Corporations Are Reading Your Mind

Corporations Are Reading Your Mind?

Let us try a thought experiment? What if you could read people’s minds? Well you might want to do some cool party tricks. Astonish your friends by asking them to pick a number between one and a million. This is cool and might make you a lot of friends. After a while, you might want to put your talents to good use, making money. Okay so you can bet people that you will win guessing games. Besides the obvious, there is a lot of money to be made by reading people’s minds. Mind reading would give the ultimate leverage in a negotiation. You will be able to haggle any buyer or seller into the most advantageous price. Wielding this power as a corporation can help solve the problem of pricing your products.

Image result for can of coke

Let us look at Coca-Cola and its classic product. Did you know that it costs less than $0.02 to manufacture a can of coke? This does not factor in all the other costs, but still they are selling a can at much more than it costs to make. For every dollar that Coca-Cola spends, they make about $0.18 in profit. Why not raise your prices even more and make a larger profit margin? The problem with this is that as you raise the price, less people will want to consume coke. Maybe the price is too high and you will get a lot more customers if you lower the price. Being able to find the right price inorder to maximize profit is a hard task for firms.

Since you can read minds, then you will be able to figure out how much people are willing to pay you for a can of coke. Then you can calculate the effect of different prices and see your projected profit. The only issue with this is that corporations often do a pretty okay job pricing. This is especially true for big corporations such as Coca-Cola. Instead of trying to do this better, we could cheat the system and make even more money. When someone walks into your store, just read their mind and then charge them the price they are most willing to give you. If you think about it for a second, this system really allows you to have the best of both worlds. For people who really love to drink a can of coke, you can charge them ridiculous prices. You could charge pepsi drinkers just the right price to get them to switch over. This is actually a very trivial and tedious example, in reality you would probably be used in large corporate negotiation. But the takeaway here is simple: The problem of pricing low or high is only a problem if you have one price.

While this may seem like a crazy hypothetical, companies are already using your data to charge you different prices. We can interpret this as a type of imperfect mind reading. Data is a history of past behavior which can predict future behavior. Collecting data about how the market would respond to price changes can help you set a price for a good or service. With the use of personalized data, companies are attempting to also offer individuals a personalized price. The technology behind data collection may be new, but the economic strategy of trying to charge people different prices has long existed and been studied. So this strategy might seem like a radical new scheme. I am going to try to open your eyes and show you what to look for. I am going to start with the obvious examples using modern technology. As we go, I will work in various strategies and limitations that are known about in existing markets. 

Consider when you open your favorite free to play mobile game, it often will say it has a special offer for you. It is very likely the special items they are offering you at your special price are an educated guess based on your data. They don’t need to read your mind, they just use behavioral and statistical economics. What is more interesting is that for all you know they could offer your friend something very similar or maybe even the same thing but for a few dollars more. This is because they are pretty sure using the same methods, that they are much more willing to give the game money. You may be unaware of this, because there is very little transparency in special offers and discounts.

It is easy to worry about companies spying on us, but we often hand over the data quite transparently. Consider all the loyalty clubs you have memberships with for your local stores. Each household in the United States has about 29 such memberships. The corporation gives these out, so they can look at your shopping behavior in exchange for some member benefits. One of the goals is to be able to offer you special deals in order to get you to buy more products. When they send you special member coupons for certain products, they are doing the same thing as a mobile game special offer pop up. You unknowingly just call this a coupon and don’t pay it much thought. I mean if you are the type of person to spend a lot of time clipping coupons, you are probably the type of person that could need a lower price to entice you to shop more. All of this segmenting people based on data allows companies to figure out what prices they could offer you to most maximize their profits. 

There was a comical example many years ago where a teen aged girl was sent coupons for things new mothers would need. Target’s system could monitor shopping behavior and anticipated in the future when a woman was likely to give birth and thus need to buy stuff for her new child. The father was outraged they would send a teenaged girl coupons for strollers and diapers. Were they trying to entice her to have a baby? It turns out Target’s system was right and the father was very wrong.

It might have been many years ago that they targeted specific groups manually with big data. Today we have much more advanced and general recommendation systems that are pretty good. A lot of new techniques can identify very strong trends in a set of data and identify groups to segment. This is what websites like YouTube and Amazon try to do. YouTube is trying to maximize watch time and Amazon is trying to show you things you are likely to buy. In both cases they are an attempt to maximize profit. They are just not using this to charge personalized prices. Not yet at least. 

While it is easy to scare people about the power of big data to charge people different prices. Just as with the coupon clipper, there are many simple ways that we use information to segment people. If you are working in insurance sales, then your goal is to get customers to often switch over to your company. Now one trick they will have you use is to ask people what they are already paying. Just follow a simple formula to determine the price you will charge them. This price will usually be less than they are already paying, but still profitable for the company. It is not just internet surveillance, but often the information you provide in a conversation or application that can be used to customize your price. You might tell them, because you interpret it as a bit of harmless information they need to know so they can look up if you are going to save money by switching. When you apply for a job, you often tell your employers how much you made at your old job. In this context, it is more transparent that the employer wants leverage over you. 

So far we have gone over how firms might go about personalizing your price for services. There exists reasons why this can’t actually work for every market. Let us say that we have a game such as RuneScape where we could try some of the same strategies with ingame gold. What problem might they encounter? Well if you could buy a million gold for $2 and your friend could buy a million gold for $4. Why not just act as the intermediary for your friend? You can charge your friend $3 for a million gold and you just pocket the difference. Once you both realize this, it will change your behavior and then the most you are both willing to pay will be $3. This scheme just doesn’t work here. People can trade and establish a price equilibrium in the grey market.

