4 ms·

Out of curiosity, how does one even begin to address such a question? Because it seems to me that the answer turns entirely on your choice of a quality metric,

by lisper 4y ago

Out of curiosity, how does one even begin to address such a question? Because it seems to me that the answer turns entirely on your choice of a quality metric, which is entirely subjective. If you are a consumer, you would come up with one answer, and if you are a shareholder you would come up with a different one. On what principled basis could one possibly resolve this?

tomrod 4y ago
Not the OP. Designing a policy for minimization of dead weight loss in the economy (typically centered around consumer surplus), with preferential properties including time stability, enforceability, and fairness across implementees.
- lisper 4y ago
  But "dead weight", "fairness", and the desirability of time stability (weighed against other considerations) are all judgement calls.
  - tomrod 4y ago
    No, they really aren't. - Lacking time stability means no one tomorrow has any incentive to stick to the policy, and means the policy is unlikely to succeed in its objectives. - Deadweight is lost efficiency - The only arguable one is "fairness", and to clarify I blunted the term to avoid the nuance of explaining Pareto optimality. But sure, we can also consider egalitarianism and other moral frameworks.
    - ttfkam 4y ago
      Many industries got rid of deadweight only to find during the pandemic they and their industry had lost resilience when circumstances changed (which they always do). See: CPUs and GPUs in 2020-2021, baby formula in 2022, etc. It can absolutely be a judgment call.
      - colinmhayes 4y ago
        deadweight loss has a specific meaning in economics.
        ttfkam 4y ago
        TIL
      - wbsss4412 4y ago
        Deadweight loss refers to a net reduction in consumer+producer surplus within the economy. It has nothing to do with the everyday meaning of the term “deadweight”.
        ttfkam 4y ago
        TIL
    - lisper 4y ago
      > - Lacking time stability means no one tomorrow has any incentive to stick to the policy, and means the policy is unlikely to succeed in its objectives. That's true, but time stability means that a bad policy is going to be maintained even in the face of evidence that it is bad. Deciding which is worse is, as I said, a judgement call. > Deadweight is lost efficiency The flip side of increased efficiency is decreased resilience. Without unused capacity (i.e. inefficiency) the slightest contingency will send the entire system into chaos. How much inefficiency you want to maintain as a hedge against contingencies is a judgement call. Different people have different risk postures. > Pareto optimality I think it's safe to assume that people on HN understand Pareto optimality (or are capable of looking it up). Do you really think that Pareto optimality is synonymous with "fairness"? > we can also consider egalitarianism and other moral frameworks. Of course we can consider these things. But that doesn't answer my question, which is how do we address them in a principled way that doesn't degenerate into a political dispute?
  - colinmhayes 4y ago
    Deadweight loss is not a judgement call, it's an actual calculable amount, effectively the loss of productivity due to the tax. https://en.wikipedia.org/wiki/Deadweight_loss https://en.wikipedia.org/wiki/Deadweight_loss
    - arethuza 4y ago
      Maybe its just the way things are described on Wikipedia, but isn't there an almost complete lack of citing any experiments or empirical evidence on that page?
      - colinmhayes 4y ago
        I'm not sure what you mean. Deadweight loss is tautological. Maybe you're asking for evidence that taxes distort markets? If you accept that as true it's easy to see that deadweight loss is just the difference in surplus before and after the tax. Every econ paper on tax policy will try to measure the deadweight loss of the intervention.
        arethuza 4y ago
        I guess I just find it weird to have a page on Wikipedia about a quantity with no mention of what that quantity has ever been measured to be?
