition labels on our food to real estate transactions in which information flow is necessitated, and for example making insider trading illegal in which information flow is prevented. > Non-market systems hide incentives under opaque covers and increase the potential for catastrophic failure. Market based systems can and have done this too. Most recent example is the 2008 crisis in which in the name of financial instrument innovation, toxic assets were blended under opaque covers and people bought them, leading to catastrophic failure. Information flow and markets are mostly unrelated. Think of the stock market; only information it can tell us is the current and historical price points, everything else has to come from side channels, which will never add up to telling if a stock will go up or not for sure.
- andrewjl 6y ago
  > Perfect information symmetry... by no means a magical, inherent property to markets. I don't agree. This is view not indicative of how things operate in reality. As a market participant, one can always determine incentives by "following the money", as long as the actors are somewhat rational. Talented traders, middle-men, etc develop an instinct for these flows which can never be perfectly legibilized into economic models. This intuition then leads them to deduce information that is hidden. The corollary to this is one shouldn't participate in markets without this ability, which is why almost every retail investor should not be directly involved in stock markets and just invest in index funds instead. The second corollary is because these flows are impossible to realistically quantitatively model, no faithful model of the market is possible unless the model replicates the market structure itself. All thats left are impermanent imperfect models, some may be based on historical data, some on various heuristics specific to a given market, some even partially successful in predicting what will happen for some time, but all ultimately doomed to failure as other market participants game them. Your examples, food labeling, real estate txns, insider trading are great arguments for progressive refinement of market dynamics, which is the position I'm arguing. They are not arguments for an alternative to markets and no known alternative to markets can solve these problems while maintaining the same level of functional efficiency that markets do. > Market based systems can and have done this too. Yet society recovered. Under non-market systems, an irreversible catastrophe is more likely than under market systems. Because market systems are unstable, they transmit critical information faster than non-market alternatives, allowing for preventive measures. Even if this information is imminent collapse. Market collapse and dysfunction prefigure collapse and are valuable information in-and-of themselves. This remains the case despite anthropogenic climate change, etc. Markets are ultimately not about money, but information. What sort of system can transmit information more efficiently than a market can? No centralized system has been proven to be as successful. And, for foundational math reasons, I don't believe any sort of planning algorithm can beat a network of decentralized profit maximizing agents. So our two options are 1) to improve market function via progressive refinement or 2) find an alternative analog that preserves the information fluidity that markets provide. I have very little optimism on 2) but am open to being surprised.

acituan 6y ago

> almost magical property of making incentives legible. Perfect information symmetry is a precondition for the theoretical free market construct, but by no means a magical, inherent property to markets. In fact, there are many instances in which information flow has to be legislated in order to help the market operate; from nutrition labels on our food to real estate transactions in which information flow is necessitated, and for example making insider trading illegal in which information flow is prevented. > Non-market systems hide incentives under opaque covers and increase the potential for catastrophic failure. Market based systems can and have done this too. Most recent example is the 2008 crisis in which in the name of financial instrument innovation, toxic assets were blended under opaque covers and people bought them, leading to catastrophic failure. Information flow and markets are mostly unrelated. Think of the stock market; only information it can tell us is the current and historical price points, everything else has to come from side channels, which will never add up to telling if a stock will go up or not for sure.

andrewjl 6y ago
> Perfect information symmetry... by no means a magical, inherent property to markets. I don't agree. This is view not indicative of how things operate in reality. As a market participant, one can always determine incentives by "following the money", as long as the actors are somewhat rational. Talented traders, middle-men, etc develop an instinct for these flows which can never be perfectly legibilized into economic models. This intuition then leads them to deduce information that is hidden. The corollary to this is one shouldn't participate in markets without this ability, which is why almost every retail investor should not be directly involved in stock markets and just invest in index funds instead. The second corollary is because these flows are impossible to realistically quantitatively model, no faithful model of the market is possible unless the model replicates the market structure itself. All thats left are impermanent imperfect models, some may be based on historical data, some on various heuristics specific to a given market, some even partially successful in predicting what will happen for some time, but all ultimately doomed to failure as other market participants game them. Your examples, food labeling, real estate txns, insider trading are great arguments for progressive refinement of market dynamics, which is the position I'm arguing. They are not arguments for an alternative to markets and no known alternative to markets can solve these problems while maintaining the same level of functional efficiency that markets do. > Market based systems can and have done this too. Yet society recovered. Under non-market systems, an irreversible catastrophe is more likely than under market systems. Because market systems are unstable, they transmit critical information faster than non-market alternatives, allowing for preventive measures. Even if this information is imminent collapse. Market collapse and dysfunction prefigure collapse and are valuable information in-and-of themselves. This remains the case despite anthropogenic climate change, etc. Markets are ultimately not about money, but information. What sort of system can transmit information more efficiently than a market can? No centralized system has been proven to be as successful. And, for foundational math reasons, I don't believe any sort of planning algorithm can beat a network of decentralized profit maximizing agents. So our two options are 1) to improve market function via progressive refinement or 2) find an alternative analog that preserves the information fluidity that markets provide. I have very little optimism on 2) but am open to being surprised.