8 ms·

If prices encode information, then we are talking about a one-way encoding. You can’t turn that price back into a description of the whole vast supply chain beh

by jl6 2y ago

If prices encode information, then we are talking about a one-way encoding. You can’t turn that price back into a description of the whole vast supply chain behind it. That gives us another problem: prices can’t tell us whether a price is low for good reasons (efficient processes, technological innovation, economies of scale perhaps) or bad reasons (pollution externalities not included, use of forced labor, low quality ingredients, corners cut). Understanding these factors (“quality”) becomes a complex ordeal and the price doesn’t help. It seems like we have an economy which is highly optimized at reducing price, but extremely primitive at making “quality” transparent enough that price can be properly assessed. A case in point being Amazon marketplace where you can find very low priced products from completely opaque brands with almost zero signal on quality.

yarg 2y ago
Makes me think of good/cheap/fast - pick two. You can't tell from the output price which selection was made.
kitd 2y ago
Hence the obsession with customer reviews. In the absence of an objective measure of quality, the easiest to implement is a star rating of "what everyone else thinks about this product".
- dredmorbius 2y ago
  Easy != Informative. Such review systems are trivially gamed, with exceedingly high incentives to do so. One of the underappreciated benefits of an established retailier with limited suppliers and a centralised buying operation, as with traditional brick-and-mortar establishments (Harrods, Costco, Macy's, etc.) is that those establishments can set their own minimum standards and select merchandise which is highly likely to provide high value to the end customer. The notion that "choice is good" falls flat in the reality that uninformed choice over a range of intentionally insufficient products is not good, and is in fact a form of gambling with low payoffs. Some retailers target high-end products (e.g., Harrods), some mid- or low-market (e.g., Costco). But by restricting upstream vendors, tracking satisfaction, and having their own testing and development of products or offerings, as well as return/warrantee programmes, they can assure a reasonable rate of satisfaction. I'm also finding retailers who sell manifest crap (o hai any Samsung home appliances) can be eliminated from my own list of acceptable outlets for future purchases.
  - kitd 2y ago
    > Easy != Informative. Oh sure, absolutely, but note I said "easiest to implement". And there's that cost measure again, as if it's the only KPI. How do we measure the quality of the "quality" system? :)
    - dredmorbius 2y ago
      My thoughts on assessment of a rating system leans strongly on audit methodologies. It also starts with what the goals of a rating system are, and how it might be subverted or attacked. I see four key principles or assumptions: 1. The reported ratings for overall product performance should correspond with some reasonable informed-experts' ratings. 2. Issues with product support (returns, refunds, repairs, replacements, etc.) should correspond with identifiable events. 3. Solicitation of ratings, false positive ratings, or false negative ratings as forms of harassment or industrial subversion are all obvious (and extant) forms of abuse, as would be the ratings platform itself predicating positive reviews on, say, advertising purchases by the reviewed site, as has been alleged in numerous cases. 4. Systematic abuse will tend to be orchestrated by a given entity, and should exhibit some form of behavioural or networked anomalies. For key products (high volume, high-price, and/or both), independent assessments should be performed on at least some sample of products and conformity with assessed ratings shown. Where expert opinions can be reasonably attained, they should generally take priority over crowdsourced reivews, especially where specific expertise and tangible distinction in results exists. This is guided by both the notion that you'd rather have a skilled pilot than a democratic representation of passengers flying an aeroplane (a notion dating back to Plato, though he somewhat unambitiously used the example of a ship at sea), and awareness that in some cases there isn't much consistency even amongst experts, as with wine tastings and ratings. Third parties (e.g., Consumers' Union, Underwriters Laboratories) might also be compensated for unbiased expert assessments. Individual raters with high volumes, anomalous ratings, or patterns of coordination with other raters (e.g., similar ratings on the same products) should be flagged for review, and potentially voided from the system. Any indications of suppliers soliciting ratings, providing kickbacks or rebates, or otherwise inducing positive ratings should be addressed severely. I'd be in favour of a quick and long-term minimum-rating consequence. This of course raises the risk of suppliers "joe-jobbing" competitors' offerings to create the appearance of manipulation (by the target). That activity should result in an even harsher consequence. The overall rating system and activity should be constantly monitored for anomolous patterns. Highly-active individual accounts are probably the easiest to detect. Large groups of low-activity accounts with similar activity are probably the hardest to detect, but would be another key issue. Audits of such behaviours should be a constant part of a system, and the subject of regular transparency reports.
lazide 2y ago
You were making sense for a bit, then kind of went off the rails? For instance, forced labor, pollution, etc. are factored into price. Or more specifically, the customers willingness to care about these things is factored into the price, on the buy side. And someone’s willingness and ability to do them (or hide them) is priced on the sell side. Same with the customers willingness to gamble on quality (aka random no name branding), and a sellers willingness to deal with legal and reputational blowback. People just don’t want to say it. At the end of the day, as long as no one is going to shame them or punish them, most people will happily fund super polluting slave labor and gamble on quality for a cheap price. Hell, as has been made clear over and over again, people will happily risk serious legal consequences and even murder people to supply/consume illegal goods that get them high, at a price. And that price is a lot lower than most people want to think about. And this is where the EMH bears actual fruit - because the ultimate test is people’s willingness to part with their cash for a good. And both sides of the transaction are always trying to figure out ways to shift the line where they both meet in their favor. It’s not about what they say, what they profess to believe, what is acceptable to admit, what is legal (per-se), etc. unless it actually matters. Which is rarely as often as we’d all like to believe.
- SamoyedFurFluff 2y ago
  > For instance, forced labor, pollution, etc. are factored into price. Or more specifically, the customers willingness to care about these things is factored into the price, on the buy side. And someone’s willingness and ability to do them is priced on the sell side. I don’t agree with this. Pollution primarily affects people who cannot afford to pay to not affected by pollution. The people who buy the most polluting products are not the people who are directly exposed to the most pollution. This isn’t as simple as “oh people just don’t feel bad enough to not buy cheap things”, the people who cannot afford to avoid the consequences of societally bad decisions are suffering way beyond their consumption! The poor live most exposed to effects of climate change (fires, floods, etc) because they cannot afford to avoid it, not because they somehow calculated that they don’t feel bad enough about it. The wealthy are not forced to have their house flooded in accordance to the number of cars they own, for example.
fredgrott 2y ago
prices do not encode information! Prices are a reduction of information in that since decisions that lead to price being set are past that information gets reduced. Or to put it another way for an investor speculator they have to go to the chain that goes into producing that product to find the signals to use to short or buy a stock...not the price of the good itself..
hulium 2y ago
Related is the theory of the "Lemon Market": https://en.wikipedia.org/wiki/The_Market_for_Lemons https://en.wikipedia.org/wiki/The_Market_for_Lemons If the buyer cannot estimate the quality of the product before buying, the sellers will reduce quality or be forced to by competition. Buyers lose trust and the market can collapse.
- ghaff 2y ago
  The problem there is that the owner of a car that’s good as far as they know (but not a given as a major repair of an older car could be just around the corner) may sell anyway so they can buy a new car even if they think they’re not getting a good deal. But certainly of cars that know they have major not easily detectable problems will be much quicker to sell or trade in. (I know.)
- pjc50 2y ago
  The Akerloff Market for Lemons paper is really important. It explains so many things, like why people very rarely pay upfront for mobile games or online articles.
  - datavirtue 2y ago
    According to this, Walmart ruined toasters.
    - pjc50 2y ago
      ?
  - littlestymaar 2y ago
    Yet people buyer newspaper without having read them… The reason why people don't pay for online stuff is mostly because we're used to get free stuff online + the fact that online payment remains cumbersome (even moreso since the businesses have all incentives to pish you to a regular payment model instead of a one-shot one). It has nothing to do with information asymmetry. And that a paper that reads like a parables like this was deemed Nobel-prize worthy tells us more about economics as an academic field than about the paper itself.

