3 ms·

This illustrates an issue that I’ve noticed for a while (separate from the discussion about porn websites)- we can either have truly free markets everywhere or

by parsimo2010 6y ago

This illustrates an issue that I’ve noticed for a while (separate from the discussion about porn websites)- we can either have truly free markets everywhere or we can have strong regulation everywhere, but trying to mix both causes conflicts. In a free market, Pornhub could just use a different payment processor. But because of the strict regulation in the financial market, there are very few payment options, and Visa and Mastercard can abuse their oligopoly. To fix this, we can either lower the bar to entry in the financial markets, which would mean that Visa and Mastercard couldn’t be gatekeepers to payments. Or we could force stronger regulations on the financial market and force them to do business with everyone unless given an offer by the government to stop, and probably cap their rates so they can’t abuse their oligopoly with pricing schemes either. What’s funny is that most people would disagree with one of my proposed solutions and agree with the other, depending on who the affected parties are. Blocking payments to a porn website? A lot of people applaud this on a moral stance. Refusing to make a cake for a gay couple? A lot of those same people condemn this action. But they are very similar actions once you take away the emotional pleas. I guess what I’m trying to get at is that we can’t have one solution on day one and then switch to another solution on day two. Trying a mix is how we created these problems. I could expand but I think I’ll leave it here before I get to political. Edit: I guess I should acknowledge that a fully regulated market is inefficient and slow, and that’s part of the reason communism/socialism ended in the collapse of the USSR. A fully deregulated financial market would probably mean some shady payment processors would pop up and take advantage of people. But what we have right now allows a small group of unelected people to make decisions for us by taking advantage of the situation they’ve lobbied for. I guess you have to decide whether you like this status quo or if you want to try an alternative.

MichaelZuo 6y ago
Well the first option is physically impossible, no ‘truly free’ markets can ever exist anywhere, anytime. You can have markets that are almost ‘free’ but never actually ‘truly free’. There are a couple of reasons why though the most fundamental would be entropy generation. There are always frictional losses for even the smallest of transactions, and if all participants have to accommodate for these losses ahead of time, or pay the penalty if not (eventually), then there is in effect path dependency to any possible market behaviour. Really, a global maxima solution of ‘truly free’ anything is unobtainable in the real world. (And even if it was achieved by happenstance, how could we tell it’s the global maxima?) I imagine the actual trade off wouldn’t be the simple one dimensional spectrum either, since the problem space is obviously multi-dimensional, the ideal solution would almost certainly require multi-dimensional optimization.
gamblor956 6y ago
Visa and Mastercard are not the only payment processors. Moreover, they're not even the primary payment processors for most adult websites, and haven't been for over a decade.
- hcurtiss 6y ago
  I suppose companies like Epoch are alternative payment processors, but in the wake of this decision by Visa and MasterCard, my understanding is that you cannot use cards with those logos with any payment processor. Is that incorrect?
- parsimo2010 6y ago
  Ultimately they have control. Your payment may go through an intermediate website, but if you give them a credit card number, it was likely a Visa or MasterCard. It’s possible that a person can pay with one of the less prevalent options, but Visa and MasterCard holds a lot of power. If they want to sanction a porn website, they just cut the intermediate processors of from their network, and they’re pretty much guaranteed to fold.
- duskwuff 6y ago
  Visa and Mastercard aren't payment processors at all. They're card issuers. The only other major card issuer in the US is AMEX, and they don't generally do business with adult sites at all.
LatteLazy 6y ago
They're either a natural monopoly and this a utility, and they can't refuse service to any legal customer OR they're a monopoly in what should be a competitive market and need to be broken up.
- wang_li 6y ago
  They literally aren’t a monopoly. It’s two different companies with nearly equal penetration. If one decides not to do business with you, customers can just use their other card. If your business model involves a wink and a nod to overlook human trafficking and child porn, too bad.
  - m-p-3 6y ago
    They're close to a monopoly, more precisely an oligopoly where choice is basically an illusion and newcomers have almost no chance of gaining significant market share.
Barrin92 6y ago
This is not the result of regulation but of trust and reputation. Firms and consumers don't want to do business with companies that look like they're triviliasing child abuse. The payment processors are not compelled by regulation here. Even in a 'free market' you're not free from the consequences of your actions, and you're not unaccountable. And furthermore, just because two actions are motivated by ethical judgements, doesn't mean they're equivalent. Being a homophobic cake vendor isn't the same as trying to stop the funding of child porn. The EFF article seems to suffer from the same misconception, accusing Visa and Mastercard of 'censorship' and asks where they got the authority to 'regulate speech'. In free societies there is another freedom, namely freedom of association, which these firms exercise when they decide not to do business with Pornhub, which nobody ought to compell them to. Also as a sidenote, declaring pornsite payments freedom of speech is a strange reframing of the concept
- parsimo2010 6y ago
  My point was that freedom of association doesn’t work if you’re the only game in town. In an ideal situation, Visa and MC would decide that their reputation was at risk, cut off PornHub, and then PornHub would switch to a competing payment network. But because of the high bar to entry (regulations which Visa and MC lobbied for after they gained their dominant position), it is almost impossible to start a new credit card company today. All the startups like Stripe and Privacy sit on a different layer from Visa and MC. Cards from your bank are just Visa and MC with different artwork. Nobody has created a new credit card company in decades. We can let Visa and MC have their freedom of association or we can let them have their protected position in the market, but we can’t have both. It’s not working. But because this case is all “somebody think of the children” then people are letting them get away with it. What about the other instances that the EFF linked to where a porn site wasn’t doing anything illegal? Are you going to have any options when it’s your (healthy and legal, but maybe niche) kink under attack? What about when it’s not even porn, but Visa and MC decide that Discord is used to enable piracy, and cuts off payments? Are you going to support these actions when a popular chat app with many legitimate users is the one affected?
  - Barrin92 6y ago