This does not mean that you can’t try to prevent trading goods that are considered easily tradable. As we have explored, it could be very profitable to figure out a method of doing this. There was hype not too long ago about Trump proposing to allow people to import pharmaceutical drugs from Canada and Mexico. The reason being that they are somehow cheaper in these countries. This seems perfectly logical and it begs the question. Like yeah, we manufacture stuff in China and then import it to America because it is cheaper. This is the whole point of international trade. Why would there exist laws making it illegal to trade something between countries? 

In Utah, a few state employees are even getting trips to Mexico to refill their prescriptions. This is bizarre considering it is costly to travel every few months to Mexico. It is clearly inefficient to send an individual across the border with pharmaceutical drugs as opposed to a truck shipping them to a pharmacy. Still about 10 people so far are part of this program. How could this be happening?

This might seem like a big conspiracy to you and it might as well be. By having borders and making trade harder, they can charge two groups different prices.  The data point is different countries and the profit maximizing price they are willing to pay. It is not that Canada or Mexico can manufacture drugs cheaper, but it is often the same drugs being sold at a different price. These countries have different markets and different prices they will be willing to pay. 

One thing we have yet to talk about is resentment and morality. Is it immoral for you to be price gouged, because you are willing to pay more? The answer to this might seem obvious. It does not take much imagination to see a firm exploiting those who are loose with their credit cards to squeeze a few extra dollars out of them. There are numerous headlines about people spending thousands of dollars on microtransactions. Let us put this thought on hold and explore the economics of the third world.

AIDS is a disease which has had devastating effects when it was first introduced, but we can now treat it. This has not been a serious problem for many in the first world as they can afford the medication to stay healthy for years. The problem is for people who live in countries that lack economic development. Most people in these countries could hardly be expected to pay the same price. You could say that while it may be profitable to be able to sell to Africa at a different price, it would also be a humanitarian choice. Just because you have HIV and are stuck in a country that is poor, this doesn’t mean you should die from AIDS.

The drug combivir is an example of something used to treat HIV. In Europe it was being sold for $12.50 a pill and in Africa it was being sold for $0.50 a pill. This presented an opportunity to buy up millions of pills in Africa and sell them for an insane markup in Europe. People were in fact buying up the pills in Africa and smuggling them to sell for $12.00 a pill in Europe. The only problem is that this ruins the whole point of selling to Africa at a cheap price. The idea of selling at a price affordable and still profitable only works if those who can afford to pay more do in fact pay more. Even if we gave out the pills for free in Africa purely on philanthropy, people will still be incentivized to get them and smuggle them out of the country. This means that people in Africa would be incentivized to sell their medication so foreigners could get a discount. This also ruins the incentive to give them to African patients, because they take away business from wealthier Europeans. In many ways preventing smuggling over borders is important to making sure people receive their HIV treatment. 

Corporations don’t actually price based on need, nor will they ever. If you need something, it will not necessarily make the price higher or lower. It is based on the most money you are willing to pay for it. This can work both ways. Poor people don’t need the drug more than rich westerners necessarily. The difference here is the amount of money we can pay for it. In this sense people can make a case for borders on both humanitarian and corporate profit grounds. Borders act to segment markets so they can be charged based on how much people in that group are willing to pay. Trying to put people in categories and price based on these categories is the name of the game here. While exploiting psychological weakness is one possibility. The lucrative and more definite predictor is income. It has consistently been the main motivation behind these massive price differences. 

Is there a serious danger of corporations exploiting the vulnerable by using price dscrimination? In many ways, they will indeed do this, but this ignores that they only care about need in terms of how much people will be willing to pay for it. Consider a guy with $10 in his pocket and another guy with $1000 in his pocket. I would be willing to bet that it is much more worth your time to try and squeeze the guy with $1000 for more money. Even if rich people need or desire something less, they have much money at their disposal. As we have demonstrated corporations are very willing to sell to poor people at a reduced price, as long as it doesn’t mean their richer customers get that same price.

This is not to say that prices will always be cheaper for the poor. We can think about various examples where prices are higher for the poor. In the case of interest rates, richer people are usually less of a risk to lend to. Some goods are cheaper per unit if you can pay a larger up front price. It is often more costly to run stores in areas which have high crime rates. These effects often hurt the poor and I am not disputing their effects. I am simply referring to various market conditions that work the other way. Markets are incentivized to price higher for the rich people and it can happen given certain conditions. The increase of technology here and data collection helps enable this effect to make prices cheaper for the poor. 

Let us visit an even more extreme example, the United States university system. Did you know that while the price of tuition is radically increasing, the price being paid on average for tuition is growing much slower or in some years decreasing. This seems nonsensical until you consider that tuition is being priced based on how much money people are willing to pay. The price that you see for tuition is just the maximum price that people could pay. The university simply puts out a ridiculously high price and asks you to fill out a form detailing your income and assets to receive a discount. 

This would appear strange if you went to the store tomorrow and prices increased 10 fold. Before you panic, the people at the store told you to send them all your financial details and then they might give you a discount. If they could successfully do this, then it would probably save poorer people a boat load of money and really rake the rich over the coals. 

Besides the outrage that would be generated if corporations try to do this, there would be a lucrative black market created for poorer people to make money on the side as personal shoppers. Just hire someone who is poorer to shop for you and then you can save a boatload of money. 

This is harder to avoid if you are being surveilled without your knowledge. That website can just offer you less discounts if you are logging in from that expensive mac computer and have a history of being a big spender. I am somewhat safe as I own a ghetto laptop and am a computer nerd that has Brave browser installed. I am kidding, only if you really could magically hide who you are.

American Universities have successfully pulled this off. How? You can’t resell your education and they have convinced people that giving them your financial information is normal and probably moral. The latter is accomplished with the FAFSA, Free Application For Student Aid. Basically it is used to apply for student aid from the government and university. They charge a ridiculous price and then ask you to send them information detailing all of your income and assets to hopefully get a discount. 

