The Magnitude of Inequality
James Kwak
933

The Magnitude of Inequality on Medium

Some people’s stories don’t receive any recommendations… other people’s stories receive 1000s of recommendations. That’s infinitely more recommendations. Why do you ignore the massive inequality that’s right under your nose?

Unlike the government, Medium is not way outside your range of effectiveness. You should have no problem persuading Medium to massively reduce recommendation inequality. When it does so, we’ll all be amazed and astounded by how much the stories improve as a result. Right? With such conclusive evidence, the government will no longer be way outside your range of effectiveness.

Fortunately for everybody, Medium is way outside my range of effectiveness. If it wasn’t, then we’d all have the option to allocate our pennies to our favorite stories. Oh man, can you imagine what would happen to penny inequality? For sure it would skyrocket. I wonder though if the most popular stories would also be the most valuable stories…

Seriously though, the primary purpose of paying for things is to reveal and communicate our perception of their relative scarcity. This should be pretty intuitive. If Medium facilitated micropayments then for sure you’d allocate more pennies to rarer stories.

It is these needs which are essentially deficits in the organism, empty holes, so to speak, which must be filled up for health’s sake, and furthermore must be filled from without by human beings other than the subject, that I shall call deficits or deficiency needs for purposes of this exposition and to set them in contrast to another and very different kind of motivation. — Abraham Maslow, Toward a Psychology of Being

We’d all use our pennies to communicate which stories fill our empty holes, so to speak. This fundamental feedback would logically alter everybody’s behavior. The result would be a feedback loop…

It is thus that the private interests and passions of individuals naturally dispose them to turn their stocks towards the employments which in ordinary cases are most advantageous to the society. But if from this natural preference they should turn too much of it towards those employments, the fall of profit in them and the rise of it in all others immediately dispose them to alter this faulty distribution. Without any intervention of law, therefore, the private interests and passions of men naturally lead them to divide and distribute the stock of every society among all the different employments carried on in it as nearly as possible in the proportion which is most agreeable to the interest of the whole society. — Adam Smith, Wealth of Nations

Economics is all about behavior optimization. Behavior can only be optimized when our payments accurately reflect our perception of relative scarcity…

allocation = valuation

Is labor an exception to this rule? Should we disregard people’s perception of labor’s relative scarcity? Should we pretend that it’s economically impossible for any given geographic area to ever have a labor surplus? It’s impossible for Seattle to ever have too many waiters? No matter what… Seattle will always have a shortage of waiters? No matter what… students in Seattle should drop out of school and become waiters? No matter what… waiters in Los Angeles and Houston should move to Seattle? But wouldn’t that mean that Seattle’s shortage of waiters is greater than the shortage of waiters in Los Angeles and Houston?

In ants, one such behaviour is the collective food search: ants initially explore at random. If they find food, they lay down pheromone trails on their way back to base which alters the behaviour of ants that subsequently set out to search for food: the trails attract ants to areas where food was previously located. — Jo Michell, The Fable of the Ants, or Why the Representative Agent is No Such Thing

Also…

Today’s Mandeville is the renowned biologist Thomas D. Seeley, who was part of a team which discovered that colonies of honey bees look for new pollen sources to harvest by sending out scouts who search for the most attractive places. When the scouts return to the hive, they perform complicated dances in front of their comrades. The duration and intensity of these dances vary: bees who have found more attractive sources of pollen dance longer and more excitedly to signal the value of their location. The other bees will fly to the locations that are signified as most attractive and then return and do their own dances if they concur. Eventually a consensus is reached, and the colony concentrates on the new food source. — Rory Sutherland and Glen Weyl, Humans are doing democracy wrong. Bees are doing it right

It seems pretty straightforward that there’s some sort of relationship between the accuracy of communication and the benefit of behavior.

From my perspective, you’re never going to make the feedback loop more accurate by disregarding/overruling/overriding/ignoring/diminishing people’s true perceptions of relative scarcity. Of course I might be wrong.

FYI…. I did notice your scarcity. Even though we fundamentally disagree I really don’t think that your absence improved Medium. For sure you’re a liberal… but at least you’ve done some homework. You’ve read at least some Hayek. Like I’ve read at least some Samuelson.

So I’ll definitely appreciate your thoughts on the topic of disregarding people’s perception of relative scarcity. Please ignore my snark/sarcasm and do your best to try and persuade me that I’m barking up the wrong tree! My life is way too short to spend barking up the wrong tree!