      - kelseyfrog 4y ago
        Wikipedia is a very difficult way to learn economics. In many ways it's like trying to learn mathematics or physics from an encyclopedia. The encyclopedic approach is - pedagogically speaking - sub-optimal.
        arethuza 4y ago
        But if I look at the page for "friction" it has tables of actual values and many references to practical experiments? NB I was just comparing the writing style of that page (which seemed a bit odd to me) with other examples. https://en.wikipedia.org/wiki/Friction https://en.wikipedia.org/wiki/Friction
  - marcosdumay 4y ago
    If you go look at the theories, you will find that economics uses a lot of those overloaded terms, but they have perfectly reasonable objective meanings for them that are different from the popular subjective meaning.
    - lisper 4y ago
      OK, but it doesn't help to answer a question posed by a layman using overloaded terms of art without defining them, or at least providing references, or at least pointing out that the words you are using do not mean what they mean in common usage. So where do I find these definitions? Because I am still highly skeptical that they can be defined in ways that do not conceal hidden judgement calls.
      - vkou 4y ago
        If we applied that same standard when talking about programming here, we would never get past talking eli5 semantics and definitions. You can be skeptical, but the cure for that skepticism is something more akin to taking an undergrad course, or two.
rvba 4y ago
The "fair" way to do it is allocation of costs per value of sales AND zero access to data by market owner. So everyone pays the same charge for IT costs AND market does not have an unfair advantage.
huitzitziltzin 4y ago
Theory and data. Both are hard, especially in the cases I listed. With a good theory of (e.g.) platforms, you could likely identify a few different fundamental forces which may push in different directions. Hypothetical example: force X would benefit the platform at the expense of sellers, force Y would benefit the sellers at the expense of the platform. A priori it may not be possible in theory to put a magnitude on those effects: there may be nothing that would say "we can show that X > Y in every case." This is where you need data. (This part is especially hard for platform markets!) You would need data on the platform side AND on the consumer side AND on the supplier side. You write down a model of (generally) consumer demand, supplier response and platform behavior (at least - probably taking a somewhat simplified approach to at least one of those sets of agents). With your estimates, you would try to answer the "Is X > Y?" question posed above. You can also simulate the impacts of counterfactual policies, among other things.
- lisper 4y ago
  Thanks!
- nybble41 4y ago
  > This is where you need data. More specifically, this is where you need data which does not and cannot exist. Specifically, an objective scale which would allow you to compare the cost or benefit of policy to the platform and the sellers. There is no such objective scale, because value is subjective and not comparable between different economic actors, or even for the same actor at different times. Any model which assigns numeric "estimates" for these costs and benefits so they can be compared is substituting the authors' own subjective valuations in place of those of those who will be affected by the policy.
  - huitzitziltzin 4y ago
    > More specifically, this is where you need data which does not and cannot exist. This is wrong. All important work in my field in the past 25 years has been empirical. > Any model which assigns numeric "estimates" for these costs and benefits so they can be compared is substituting the authors' own subjective valuations in place of those of those who will be affected by the policy. Very, very wrong. You’ll never get away with picking your own parameter values in modern empirical IO. If you don’t know the field that’s fine. I probably don’t know your field either. But don’t make these overconfident and totally wrong claims about what’s done in a field you don’t know anything about.