The curious thing about this arrangement is that we offer everyone the same service, but we charge the richer people even more. This trick to maximize output and squeeze more profit out of people reminds me of another principle; From each according to their ability to each according to their need. The richest among us are squeezed for a high price and the poor get it at closer to cost. This acts to reduce the benefits of having a high income. The plain irony of this arrangement is that it contradicts what you intuitively would think about such schemes and their impact. The intuition would be that companies using your data to change the price of something would lead to the rich robbing the poor. The fact is that in essentially all cases the richer always get the raw end of the deal. The market here is exploiting the idea of the rich paying more, because they can afford it. 

The university system was in fact established by government intervention. This does not mean that if government intervention was pulled, then it would end the system. The issue here is that the university system is widely considered to be moral. Of course universities want to see your financial information! It is just to help you and poor people afford university. This might still occur even if the government stopped giving aid. The numbers would indeed shift and it would most certainly hurt the poor. Universities are still incentivized by profit and the market is trained so that people hand over their information. 

A curious fact of the university system is that in many circumstances there is a disincentive. If you are a family that is well off and are paying for your child in university, then it is possible that it will make you better off than if you earned just a little bit less. They actually almost function like taxes. Universities have yet to properly squeeze the very rich and maybe that is not desirable. We might need million dollar tuition with massive million dollar student aid packages for everyone except the 1% of the 1% to successfully pull off this scheme. This system does have the one flaw that if your parents are well off and they refuse to help you, then you are expected to go into massive amounts of debt. There are questions about the effect of taxation on willingness to work, and the same arguments apply here. 

Let us return to the moral issue of doing imperfect mind reading or as it is more technically called data collection and behavioral economics. A lot of the panic here is not entirely realistic. I believe that optimism is for cowards, but it is bad to be absurdly pessimistic. There are a lot of critiques here of this development, but I want to offer counter points. In terms of goods and services which are common and competitive, this development will not likely affect them. It is very hard to have a broad monopoly on water and food. For people who can already easily afford less competitive services, they would probably be gouged. Those who struggle to afford various services will be offered them at a cheaper price. All of this will lead to more profits and thus more money for research and development. New markets in providing people cutting edge services might be able to offer everyone access with the bulk of profits coming from those who can afford to pay the most.

Earlier, I made a tongue and cheek comparison to communism. While I am not using that word in a technically correct sense, I was trying to invoke the spirit of what people want. From each according to their ability to each according to their need. The idea that everyone can have something and people who can pay more contribute to paying for the fixed costs. 

Consider that it costs a lot to build a police station, but it costs very little to protect more people. If we were to be charged equally for police, the price would need to compensate for these fixed startup costs. One argument for the government is its ability to come in and offer monopoly services to everyone at different prices. The poor can get the monopoly services at near marginal cost and the rich pay for the fixed costs. 

The government does this by investigating people’s income and assets. Its business is data collection and price discrimination. Taxes are a type of discrimination against those who have more money. If you have a higher income, you pay a higher price for civilization. So far this business has largely been cornered by the public sector. Opening up this access to data can usher in a new era of private commons. Areas which are open for the public use, but are not public commons. They are “taxed” services which exist for profit. 

The historical battle between efficiency and public access for monopolies could be solved by the data revolution. Instead of government expansion to meet the needs for all as new services become considered a necessity, private entities can act to build these commons and run them for profit. This could be a solution to halt the growth of government into various new sectors of the economy that come out of a unique private intervention. 

Social media is a service that most of the public consumes and has equal access to, but it is not a public service. We can all come to Twitter, YouTube, and Facebook as the public. These are services which act as common grounds for the public. The question is always monetizing them and holding them accountable. These services are incentivized to pull in and have participation from the public. They are however not mandatory and can in theory be replaced. This is a problem with most government institutions. Even if we have a revolution, they would probably just occupy and only partially demolish the existing structure. Myspace collapses and is replaced by a new institution, facebook. What is next? I am not sure, but I at least don’t have to worry about it on a more foundational scale.

What is the potential of data to revolutionize the world? Will it be used as a tool of the powerful to exploit people in need? Hopefully, I have put some ideas in your head to think more positively and critically about the power and uses of big data. I do not possess the power to read minds, so I don’t know what you are thinking anyway.


Epic Destruction of Truth And Altruism! (Nietzsche)

Why are you so in love with the truth? Why do you worship it like the false god that it is? I bet you only enjoy the aesthetics and power of truth. Look at me everyone, I got the truth. Aren’t I special? 

This section opens Beyond Good and Evil, by Fredrich Nietzche. Nietzche will cure you of your delusional love of facts and logic.

1. The Will to Truth, which is to tempt us to many a hazardous enterprise, the famous Truthfulness of which all philosophers have hitherto spoken with respect, what questions has this Will to Truth not laid before us! What strange, perplexing, questionable questions! It is already a long story; yet it seems as if it were hardly commenced. Is it any wonder if we at last grow distrustful, lose patience, and turn impatiently away? That this Sphinx teaches us at last to ask questions ourselves? WHO is it really that puts questions to us here? WHAT really is this “Will to Truth” in us? In fact we made a long halt at the question as to the origin of this Will—until at last we came to an absolute standstill before a yet more fundamental question. We inquired about the VALUE of this Will. Granted that we want the truth: WHY NOT RATHER untruth? And uncertainty? Even ignorance? The problem of the value of truth presented itself before us—or was it we who presented ourselves before the problem? Which of us is the Oedipus here? Which the Sphinx? It would seem to be a rendezvous of questions and notes of interrogation. And could it be believed that it at last seems to us as if the problem had never been propounded before, as if we were the first to discern it, get a sight of it, and RISK RAISING it? For there is risk in raising it, perhaps there is no greater risk.