by jl6 2y ago

yarg 2y ago

Makes me think of good/cheap/fast - pick two. You can't tell from the output price which selection was made.

kitd 2y ago

Hence the obsession with customer reviews. In the absence of an objective measure of quality, the easiest to implement is a star rating of "what everyone else thinks about this product".

dredmorbius 2y ago
Easy != Informative. Such review systems are trivially gamed, with exceedingly high incentives to do so. One of the underappreciated benefits of an established retailier with limited suppliers and a centralised buying operation, as with traditional brick-and-mortar establishments (Harrods, Costco, Macy's, etc.) is that those establishments can set their own minimum standards and select merchandise which is highly likely to provide high value to the end customer. The notion that "choice is good" falls flat in the reality that uninformed choice over a range of intentionally insufficient products is not good, and is in fact a form of gambling with low payoffs. Some retailers target high-end products (e.g., Harrods), some mid- or low-market (e.g., Costco). But by restricting upstream vendors, tracking satisfaction, and having their own testing and development of products or offerings, as well as return/warrantee programmes, they can assure a reasonable rate of satisfaction. I'm also finding retailers who sell manifest crap (o hai any Samsung home appliances) can be eliminated from my own list of acceptable outlets for future purchases.
- kitd 2y ago
  > Easy != Informative. Oh sure, absolutely, but note I said "easiest to implement". And there's that cost measure again, as if it's the only KPI. How do we measure the quality of the "quality" system? :)
  - dredmorbius 2y ago
    My thoughts on assessment of a rating system leans strongly on audit methodologies. It also starts with what the goals of a rating system are, and how it might be subverted or attacked. I see four key principles or assumptions: 1. The reported ratings for overall product performance should correspond with some reasonable informed-experts' ratings. 2. Issues with product support (returns, refunds, repairs, replacements, etc.) should correspond with identifiable events. 3. Solicitation of ratings, false positive ratings, or false negative ratings as forms of harassment or industrial subversion are all obvious (and extant) forms of abuse, as would be the ratings platform itself predicating positive reviews on, say, advertising purchases by the reviewed site, as has been alleged in numerous cases. 4. Systematic abuse will tend to be orchestrated by a given entity, and should exhibit some form of behavioural or networked anomalies. For key products (high volume, high-price, and/or both), independent assessments should be performed on at least some sample of products and conformity with assessed ratings shown. Where expert opinions can be reasonably attained, they should generally take priority over crowdsourced reivews, especially where specific expertise and tangible distinction in results exists. This is guided by both the notion that you'd rather have a skilled pilot than a democratic representation of passengers flying an aeroplane (a notion dating back to Plato, though he somewhat unambitiously used the example of a ship at sea), and awareness that in some cases there isn't much consistency even amongst experts, as with wine tastings and ratings. Third parties (e.g., Consumers' Union, Underwriters Laboratories) might also be compensated for unbiased expert assessments. Individual raters with high volumes, anomalous ratings, or patterns of coordination with other raters (e.g., similar ratings on the same products) should be flagged for review, and potentially voided from the system. Any indications of suppliers soliciting ratings, providing kickbacks or rebates, or otherwise inducing positive ratings should be addressed severely. I'd be in favour of a quick and long-term minimum-rating consequence. This of course raises the risk of suppliers "joe-jobbing" competitors' offerings to create the appearance of manipulation (by the target). That activity should result in an even harsher consequence. The overall rating system and activity should be constantly monitored for anomolous patterns. Highly-active individual accounts are probably the easiest to detect. Large groups of low-activity accounts with similar activity are probably the hardest to detect, but would be another key issue. Audits of such behaviours should be a constant part of a system, and the subject of regular transparency reports.