by lisper 4y ago

tomrod 4y ago

Not the OP. Designing a policy for minimization of dead weight loss in the economy (typically centered around consumer surplus), with preferential properties including time stability, enforceability, and fairness across implementees.

lisper 4y ago
But "dead weight", "fairness", and the desirability of time stability (weighed against other considerations) are all judgement calls.
- tomrod 4y ago
  No, they really aren't. - Lacking time stability means no one tomorrow has any incentive to stick to the policy, and means the policy is unlikely to succeed in its objectives. - Deadweight is lost efficiency - The only arguable one is "fairness", and to clarify I blunted the term to avoid the nuance of explaining Pareto optimality. But sure, we can also consider egalitarianism and other moral frameworks.
  - ttfkam 4y ago
    Many industries got rid of deadweight only to find during the pandemic they and their industry had lost resilience when circumstances changed (which they always do). See: CPUs and GPUs in 2020-2021, baby formula in 2022, etc. It can absolutely be a judgment call.
    - colinmhayes 4y ago
      deadweight loss has a specific meaning in economics.
      - ttfkam 4y ago
        TIL
    - wbsss4412 4y ago
      Deadweight loss refers to a net reduction in consumer+producer surplus within the economy. It has nothing to do with the everyday meaning of the term “deadweight”.
      - ttfkam 4y ago
        TIL
  - lisper 4y ago
    > - Lacking time stability means no one tomorrow has any incentive to stick to the policy, and means the policy is unlikely to succeed in its objectives. That's true, but time stability means that a bad policy is going to be maintained even in the face of evidence that it is bad. Deciding which is worse is, as I said, a judgement call. > Deadweight is lost efficiency The flip side of increased efficiency is decreased resilience. Without unused capacity (i.e. inefficiency) the slightest contingency will send the entire system into chaos. How much inefficiency you want to maintain as a hedge against contingencies is a judgement call. Different people have different risk postures. > Pareto optimality I think it's safe to assume that people on HN understand Pareto optimality (or are capable of looking it up). Do you really think that Pareto optimality is synonymous with "fairness"? > we can also consider egalitarianism and other moral frameworks. Of course we can consider these things. But that doesn't answer my question, which is how do we address them in a principled way that doesn't degenerate into a political dispute?
- colinmhayes 4y ago
  Deadweight loss is not a judgement call, it's an actual calculable amount, effectively the loss of productivity due to the tax. https://en.wikipedia.org/wiki/Deadweight_loss https://en.wikipedia.org/wiki/Deadweight_loss
  - arethuza 4y ago
    Maybe its just the way things are described on Wikipedia, but isn't there an almost complete lack of citing any experiments or empirical evidence on that page?
    - colinmhayes 4y ago
      I'm not sure what you mean. Deadweight loss is tautological. Maybe you're asking for evidence that taxes distort markets? If you accept that as true it's easy to see that deadweight loss is just the difference in surplus before and after the tax. Every econ paper on tax policy will try to measure the deadweight loss of the intervention.
      - arethuza 4y ago
        I guess I just find it weird to have a page on Wikipedia about a quantity with no mention of what that quantity has ever been measured to be?
    - kelseyfrog 4y ago
      Wikipedia is a very difficult way to learn economics. In many ways it's like trying to learn mathematics or physics from an encyclopedia. The encyclopedic approach is - pedagogically speaking - sub-optimal.
      - arethuza 4y ago
        But if I look at the page for "friction" it has tables of actual values and many references to practical experiments? NB I was just comparing the writing style of that page (which seemed a bit odd to me) with other examples. https://en.wikipedia.org/wiki/Friction https://en.wikipedia.org/wiki/Friction
- marcosdumay 4y ago
  If you go look at the theories, you will find that economics uses a lot of those overloaded terms, but they have perfectly reasonable objective meanings for them that are different from the popular subjective meaning.
  - lisper 4y ago
    OK, but it doesn't help to answer a question posed by a layman using overloaded terms of art without defining them, or at least providing references, or at least pointing out that the words you are using do not mean what they mean in common usage. So where do I find these definitions? Because I am still highly skeptical that they can be defined in ways that do not conceal hidden judgement calls.
    - vkou 4y ago
      If we applied that same standard when talking about programming here, we would never get past talking eli5 semantics and definitions. You can be skeptical, but the cure for that skepticism is something more akin to taking an undergrad course, or two.

rvba 4y ago

The "fair" way to do it is allocation of costs per value of sales AND zero access to data by market owner. So everyone pays the same charge for IT costs AND market does not have an unfair advantage.

huitzitziltzin 4y ago

Theory and data. Both are hard, especially in the cases I listed. With a good theory of (e.g.) platforms, you could likely identify a few different fundamental forces which may push in different directions. Hypothetical example: force X would benefit the platform at the expense of sellers, force Y would benefit the sellers at the expense of the platform. A priori it may not be possible in theory to put a magnitude on those effects: there may be nothing that would say "we can show that X > Y in every case." This is where you need data. (This part is especially hard for platform markets!) You would need data on the platform side AND on the consumer side AND on the supplier side. You write down a model of (generally) consumer demand, supplier response and platform behavior (at least - probably taking a somewhat simplified approach to at least one of those sets of agents). With your estimates, you would try to answer the "Is X > Y?" question posed above. You can also simulate the impacts of counterfactual policies, among other things.

lisper 4y ago
Thanks!
nybble41 4y ago
> This is where you need data. More specifically, this is where you need data which does not and cannot exist. Specifically, an objective scale which would allow you to compare the cost or benefit of policy to the platform and the sellers. There is no such objective scale, because value is subjective and not comparable between different economic actors, or even for the same actor at different times. Any model which assigns numeric "estimates" for these costs and benefits so they can be compared is substituting the authors' own subjective valuations in place of those of those who will be affected by the policy.
- huitzitziltzin 4y ago
  > More specifically, this is where you need data which does not and cannot exist. This is wrong. All important work in my field in the past 25 years has been empirical. > Any model which assigns numeric "estimates" for these costs and benefits so they can be compared is substituting the authors' own subjective valuations in place of those of those who will be affected by the policy. Very, very wrong. You’ll never get away with picking your own parameter values in modern empirical IO. If you don’t know the field that’s fine. I probably don’t know your field either. But don’t make these overconfident and totally wrong claims about what’s done in a field you don’t know anything about.