2. “HOW COULD anything originate out of its opposite? For example, truth out of error? or the Will to Truth out of the will to deception? or the generous deed out of selfishness? or the pure sun-bright vision of the wise man out of covetousness? Such genesis is impossible; whoever dreams of it is a fool, nay, worse than a fool; things of the highest value must have a different origin, an origin of THEIR own—in this transitory, seductive, illusory, paltry world, in this turmoil of delusion and cupidity, they cannot have their source. But rather in the lap of Being, in the intransitory, in the concealed God, in the ‘Thing-in-itself—THERE must be their source, and nowhere else!”—This mode of reasoning discloses the typical prejudice by which metaphysicians of all times can be recognized, this mode of valuation is at the back of all their logical procedure; through this “belief” of theirs, they exert themselves for their “knowledge,” for something that is in the end solemnly christened “the Truth.” The fundamental belief of metaphysicians is THE BELIEF IN ANTITHESES OF VALUES. It never occurred even to the wariest of them to doubt here on the very threshold (where doubt, however, was most necessary); though they had made a solemn vow, “DE OMNIBUS DUBITANDUM.” For it may be doubted, firstly, whether antitheses exist at all; and secondly, whether the popular valuations and antitheses of value upon which metaphysicians have set their seal, are not perhaps merely superficial estimates, merely provisional perspectives, besides being probably made from some corner, perhaps from below—”frog perspectives,” as it were, to borrow an expression current among painters. In spite of all the value which may belong to the true, the positive, and the unselfish, it might be possible that a higher and more fundamental value for life generally should be assigned to pretence, to the will to delusion, to selfishness, and cupidity. It might even be possible that WHAT constitutes the value of those good and respected things, consists precisely in their being insidiously related, knotted, and crocheted to these evil and apparently opposed things—perhaps even in being essentially identical with them. Perhaps! But who wishes to concern himself with such dangerous “Perhapses”! For that investigation one must await the advent of a new order of philosophers, such as will have other tastes and inclinations, the reverse of those hitherto prevalent—philosophers of the dangerous “Perhaps” in every sense of the term. And to speak in all seriousness, I see such new philosophers beginning to appear.

3. Having kept a sharp eye on philosophers, and having read between their lines long enough, I now say to myself that the greater part of conscious thinking must be counted among the instinctive functions, and it is so even in the case of philosophical thinking; one has here to learn anew, as one learned anew about heredity and “innateness.” As little as the act of birth comes into consideration in the whole process and procedure of heredity, just as little is “being-conscious” OPPOSED to the instinctive in any decisive sense; the greater part of the conscious thinking of a philosopher is secretly influenced by his instincts, and forced into definite channels. And behind all logic and its seeming sovereignty of movement, there are valuations, or to speak more plainly, physiological demands, for the maintenance of a definite mode of life For example, that the certain is worth more than the uncertain, that illusion is less valuable than “truth” such valuations, in spite of their regulative importance for US, might notwithstanding be only superficial valuations, special kinds of niaiserie, such as may be necessary for the maintenance of beings such as ourselves. Supposing, in effect, that man is not just the “measure of things.”

4. The falseness of an opinion is not for us any objection to it: it is here, perhaps, that our new language sounds most strangely. The question is, how far an opinion is life-furthering, life-preserving, species-preserving, perhaps species-rearing, and we are fundamentally inclined to maintain that the falsest opinions (to which the synthetic judgments a priori belong), are the most indispensable to us, that without a recognition of logical fictions, without a comparison of reality with the purely IMAGINED world of the absolute and immutable, without a constant counterfeiting of the world by means of numbers, man could not live—that the renunciation of false opinions would be a renunciation of life, a negation of life. TO RECOGNISE UNTRUTH AS A CONDITION OF LIFE; that is certainly to impugn the traditional ideas of value in a dangerous manner, and a philosophy which ventures to do so, has thereby alone placed itself beyond good and evil.

5. That which causes philosophers to be regarded half-distrustfully and half-mockingly, is not the oft-repeated discovery how innocent they are—how often and easily they make mistakes and lose their way, in short, how childish and childlike they are,—but that there is not enough honest dealing with them, whereas they all raise a loud and virtuous outcry when the problem of truthfulness is even hinted at in the remotest manner. They all pose as though their real opinions had been discovered and attained through the self-evolving of a cold, pure, divinely indifferent dialectic (in contrast to all sorts of mystics, who, fairer and foolisher, talk of “inspiration”), whereas, in fact, a prejudiced proposition, idea, or “suggestion,” which is generally their heart’s desire abstracted and refined, is defended by them with arguments sought out after the event. They are all advocates who do not wish to be regarded as such, generally astute defenders, also, of their prejudices, which they dub “truths,”—and VERY far from having the conscience which bravely admits this to itself, very far from having the good taste of the courage which goes so far as to let this be understood, perhaps to warn friend or foe, or in cheerful confidence and self-ridicule.

Why do you like the truth? Like what is the point? A secular and obvious answer is that the truth is useful. This lacks the romantic vision that the truth is its own end. Truth is something which does not come easy to us, it is rare. But knowing the truth is often inconvenient and hard. Can we really say that humans are these rational truth loving beings? That is probably a stupid idea.

What Nietzche is really getting at here has to do with this realization that humans are not rational, truthful, or altruistic beings. You can’t just trust humans to be able to separate their thoughts from their own subjective experience. Humans are not simple machines for satisfying the noble goals we are supposed to seek. We have to put in effort to discover the truth. To solve this problem we try to develop institutions and methods of helping remove subjective experience. There is a strong optimism; humans are flawed, but we can attempt to pursue noble ends the best we can.

There is a problem here that these optimists have overlooked. It is summed up so ellongantly here, “How could anything originate out of its opposite?” 