MichaelZuo 6y ago

Well the first option is physically impossible, no ‘truly free’ markets can ever exist anywhere, anytime. You can have markets that are almost ‘free’ but never actually ‘truly free’. There are a couple of reasons why though the most fundamental would be entropy generation. There are always frictional losses for even the smallest of transactions, and if all participants have to accommodate for these losses ahead of time, or pay the penalty if not (eventually), then there is in effect path dependency to any possible market behaviour. Really, a global maxima solution of ‘truly free’ anything is unobtainable in the real world. (And even if it was achieved by happenstance, how could we tell it’s the global maxima?) I imagine the actual trade off wouldn’t be the simple one dimensional spectrum either, since the problem space is obviously multi-dimensional, the ideal solution would almost certainly require multi-dimensional optimization.

gamblor956 6y ago

Visa and Mastercard are not the only payment processors. Moreover, they're not even the primary payment processors for most adult websites, and haven't been for over a decade.

hcurtiss 6y ago
I suppose companies like Epoch are alternative payment processors, but in the wake of this decision by Visa and MasterCard, my understanding is that you cannot use cards with those logos with any payment processor. Is that incorrect?
parsimo2010 6y ago
Ultimately they have control. Your payment may go through an intermediate website, but if you give them a credit card number, it was likely a Visa or MasterCard. It’s possible that a person can pay with one of the less prevalent options, but Visa and MasterCard holds a lot of power. If they want to sanction a porn website, they just cut the intermediate processors of from their network, and they’re pretty much guaranteed to fold.
duskwuff 6y ago
Visa and Mastercard aren't payment processors at all. They're card issuers. The only other major card issuer in the US is AMEX, and they don't generally do business with adult sites at all.

LatteLazy 6y ago

They're either a natural monopoly and this a utility, and they can't refuse service to any legal customer OR they're a monopoly in what should be a competitive market and need to be broken up.

wang_li 6y ago
They literally aren’t a monopoly. It’s two different companies with nearly equal penetration. If one decides not to do business with you, customers can just use their other card. If your business model involves a wink and a nod to overlook human trafficking and child porn, too bad.
- m-p-3 6y ago
  They're close to a monopoly, more precisely an oligopoly where choice is basically an illusion and newcomers have almost no chance of gaining significant market share.

Barrin92 6y ago

This is not the result of regulation but of trust and reputation. Firms and consumers don't want to do business with companies that look like they're triviliasing child abuse. The payment processors are not compelled by regulation here. Even in a 'free market' you're not free from the consequences of your actions, and you're not unaccountable. And furthermore, just because two actions are motivated by ethical judgements, doesn't mean they're equivalent. Being a homophobic cake vendor isn't the same as trying to stop the funding of child porn. The EFF article seems to suffer from the same misconception, accusing Visa and Mastercard of 'censorship' and asks where they got the authority to 'regulate speech'. In free societies there is another freedom, namely freedom of association, which these firms exercise when they decide not to do business with Pornhub, which nobody ought to compell them to. Also as a sidenote, declaring pornsite payments freedom of speech is a strange reframing of the concept

parsimo2010 6y ago
My point was that freedom of association doesn’t work if you’re the only game in town. In an ideal situation, Visa and MC would decide that their reputation was at risk, cut off PornHub, and then PornHub would switch to a competing payment network. But because of the high bar to entry (regulations which Visa and MC lobbied for after they gained their dominant position), it is almost impossible to start a new credit card company today. All the startups like Stripe and Privacy sit on a different layer from Visa and MC. Cards from your bank are just Visa and MC with different artwork. Nobody has created a new credit card company in decades. We can let Visa and MC have their freedom of association or we can let them have their protected position in the market, but we can’t have both. It’s not working. But because this case is all “somebody think of the children” then people are letting them get away with it. What about the other instances that the EFF linked to where a porn site wasn’t doing anything illegal? Are you going to have any options when it’s your (healthy and legal, but maybe niche) kink under attack? What about when it’s not even porn, but Visa and MC decide that Discord is used to enable piracy, and cuts off payments? Are you going to support these actions when a popular chat app with many legitimate users is the one affected?
- Barrin92 6y ago