lazide 2y ago

You were making sense for a bit, then kind of went off the rails? For instance, forced labor, pollution, etc. are factored into price. Or more specifically, the customers willingness to care about these things is factored into the price, on the buy side. And someone’s willingness and ability to do them (or hide them) is priced on the sell side. Same with the customers willingness to gamble on quality (aka random no name branding), and a sellers willingness to deal with legal and reputational blowback. People just don’t want to say it. At the end of the day, as long as no one is going to shame them or punish them, most people will happily fund super polluting slave labor and gamble on quality for a cheap price. Hell, as has been made clear over and over again, people will happily risk serious legal consequences and even murder people to supply/consume illegal goods that get them high, at a price. And that price is a lot lower than most people want to think about. And this is where the EMH bears actual fruit - because the ultimate test is people’s willingness to part with their cash for a good. And both sides of the transaction are always trying to figure out ways to shift the line where they both meet in their favor. It’s not about what they say, what they profess to believe, what is acceptable to admit, what is legal (per-se), etc. unless it actually matters. Which is rarely as often as we’d all like to believe.

SamoyedFurFluff 2y ago
> For instance, forced labor, pollution, etc. are factored into price. Or more specifically, the customers willingness to care about these things is factored into the price, on the buy side. And someone’s willingness and ability to do them is priced on the sell side. I don’t agree with this. Pollution primarily affects people who cannot afford to pay to not affected by pollution. The people who buy the most polluting products are not the people who are directly exposed to the most pollution. This isn’t as simple as “oh people just don’t feel bad enough to not buy cheap things”, the people who cannot afford to avoid the consequences of societally bad decisions are suffering way beyond their consumption! The poor live most exposed to effects of climate change (fires, floods, etc) because they cannot afford to avoid it, not because they somehow calculated that they don’t feel bad enough about it. The wealthy are not forced to have their house flooded in accordance to the number of cars they own, for example.

fredgrott 2y ago

prices do not encode information! Prices are a reduction of information in that since decisions that lead to price being set are past that information gets reduced. Or to put it another way for an investor speculator they have to go to the chain that goes into producing that product to find the signals to use to short or buy a stock...not the price of the good itself..

hulium 2y ago

Related is the theory of the "Lemon Market": https://en.wikipedia.org/wiki/The_Market_for_Lemons https://en.wikipedia.org/wiki/The_Market_for_Lemons If the buyer cannot estimate the quality of the product before buying, the sellers will reduce quality or be forced to by competition. Buyers lose trust and the market can collapse.

ghaff 2y ago
The problem there is that the owner of a car that’s good as far as they know (but not a given as a major repair of an older car could be just around the corner) may sell anyway so they can buy a new car even if they think they’re not getting a good deal. But certainly of cars that know they have major not easily detectable problems will be much quicker to sell or trade in. (I know.)
pjc50 2y ago
The Akerloff Market for Lemons paper is really important. It explains so many things, like why people very rarely pay upfront for mobile games or online articles.
- datavirtue 2y ago
  According to this, Walmart ruined toasters.
  - pjc50 2y ago
    ?
- littlestymaar 2y ago
  Yet people buyer newspaper without having read them… The reason why people don't pay for online stuff is mostly because we're used to get free stuff online + the fact that online payment remains cumbersome (even moreso since the businesses have all incentives to pish you to a regular payment model instead of a one-shot one). It has nothing to do with information asymmetry. And that a paper that reads like a parables like this was deemed Nobel-prize worthy tells us more about economics as an academic field than about the paper itself.