Consider that humans are not machines to seek out the truth. Now we have these institutions that are supposed to help us reach the truth. This just sidesteps the question; how could we even value truth in the first place? Sure we might value truth by coincidence, but not innately. If we had innate love of the truth, then there would not be an issue of trying to discover the truth. Maybe we love the truth partially? This still sidesteps the issue of why we only love the truth in certain ways; I propose this is just another way of saying we love truth by coincidence. 

The issue is not a matter of how or what we say is a noble end. The issue is how we can even arrive at these moral noble ends. If we are inherently selfish creatures, then is it possible for us to act for altruistic ends? What we call our noble ends must originate out of our selfish and lower nature. Perhaps the difference is illusory? Maybe all of what we call nobel ends originates from selfish urges. 

Let us use the example of scorning groups of people for having sexual motivations. A lot of people shame sexual and gender minorities for having sexual urges that motivate their behavior. Unlike the higher and nobel urges of normal heterosexual cisgendered society. But why not just point out the universality of sexuality motivating all actions? It is taken as basic evolutionary psychology that people are motivated by the desire to get sex, because it is an evolutionary strategy. This has yieled surprisingly both explanations for heterosexual and homosexual sexual desires. They are united in a common explanation and not an illusory distinction.This form of analysis is more likely than suggesting that humans have overcome their nature. 

If you predefine someone to always lie, then you are left with someone who will never say the truth. A simple exercise I propose: Try reaching pure altruism from a purely selfish starting point. The immediate issue you will have is that you can appear altruistic, while having secret selfish motivations. It is really impossible to determine the intentions from an action. 

I will try out the exercise right now. A man takes care of his family, gives to his church, and participates in his community. Does he take care of his family because he overcame his selfish nature or has a second altruistic nature? Well, you can appeal to evolutionary arguments and the fact that your children are an extension of you. How about the church? I mean have you ever been to a church? In college, I had visited some churches at request of friends and had a glimpse into something magical. Is it really less material than the experience of spending hundreds of dollars a week clubbing, partying, and drugging? When it comes to your community, let us consider the alternative. Are you really sure you would prefer to live an atomized and isolated existence? Is this really the superior state of humanity?Given these reasonings, it is very plausible that these have explanations which originate in our selfish desires.

It is this realization which leads one to question if all of the higher moral ends are even distinct from your mere lower nature. But also significantly, where does the moral value of these higher and more noble ends come from? 

As far as we can say we value the truth, because it is useful. This begs the question? Useful for what? Well useful to yourself and the flourishing of your life. This is a selfish end, this is part of your lower and biological urges. Is this the real ultimate source of morality? If the real standard has always been preservation of life, then truth, altruism, and all of the more noble ends might just be instinctual approximations. It might ultimately be more fruitful to go to the source and see if delusions, lies, selfishness help us.

Imagine we have a man who makes videos on the internet, Simpman Reviews. Now one day he switches his political views around after watching the beautiful Counterpussy. I mean is it not a stretch that he switched because he wanted the beautiful e-girl to notice him. No one really thinks that he was actually convinced. He might have arguments and defenses for his conversion, but we imagine it was motivated by other urges.

A researcher could do a study on whether lesbians are more attractive than heterosexual women. Well this truth is dependent on the attractiveness subjective to the researcher. Maybe this truth seeking was motivated by his desire to “study” women. He assigned attractiveness in his carefully composed and seemingly objective scales and such, but it secretly communicated his sexual fantasies. 

What impacts has homosexuality had on modern economics and computer science? I mean their early contributors and often called fathers, John Maynard Keynes and Alan Turing were known homosexuals. Careful pondering and scholarship has gone into trying to understand how they generated their unique contributions. Social alienation, oppression, and lack of family life must have informed something of their thinking. Maybe their experience lives on in how we are taught to think about these subjects. 

But there is a question here, if we recognize that the start of our intellectual journey may be built on motivations which do not serve the truth, then do we reject them? Well probably not. The issue is still whether they serve life. Is it fair to reject determinism and accept free will, because a belief in determinism restrains our lives and the possibilities? All the foundational assumptions people carry around about ideas they believe might be started in a falsehood. 

Even then it is a well recognized fallacy that you can’t derive an ought from an is. The core beliefs about how we ought to live in this world are only guided by how the world is. We can’t use facts to justify our desires and motivations, they are simply innate to who we are as people. 

If we recognize that as beings we have an independence from truth, altruism, and all the higher ideals; then, we are beyond good and evil. 


We Live In A Society (Max Stirner)

All of your life you have probably been told that you are not the center of the universe. That there are just bigger things other than oneself. Life is about excellent service. Excellent service to what? This school of thought often asserts you ought to recognize that you are a cog in something greater. We live in a society! If we do not sacrifice for the greatness that is society, then everything will collapse. You don’t want society to collapse, best go back to work.

Let us take a look at this section of The Unique and It’s Property, by Max Stirner. This will help us frame our further thinking on what people mean by “sacrifice for society”.

How is it with mankind, whose cause we are to make our own? Is its cause that of another, and does mankind serve a higher cause? No, mankind looks only at itself, mankind will promote the interests of mankind only, mankind is its own cause. That it may develop, it causes nations and individuals to wear themselves out in its service, and, when they have accomplished what mankind needs, it throws them on the dung-heap of history in gratitude. Is not mankind’s cause — a purely egoistic cause?

I have no need to take up each thing that wants to throw its cause on us and show that it is occupied only with itself, not with us, only with its good, not with ours. Look at the rest for yourselves. Do truth, freedom, humanity, justice, desire anything else than that you grow enthusiastic and serve them?

