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It's correcting the common market failure of humans undervaluing opportunity costs. The economic foundation is behavioral economics, or maybe a more advanced mo
by mrob 12y ago
It's correcting the common market failure of humans undervaluing opportunity costs. The economic foundation is behavioral economics, or maybe a more advanced model of rational actor economics which takes into account the often high cost of measuring opportunity costs.
- Frozenlock 12y agoAll value is determined by humans; you can't say that humans undervalue something. That simply doesn't make sense. What you can say, however, is that humans prefer the statu quo. (Or as you would say, the cost of measuring opportunity costs.) Any transaction need to provide at least some additional benefit to be considered worthwhile. For example, I won't sell you my car for only 5% over the market value because it's not worth it for me. You coming every day and breaking a mirror, a whipper, or steeling a wheel would not correct any economic calculation 'error'.