Voltroning Economics
Xerographica
12

Right — well I still don’t know how much you’d value my reply, but I value the warm feeling of writing one enough to sacrifice my time, so here goes.

Starting with the comment in your earlier reply…

I can’t tell you how much I value your story before you’ve even written it!

That is an inevitable and fundamental economic problem, even for pragmatarians. You advocate rewarding people for the stories they’ve already written, in order to encourage them to write more similar stories. In most transactions for goods, payment is made (and the goods handed over) before the buyer can ascertain that the goods received outweigh the price paid. Even if you have bought similar goods before, this is no guarantee that the new purchase will live up to the same expectations.

Back to your Ecotron story.

As a preamble, evidence for Marcnore: https://t.co/FdlHqfkPQG — we seem to have an ingrained anti-profit bias. That’s a big challenge, but at least we know our enemy!

1. The book chapters

Much in life is about prioritizing, because our time/money is scarce, and we can not have everything (at the same time). But why would setting a priority between chapters require money? What additional benefit would it bring if you had to pay to set the priority? I can only think of one (not particularly strong) reason: you would possibly spend more time/effort doing it well, as there is a material investment required. We value stuff more if it costs us. But I am still not sure it would really make a difference here.

Would it work better at a plant show? Well, the set up is quite different here. It is not one person providing a personal recommendation as to what an optimum priority set is; it is multiple people whose preferences you want to aggregate.

First of all we have to establish what the significance is of the ranking of the plants at the show. To whom is an ‘optimum’ ranking valuable? To the society members in their capacity of voters? Or to the society members in their capacity of members who ‘consume’ the ranking? (Some people may be in both categories.)

What matters (as we have discussed before) is the scarcity of the votes — and that can easily be achieved without actual money. You can ask people to rank their preferred plants — that introduces immediate scarcity: there is only one #1 position, one #2 position etc. Or you can give people a limited number of votes, that they can allocate to the plants on display as they wish — again: scarcity. Of course, you could ask people to put up real money for each plant, and the plant with the most money behind it would the be the winner, etc.

But let’s think about this further: what is being bought and sold here, between whom? Why would a voter pledge $0.01, or $10, or $100,000 to a plant? What is the value they get in return? Who would be the beneficiary and why?

I’ll leave this question hanging for Ecotron to ponder: can market thinking improve the awards at the ESSC?

OK, on to the next challenge — the Samantha with the flat tyre and the thirsty cavemen.

One of the big problems with money is the illusion of fungibility. Kahneman and Tversky showed how many more people would be happy to drive 20 minutes to save $5 on a $15 item, than to do the same to save $5 on a $125 item (these are 1981 dollars!). It is the same $5, yet we act very differently. Richard Thaler makes a similar observation regarding the price of a cold beer on the beach.

So if we are not consistent in valuing stuff, even if we value it in money, any conclusion on the basis of people professed valuation is precarious (I wrote this about it).

In addition, even in the same objective situation the valuation can be hugely influenced by the framing of the question.

Do I mean that it is impossible for people to express how valuable something would be to them? By no means. I think it is entirely legitimate and helpful for Frank to verify how thirsty Bob is. But in a sense, the cavemen have an advantage over us, because they are not being confused by infungible money. It is water against the bear claw, a leg of mammoth, or sweeping the cave.

So what with our ESSC members? As a member of the select Ecotron team, I think, framed appropriately, this could actually work. In the base case situation (let us assume), members pay a fee to attend the show, and a proportion of that money is used to award prizes. Let us also assume that the visitors derive utility exceeding the admission price paid, and that this utility is at least in part delivered by the experience of observing the plants on display. So instead of paying (say) $10 to enter the show, visitors would be asked an entry fee of (say) $2, and required to allocate the remaining $8 over the plants on show, according to how much enjoyment they get out of them. (How this enjoyment arises is not relevant for the experiment — but it could comprise sheer visual delight, as well as inspiration, information etc.) The prize giving would then differ from the base case:

  • base case: “Third prize, $30 goes to…; runner up, winning $50 is…; $100 goes to the winner, who is…”
  • Ecotron case: winners are awarded the amount pledged by the visitors — so could be “Third prize, £19.44, goes to…; runner up, winning $54.18 is…; $227.88 goes to the winner, who is…”
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