They all have an admirable time of it when they receive zealous homage. Just observe the nation that is defended by devoted patriots. The patriots fall in bloody battle or in the fight with hunger and want; what does the nation care for that? By the manure of their corpses the nation comes to “its bloom”! The individuals have died “for the great cause of the nation,” and the nation sends some words of thanks after them and — has the profit of it. I call that a paying kind of egoism.

But only look at that Sultan who cares so lovingly for his people. Is he not pure unselfishness itself, and does he not hourly sacrifice himself for his people? Oh, yes, for “his people.” Just try it; show yourself not as his, but as your own; for breaking away from his egoism you will take a trip to jail. The Sultan has set his cause on nothing but himself; he is to himself all in all, he is to himself the only one, and tolerates nobody who would dare not to be one of “his people.”

And will you not learn by these brilliant examples that the egoist gets on best? I for my part take a lesson from them, and propose, instead of further unselfishly serving those great egoists, rather to be the egoist myself.

Let us think about the motivations behind our actions. One way to think about this is to explain our actions as attempting to serve ourselves. The main objection of this selfish theory of human action is to appeal to our sense of morality. People argue that to have selfish motivation is immoral and instead we should submit to a higher end. People argue that life is about service to some ideal or higher cause. It is an interesting retort that we are not all selfish and that the amount of selfishness inside man should be limited. 

One such progressive end is the progress of mankind united towards our common destiny. We can think here about lefties and other one world do gooders. Stirner asks us to think about mankind united to serve the interests of mankind. In this kind of arrangement we are thinking of mankind as an actor. In this sense, the idea that mankind should unite and serve mankind is a type of selfish motivation. Each individual working for a single will, the will of mankind. A spirit composed of all human beings which acts for its interest.

Looking at mankind as an acting thing which has selfish ends may sound strange. Stirner is qualifying one way of looking at the situation. This is part of his style to present alternative ways of looking at the world and expose their flaws to reach the truth. People talk about units such as mankind or other groups as a united actor, capable of having an interest and acting. This seems in many ways very absurd, a group is not a living being. This absurdity is part of Stirner’s argument. He is criticizing this worldview by showing the strange logic. I lay out his argument refuting the condemnation of selfishness as illogical.

  1. You should never act for your own interests, but instead a higher interest.
  2. An individual shouldn’t act for their own interest.
  3. An individual should serve the higher interest of mankind, the nation, etc.
  4. Mankind/The Nation/Etc. should act for its own interest???
    • This violates the idea that serving your own interest is wrong. (1)

The belief in a united mankind is much less dominant than patriotic and nationalistic tendancies. People of Stirner’s day had hoped we were moving past these tendencies, but they still remain today. The majority of demands for a great sacrifice are still the call to national service. Stirner gave the example of the ultimate sacrifice that you can give, your life. The soldiers give their life so that the nation can benefit and grow from the corpses of young men. This depending on your emotional and ideological commitments can invoke very strong feelings. Stirner is not actually taking a side to whether this is good or bad. He is just showing the kind of act people are called to do in service of the group.

To understand his point about the nation, let us consider some additional ideas. Suppose you are living your life in your nation. Now, one day you are dragged out into the street and you are shot. Some could suggest that this sacrifice of part of the nation is done by the nation for the benefit of the nation. This feels something like the rhetorical question: Why are you hitting yourself? This is a clearly perverse interpretation of the facts. Maybe the use of the nation being treated as a unified actor is flowery language covering something up. What really happened you could say is that some group of people shot you for the benefit of another group of people. In some way this kind of national thinking has covered up the functions of the state. 

Now we look to the Stirner’s example of the selfless Sultan or in other words the selfless national leader. A lot of people see many including the political class as giving a lot to society. Stirner asks us to consider that maybe these people give to society not because they are selfless, but because they transparently have a stake and benefit from society. They give to you out of a sense of their own gain. Many of the national leaders assume the egoistic pleasure and motivations of the will of the nation. As we had explored earlier maybe looking at the existence of some collective entity representing the group is absurd. They come to society not to serve as a cog in the will of society, but to promote their own good as an egoist.

Maybe you could question this arrangement. You too could come to society as an egoist. This act of serving yourself is revolutionary and is a threat to the powers that be. Some people might immediately reject Stirner and my commentary here as reckless and selfish. If people act selfishly and for their own desires, then society would come to an end. If society wouldn’t function without your exploitation, then maybe that speaks horrible of society. Why even participate if we are being led to slaughter for no benefit of our own? 

Max Stirner is not arguing against society. He just believes that ultimately, we want to come to society with a concern for ourselves. This doesn’t mean that being willing to die for something is wrong. The issue is for what end. Stirner argues that other egoists use ideas such as the nation to get you to fulfill their ends. It is very absurd to talk about society as a cohesive will. You should look at society less in a collective sense, but specific and real people.

You may benefit from the relation that other egoists have towards you. You enjoy other people and love their company. Being an egoist doesn’t mean you have to be a jerk to people. The assumption is selfishness harms you, but a leader probably would benefit by treating their subjects nice and having them appreciate what the leader does for them. This doesn’t mean the national leader has your best interest in heart. They will ask you to die for their own benefit. Instead of allowing the nation to become the property of a few egoists, we too could have a stake in the nation. Egoists may be willing to die not for a vague concept, such as the nation, but for the specific people in the nation we love. 

The call to be a conscious egoist is a call not to reject society but to be the hero of one’s own life. Those who fail to be the hero serve themselves by mere instinct and only so far as the conscious egoists allow. Will you die for the causes of other egoists and exist in a society which is the private property of another? Sure there is egoist gain to be had here. I however believe that is sad and cucked. Make all of society your property and something which serves you and your greatness.

