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> Penny Problem Gap: Economists assume demand is linear, but people’s behavior totally changes once an action costs money. If the inventors of the Internet had

> Penny Problem Gap: Economists assume demand is linear, but people’s behavior totally changes once an action costs money. If the inventors of the Internet had known about it, spam wouldn’t be such a problem. If sending an email cost you $0.001, there’d be way less spam. Freakonomics argues it can have the opposite effect, of "licensing" undesired behavior by those who can afford to pay the cost. Something to think about when it comes to carbon credits, etc.. Here's an idea which will hopefully change someone's life: If you take the best parts of in silico computing and the best parts of synthetic biology, you can make transformative hybrid devices much faster than trying to make just making tinier and tinier computers or smarter and smarter cells. Example: Mimee, M., N. Nadeau, T. J. Hayward, S. Carim, C. A. Flanagan, J. Jerger, S. Collins, T. R. McDonnell, R. N. Swartwout, W. C. Citorik, S. H. Bulovic, R. Langer, and G. Traverso. 2018. An ingestible bacterial-electronic system to monitor gastrointestinal health. Science 360: 915-918. doi: 10.1126/science.aas9315. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6430580/ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6430580/

hiharryhere 4y ago
Anecdotally a similar effect happened with a friend’s childcare center. They were sick of parents showing up late to pick their kids up so they instituted a penalty of $x for every minute a parent was late. More parents ended up being late because they felt less guilty knowing they could just pay the penalty. The social pressure to be on time was replaced by a financial one.
- schoen 4y ago
  See also "A Fine is a Price": https://www.jstor.org/stable/10.1086/468061 https://www.jstor.org/stable/10.1086/468061
  - hiharryhere 4y ago
    Ha! Perhaps I read about that some time ago and my brain decided to file it away as a memory of my own. Thanks for sharing.
- throwaway2037 4y ago
  This is a great story! Pay tell: What was the 2nd order consequence? The childcare center started to make more money from late parents. It sounds like a good trade. Ideally, raise the price little by little, until behaviour hits an equilibrium. Then you have extracted maximum value for both sides! If parents don't like it, they can go to a different daycare.
- layer8 4y ago
  It just means they didn’t set the price high enough.

hiharryhere 4y ago

Anecdotally a similar effect happened with a friend’s childcare center. They were sick of parents showing up late to pick their kids up so they instituted a penalty of $x for every minute a parent was late. More parents ended up being late because they felt less guilty knowing they could just pay the penalty. The social pressure to be on time was replaced by a financial one.

schoen 4y ago
See also "A Fine is a Price": https://www.jstor.org/stable/10.1086/468061 https://www.jstor.org/stable/10.1086/468061
- hiharryhere 4y ago
  Ha! Perhaps I read about that some time ago and my brain decided to file it away as a memory of my own. Thanks for sharing.
throwaway2037 4y ago
This is a great story! Pay tell: What was the 2nd order consequence? The childcare center started to make more money from late parents. It sounds like a good trade. Ideally, raise the price little by little, until behaviour hits an equilibrium. Then you have extracted maximum value for both sides! If parents don't like it, they can go to a different daycare.
layer8 4y ago
It just means they didn’t set the price high enough.