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> A ponzi scheme is fraud in which belief in the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors from mon

> A ponzi scheme is fraud in which belief in the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors. If you’re going to copy/paste a dictionary definition, you should probably cite the dictionary you are using (Oxford, it looks like). I think the correct term here is “speculative bubble”, but there are deep similarities between a speculative bubble and a Ponzi scheme. The similarities run deep enough that I do not think it is worth fighting over the difference between a Ponzi scheme and a speculative bubble. In both a speculative bubble and a Ponzi scheme, early investors are paid out with funds taken from later investors, for an asset which does not have enough utility to justify those payouts. In a Ponzi scheme, it’s one person or entity running it, and in a speculative bubble, it’s just “the market”. But the market is just a bunch of people. And I don’t think the bad faith component of Ponzi schemes should be considered a necessary component.

dragonwriter 3y ago
> I think the correct term here is “speculative bubble”, but there are deep similarities between a speculative bubble and a Ponzi scheme. There are deep differences, too, most obviously the one highlighted by the “scheme” in ponzi scheme. > In both a speculative bubble and a Ponzi scheme, early investors are paid out with funds taken from later investors, for an asset which does not have enough utility to justify those payouts. In a ponzi scheme, money is deliberately directed to early entrants to cover the conscious absence of any mechanism to produce actual value. That's not true of speculative bubble; yes, the usual market mechanisms involve movers out of market get money from those moving in, but outside of fraud (which can make usual market action ponzi-like) its not conscious cover for an absence of a return-generating mechanism. Yes, a ponzi-operator produces deliberately a conditions similar to that which is retrospectively observed when the market misperceives value for a time, but that's the same as saying fatal accidents produce the same results as murder plots. We call them different things for good reason, and it is worth distinguishing them. > And I don’t think the bad faith component of Ponzi schemes should be considered a necessary component. Someone having advance and certain knowledge of the absence of return mechanism is quite relevant and distinct from a market misperception, especially when looking at a prospective bubble that hasn’t popped (so its the differences between “there is specific concrete evidence someone engineered this fraudulently” and “my perception of the future differs from the consensus”.) Redefining terms so you can use terms that communicate greater certainty and have higher emotional valence than is warranted by what you are actually describing is bad, in much the same way as an (actual, proper definition) ponzi is bad. Its an attempt to mislead and motivate action based on misleading people.
- klodolph 3y ago
  > In a ponzi scheme, money is deliberately directed to early entrants to cover the conscious absence of any mechanism to produce actual value. I don’t think the “deliberate” part is particularly important. It sounds like you disagree. There’s a whole discussion to be had here about mens rea, and that discussion is important in the context of criminal justice, but I think it’s less important when discussing systemic problems because you need a different toolset (besides intent) to discuss problems with economic systems.
  - JumpCrisscross 3y ago
    > it’s less important when discussing systemic problems It’s unimportant whether commercial property owners are fraudulently or not inflating their property values? That seems incredibly important to what kind of solution is appropriate.
    - GauntletWizard 3y ago
      Everything is worth what the market will bear. If you can achieve a price, it's a fair price - some relator, probably.
      - epgui 3y ago
        It’s just not true that every market price is fair. There are all sorts of sources of market inefficiencies, and this is one of the reasons why governments spontaneously arise or form.
        dragonwriter 3y ago
        Its...not. Though it is one of the retroactive justifications for government from non-minarchist market ideologues.

dragonwriter 3y ago

> I think the correct term here is “speculative bubble”, but there are deep similarities between a speculative bubble and a Ponzi scheme. There are deep differences, too, most obviously the one highlighted by the “scheme” in ponzi scheme. > In both a speculative bubble and a Ponzi scheme, early investors are paid out with funds taken from later investors, for an asset which does not have enough utility to justify those payouts. In a ponzi scheme, money is deliberately directed to early entrants to cover the conscious absence of any mechanism to produce actual value. That's not true of speculative bubble; yes, the usual market mechanisms involve movers out of market get money from those moving in, but outside of fraud (which can make usual market action ponzi-like) its not conscious cover for an absence of a return-generating mechanism. Yes, a ponzi-operator produces deliberately a conditions similar to that which is retrospectively observed when the market misperceives value for a time, but that's the same as saying fatal accidents produce the same results as murder plots. We call them different things for good reason, and it is worth distinguishing them. > And I don’t think the bad faith component of Ponzi schemes should be considered a necessary component. Someone having advance and certain knowledge of the absence of return mechanism is quite relevant and distinct from a market misperception, especially when looking at a prospective bubble that hasn’t popped (so its the differences between “there is specific concrete evidence someone engineered this fraudulently” and “my perception of the future differs from the consensus”.) Redefining terms so you can use terms that communicate greater certainty and have higher emotional valence than is warranted by what you are actually describing is bad, in much the same way as an (actual, proper definition) ponzi is bad. Its an attempt to mislead and motivate action based on misleading people.

klodolph 3y ago
> In a ponzi scheme, money is deliberately directed to early entrants to cover the conscious absence of any mechanism to produce actual value. I don’t think the “deliberate” part is particularly important. It sounds like you disagree. There’s a whole discussion to be had here about mens rea, and that discussion is important in the context of criminal justice, but I think it’s less important when discussing systemic problems because you need a different toolset (besides intent) to discuss problems with economic systems.
- JumpCrisscross 3y ago
  > it’s less important when discussing systemic problems It’s unimportant whether commercial property owners are fraudulently or not inflating their property values? That seems incredibly important to what kind of solution is appropriate.
  - GauntletWizard 3y ago
    Everything is worth what the market will bear. If you can achieve a price, it's a fair price - some relator, probably.
    - epgui 3y ago
      It’s just not true that every market price is fair. There are all sorts of sources of market inefficiencies, and this is one of the reasons why governments spontaneously arise or form.
      - dragonwriter 3y ago
        Its...not. Though it is one of the retroactive justifications for government from non-minarchist market ideologues.