Hoarding Toilet Paper

Hoarding Toilet Paper, Economic Theory

The other day before Trump closed the borders, I was at the store buying a bit of extra food. My area has yet to be hit by the spread of the corona virus. It is however right on our doorstep. So I was being a bit safe just in case we can’t leave our homes for a little bit in the coming weeks. The situation got worse the following day as people reacted to the border closings. Then they closed down the local schools. As this is going on, the grocery store becomes packed with people buying up supplies. Soon there is a shortage of various important items, such as toilet paper. 

If people would just buy a normal or slightly increased quantity of supplies, then the shortage would not exist. However the anticipation of a shortage, leads people to hoard supplies, which causes the shortage. This is one of the emergent behaviors where apparently irrational outcomes can creep into even rational actions. To understand how this happens we need to look at beauty contests.

The great economist Keynes, a pioneer of macro-economic thought, wanted us to think about voting in a beauty contest. People will look at the contestants and cast a vote based on whom they think is the most beautiful. This is pretty straight forward and we can get a good idea of the consensus choice. 

Now, I want to introduce a new rule here. Suppose that there is now a prize for voting for the most popular choice. This has radical implications on how the voting will go. People will now try to guess how others will vote. This has a kind of recursive logic on the research. I will propose an example beauty contest to help us think here. 

Here are a few contestants: Natalie, Aydin, and Kaitlin. Suppose we ask people who they think is the most beautiful, without a reward:

  • Natalie
    • 40%
  • Aydin
    • 15%
  • Kaitlin
    • 45%

Now, the issue is that Natalie’s fans are much more rabid. Many people wrongly perceive that Natalie would win the contest. Often people at large can make incorrect guesses about the outcome of some event. There is often a distortion of the available information or ignoring of crucial bits of information. If people were asked who they think would win the most votes:

  • Natalie
    • 61%
  • Aydin
    • 0%
  • Kaitlin
    • 39%

The crucial thing to note here is that when we incentivize correct guessing, this perception becomes relevant. If people think that Natalie will win and thus make money, they will change their vote to Natalie. Now, let us look at the people who correctly guess Kaitlyn would win. They are now losing as public perception was initially incorrect. This however has a recursive effect. It is not merely the perception of who is most beautiful. It is the perception of who is perceived to be most beautiful. And so on. The best guess will be an infinite chain of perceptions on perception.

Knowing that people think Natalie would win even if she wouldn’t win will lead even the rational and informed to vote for her. Irrational and ignorant beliefs can alter the rational choice. This is how Keynes attempts to present how perception alters outcomes. Economics is about trying to isolate and model human action. Sometimes human action is hard to explain by purely rational factors. People are often misinformed and act in contradiction to evidence. One way to explain this is to assume people like ignorance and irrationality.

Image result for toilet paper throne

Buying and hoarding toilet paper is a fun activity. You can take a lot of cool selfies to post on social media. You see yourself feeling like a genius when your friends are out searching in vain for toilet paper and you have a closet full of the stuff. Maybe that woman you fantasize about will message you on facebook and ask you for some of your toilet paper stash. Then something might happen? There are all sorts of cool fantasies you can spin up which will make you feel great.

When Keynes developed this thought experiment, he imagined this as helping explain why stock market bubbles occurred despite evidence that they were overvalued. It doesn’t matter if they are overvalued necessarily. As long as people think they are correctly or undervalued. This probably can’t continue on forever. I mean even the most ignorant and irrational people at some point might start to wake up if the stakes are raised. This is the difference between saying you can fly and actually jumping off a building to prove it. When the stakes are too high and people stop acting irrational, then we can get a crash.

One way to look at this while preserving a more classical view of rationality; There is an asymmetry in the choices. I would like to present a controversial anecdote, Jeffery Epstein. Now some people argue, in my opinion correctly, that Epstein probably killed himself. It is a good possibility he was murdered, but not definitive. The reason that you should focus on the idea that Epstein was murdered is because of the magnitude of impact. So what if he killed himself, it is likely, but it does not have wide socio-political implications. However there is a decent chance he was murdered and there is so much potential there for a deep conspiracy. 😉

Bringing it back to toilet paper. If you think there is a small percentage chance of running out of toilet paper, then you might want to stock up. Running out of toilet paper is a really regrettable outcome. This then leads people to rationally stocking up on extra toilet paper. As people realize it is rational to stock up on more toilet paper, it makes the possibility of running out of toilet paper more possible. Thus the recursive thinking takes place and people all run to the store to buy as much toilet paper as possible.

In order to explain this variant of panics, people invented something called a p-beauty contest. It is a variant of the Keynesian beauty contest. Basically you choose a number p between 0 and 1. You ask people to pick a number between 0 and 100. The closest you can get to the average multiplied by p, the more money you get. 

For example, we assume p = ⅔; Then we ask a group of people to pick a number between 0 and 100; Remember you get more money the closer you get to two thirds of the average. You are rewarded for guessing much lower than everyone else. If everyone realizes this and acts on it, then it will drag the average down to the lowest possible value. If everyone acted rationally, they would drag the average down to zero.

This may or may not be good. This is just an abstract model. However, in many cases zero can be the collapse of society. In the panic, you are always incentivized in beating out the crowd. This however allows the crowd to emerge immediately and rapidly overwhelm the situation. Run on the banks, shortages, market bubbles; Also the object of discussion, hoarding toilet paper.

Trump's Price Transparency Is Not Magic

Trump’s Price Transparency Is Not Magic

During the recent state of the union, Trump mentioned that he was planning on introducing price transparency in healthcare prices. Now there are a bunch of conservative and libertarian reforms for healthcare that are supposed easy fixes. One such idea is that healthcare prices are a scam created by lack of transparency. This seems logical and intuitive. Basic economic reasoning would suggest that if you don’t know the prices, then you can’t do the necessary economic calculations to make a competitive choice. This allows for the companies to charge you higher prices and create an uncompetitive market. 

