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When demand exceeds supply you have two options: make the people who value those goods the highest compete with each other to pay the natural market price for t
by tjwebbnorfolk 2mo ago
When demand exceeds supply you have two options: make the people who value those goods the highest compete with each other to pay the natural market price for them, or have a lottery with price ceilings. Price ceilings create inefficiency, and they create black markets.
In a lottery, the goods are misallocated to a bunch of people who aren't getting the most value out of the goods, creating economic inefficiency. A bunch of GPUs would be sitting in warehouses waiting to be resold (either when the price goes up, or in the inevitable black market), or in my basement screwing around with them, instead of being deployed in a way that the most people can benefit from creating maximum economic value from their deployment.
Your gaming PC isn't as economically valuable as JPMorgan using AI for fraud detection, for example.
Moreover, if you are appointed god and force everyone to sell GPUs at one dollar just because you want cheap GPUs, then this is the last batch of GPUs that will ever be produced and you'll have a shortage until the end ot time.
- repsilat 2mo ago> you have two options There are many other ways to allocate capacity. For example, you could give preferential access to customers who sign long-term purchase commitments, or some other favourable terms. These other methods might correlate well with value to the seller and might be easier for buyers to pay. Other methods could be "allocate to customers that you want to maintain a good relationship with." I suspect HBM is not allocated either with pure auctions or by lottery.
- tsimionescu 2mo agoNot that I'm advocating for this with RAM, but another tried and true solution for necessary goods with limited supply is rationing. This is what got everyone through WW2, for example.
- tjwebbnorfolk 2mo agoRationing works when there are alternative goods available. Spam instead of steak, in your example. One of the most difficult shortages during WW2 was rubber, because there was no (known, at the time) comparable alternative. With GPUs, rationing would have the same effect as a lottery -- you either get to run AI, or you don't.
- tsimionescu 2mo agoRationing works when people can make do with a small amount of something despite preferring a larger amount. In particular, food rationing was not about alternatives, but simply about restricting everyone's diet so that a limited food supply would be consumed more slowly without starving anyone.
- EliRivers 2mo agoThis all sounds very hypothetical economic universe. In the real world, rich people do buy expensive things and do nothing with them.
- cortesoft 2mo agoSure, at the individual level lots of people/companies will make irrational decisions. At the macro level, though, the effect is still there.
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- tjwebbnorfolk 2mo agoYes it's well known that luxury goods do not fit this model. GPUs are capital goods. It isn't hypothetical when you understand the difference in the demand curves for different types of goods.
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