This seems all fine and good. I would like to argue that there are economic considerations that this reasoning does not take into account. There is some evidence that price transparency will lead to higher prices. At one time, I might have supported price transparency for the healthcare industry. I have changed my mind after a consideration of the facts. Some libertarian organizations such as FEE have made articles endorsing such a proposal. I might surprise libertarians by referring to the great libertarian economist, Murray Rothbard. His economic history has been of great use in my article to demonstrate the problem at hand.

So let us consider the famous game, the prisoner’s dilemma. Two people have committed a crime and they are interrogated. They are offered the same deal for prison time. Above is the time in jail for each outcome. The principle to learn here is something called the dominance principle. If you betray your partner, then you are guaranteed to get 1 year less in prison. However if you both betray each other to the police, then you will both get 2 years. In this situation you will get a combined maximum time in prison for a total of 4 years. If you both would have just cooperated you would have got the least amount of combined prison time for a total of 2 years. 

This simple story about prisoners is a fun experiment in how cooperation is very lucrative, but hard to maintain. People are incentivized to cheat against cooperation. Once cooperation breaks down, everyone is worse off. This simple story can have multiple parallels in economic situations. Corporations can make a lot of money if they cooperate to raise prices. However there is an incentive to lower your price and gain larger market share. Corporations have to deal with these conflicting incentives. 

This little game is not the end all be all, because it is a simple model. Corporations ultimately would prefer that they didn’t have to compete. Assuming that there are steep barriers to entry they could if theory execute a conspiracy; This of course assumes that the corporations can trust each other and they face little chance of new competition arising. Given enough time, they might try to conspire. This conspiracy will last as long as their competitors don’t lower their prices. This is not so hard to imagine that this could go on for a while. There are a few friends of yours who you might confidently be willing to play the prisoner’s dilemma with. There is one thing we haven’t considered; You could of course try to be sneaky. Remember, you are only in trouble if you get caught. If you lower your prices without your competitors knowing, then you can cheat the system. 

This sounds completely bonkers. When people go to buy something they will notice the lower prices and then the secret will slowly get out. Stay with me here, what if you just pretend to have the higher price, but conspire with some of your customers to offer a lower price. This is called price discrimination and it is when you try to discriminate against people by offering them different prices. In this case, you can have a price which everyone knows about and offer certain customers a discount. As long as those customers don’t reveal they are getting the discount, you can fool your competitors. This is assuming your other competitors aren’t trying to pull the wool over your eyes and do the same thing. Eventually all the corporations offering secret discounts will drag the price down to the competitive price. Either way conspiracies are hard to maintain.

In Murray Rothbard’s The Progressive Era, he details the attempts of Railroad companies to cartelize and raise prices. He explains how they attempt to get their cartels supported by law through a few different regulations. While many wanted to have prices outright fixed by law, this was something harder to get people behind. One of the main issues the cartels faced was members secretly offering discounts on freight rates. This led to the idea of passing regulation which prohibited such discounts. Rothbard lays out how this issue was a major driver behind Railroads lobbying the government for regulation in the Progressive Era. 

If such discounts were prohibited, then the corporation would have to charge the price they publicly declare. In other words, government enforced price transparency is a tactic corporations can use to help price fix. This way you can make sure your competitors aren’t trying to cheat the agreement and thus it creates more barriers to prevent the cartel from dissolving.

Healthcare has a lot of similarities to the railroads Rothbard talked about in the following ways. Hospitals have a lot of fixed costs, it is very hard to just open a new hospital to compete with existing hospitals. Patients pay different prices for the same services at the same hospital. This is in part because of healthcare insurance negotiations. Remember this is the problem the regulation is trying to solve. Prices are not uniform and are hidden from the public. The one difference here is that price fixing is illegal now and there is no evidence hospitals are secretly trying to conspire. 

Does this mean that we are safe and this objection is nothing to worry about? No! There is a more recent example of danish concrete mixing companies where they tried price transparency. There was the issue of only a few concrete mixers, because it is hard to transport long distances and the demand is not sufficient to have too many suppliers within reach. People were negotiating all sorts of prices for the service and thus the government stepped in with price transparency. Once everyone was transparent about the prices they charged, the prices rose by more than 15 percent. Shockingly, no evidence of a grand conspiracy to raise prices exists. So what happened? 

In the situation where prices are transparent, it is harder to compete with other businesses because you have to be transparent in the prices you are charging. If you try to get someone to switch over to you and you offer them a lower price, your other customers will legally have to know about it and you will have to offer them the same deal. If you raise prices, it is harder for your competitors who are further away to try and compete for your customers. Price transparency still makes it harder to compete for customers between two businesses. This can lead to an incentive to raise prices as you have in effect a cartel preventing competition. In these uncompetitive markets, it is a serious danger that price transparency will reduce competition. This is because the competition is occurring so far as the price is not transparent. They are competing for only a segment of the market by offering only that segment discounts. 

Only time will tell whether this leads to prices being reduced or increased. The actual effect of this policy is an empirical issue. We can only look at prior cases and draw conclusions from the evidence. That being said there is a lot to be skeptical here as we have some state implementations of the law. Various states, including New Hampshire have introduced various reforms that are similar in effect. There is no evidence that these reforms have worked. This might simply be a matter of implementation, lack of knowledge, patient habits, etc. People need to actually make use of the information for it to work. There is no guarantee that will even happen. We are just going to have to wait and see what happens. That is the issue with policy debates.

The main issue here I take with price transparency is that people present it as some smoking gun that will solve the healthcare crisis. Being optimistic and naive about the effects of the market can lead to people ignoring economic information in the future. It may help reinforce the notion that economics is just a bunch of theory that has nothing to do with the real world. Economics is a very important subject for informing people of public policy. So it is important to get it right.

Dilvany is a dedicated Internet Troll, Mathematician, and Life Long Learner.