The Cambist and Lord Iron: A Fairy Tale of Economics
Available in PDF here, the short story in question may appeal to LW readers for its approach of viewing more things than are customary in handy economic terms, and is a fine piece of fiction to boot. The moneychanger protagonist gets out of several sticky situations by making desperate efforts, deploying the concepts of markets, revealed preferences, and wealth generation as he goes.
Logorrhea is a remarkably good short story anthology, besides The Cambist and Lord Iron, Crossing the Seven is of literary and conceptual interest:
Oh, bravo! True rationalist fiction, and that is very rare.
It occurs to me that this could be made into a good film at a relatively low budget. You would basically need seven good actors (Olaf the cambist, Lord Iron, Lord Eichan, the three judges, and Mrs. Wells), a couple dozen extras, and the crew—the only special effects would be makeup and (probably) the title sequence.
Finally got around to reading it. Very good find. :)
There’re some subtle bits that’re missed, like the games that can be played with arbitrage when there isn’t a collectively agreed upon valuation, but overall, very nice.
(I am confused about what the second gunshot was, however.)
Or Lord Iron firing two shots, and making sure.
The three judges were split 2-1. My guess is that the judge who disagreed with the king shared Lord Eichan’s fate.
Either somebody shooting the third arbiter or the loser making fuss, I suppose.
I’ve actually seen that before, but I don’t know where. And it is indeed a good story.
I believe I’ve linked it in LW comments before.
This is a great story, thanks for linking it. The PodCastle reading of this story is also quite good.
I did not expect “eye-ron” as a pronunciation, but I agree.
Well, it’s a lot more villainous than “eye-urn” (which it sounds like, sometimes).
Though I initially really liked the resolution to the second story, thinking about it further has made me realize that it’s incoherent.
The cambist’s answer in the second tale appears to be that life is valued by society’s willingness to allow each one to trade life for pleasure, and that because the king is given a greater degree of freedom to trade, it follows that society values his life-time less. (Though even in this view I can’t see how one would actually come up with a numerical result.) One flaw in this argument is that society holds freedom as having a value independent from life or pleasure. Another shows up if you imagine the counterfactual case of the king being a health freak: if he used his freedom to eat lots of fresh fruits and vegetables, while the prisoners only got dry bread, he would likely live longer than them—but the way the cambist defines it, that wouldn’t change the respective value of their days of life. Nailing the coffin is the fact that only a prisoner would make such a trade.
I think the question as asked is insolvable, because it doesn’t specify perspective. If you asked the king how many days of a prisoner’s life he’d trade for one of his own, and a prisoner how many days of his life he’d trade for one of the king’s, you’d get different answers, and they’d both be correct; the utility functions simply differ.
Great story, though.
[As a side note, I wonder if there are some characteristics common to arguments that are wrong but in which it’s difficult to locate the wrongness. Even though I know that the answer the cambist gave is wrong, and I can provide a counterexample that proves it, I still don’t know exactly where it’s wrong.]
That’s not how I interpreted his argument.
I read it as “According to the actions they take, the king values an additional day of life at 82% of what a prisoner is forced to value an additional day of life at.” The rest is explanation that the prisoner is worse off because of the coercion- if they could trade quantity of life for quality of life, they would- and that the marginal value of a day in someone’s life is treated very differently from the value of their life in general or other threats. The king doesn’t approach alcohol as an assassin that might kill him eight years early, but that’s the actual impact on his lifespan.
Hmm. That makes more sense in that it allows the relationship to be precisely calculated, but that doesn’t seem to me to be the argument he actually makes. It’s strongly implied throughout (especially in the passage about the two sons) that the ‘value’ here is one being assigned by an independent observer, not by either the king or the prisoner—namely society.
Also, I don’t think it makes sense to say that you can be forced to value anything. The prisoner would trade more life for pleasure if he could, therefore he values pleasure more highly than the current ‘exchange rate’. He isn’t allowed to make the trade, but that doesn’t mean his values have been changed. (For an analogy, imagine that you want to sell your trumpet for $100 at the local pawn shop, but the pawn shop is currently closed. Does this mean that you value your trumpet at more than $100 until the pawn shop opens again?)
Yes, and this is also backed up by the resolution to the first story: the exchange rate for the guilders was the most valuable things they could be traded for on the market.
You can in the context of that conversation, where it was decided that values would be considered revealed through action rather than stated intention. If your action is forced, then so is your value (even though your stated value or your value revealed in the absence of coercion are/would be different)..
...So if you’re not allowed to sell your trumpet, you’ve been revealed as valuing your trumpet more?
Yes, because of how the word “value” has been defined in this context. One could add more detail to make it more convincing- “normally I would be willing to sell my trumpet for X, but if I sell my trumpet I will be punished an amount Y, and so I am not willing to sell my trumpet for more than X+Y.” The trumpet’s price has been inflated by the threat of punishment.
Okay, now I can see the application of this argument. You can think of the punishment as a tax, the cost of which gets tacked on to the price of the good so that the seller ultimately gets the same amount of benefit whether they sell it at X price with no punishment or at X+Y price with punishment. (As I understand it, something much like this trade-off happens in drug trafficking.) But when there’s no punishment and you’re just unable to sell?
The analysis seems to hold if you consider the tax infinitely large (or just arbitrarily large such that it’s never the best option).
Wait, that seems too high to me. If you can’t sell, then you are left unchanged or neutral. But an infinitely large punishment for selling and gaining a finite good means that you are infinitely badly off.
The only tax that leaves one unchanged or neutral is one exactly equal to the value of your gain. You sell for 10 rupees, the punishment is 10 rupees, and you are equally well-off whether you sell or don’t sell.
(Assuming the item has no intrinsic utility or disutility, I guess. Adjust the tax from parity downwards or upwards respectively.)
Only if you take the option of selling it? Keep in mind the original conclusion we’re going for- “a punishment that completely prevents me from selling my trumpet hijacks my revealed preference for keeping my trumpet, setting it at infinity.”
(For the story’s example, the punishments are finite- the prisoners could sneak in unhealthy foods or avoid exercise- and so we’re just interested in the weaker statement that the punishment dramatically increases the prisoner’s revealed preferences for eating healthily and exercising.)
But surely one’s revealed preference for the trumpet wouldn’t be infinity, say, but some small number like a million? So the infinity is excessive.
Like said in the grandparent, for a finite punishment the value would be finitely increased. But I don’t see an issue with saying complete prevention results in infinite value, knowing that’s an idealized case.
I was predicting that he’d ask people how many days of prison they’d be willing to suffer in exchange for being king for a day.
I agree this is an awesome story.
Just read it today. Thanks!
Very nice story but the ending is incomplete.
What became of Lord Iron?
He took up cambisting.
I guess I realized that after I left the computer. Poor bugger!
It’s hardly a terrible penance. Lots of people would prefer half a life of extreme riches and hedonism and then half a life of quiet, useful, technical employment to what they have today.
Poor? What do you mean? His revealed preferences clearly say that he’s better off as a cambist than a Lord Iron! He’d be poorer if he had remained Lord Iron. :)
It seems to me that, having the advantage of a good soul, he went to heaven. And so wealth was generated.
After a bit of cambisting, that is.
An uneventful but respectable life, I imagine.
It seems that he’s claiming the life of someone in prison must be more valuable because they when there’s a choice between something that makes them live longer and something that makes them happy, their given what makes them live longer.
They’re in prison as punishment. Their happiness has negative value. If he’s assuming the value of their happiness and the value of the King’s happiness are the same, he’ll get a very wrong answer.
Also, I thought the answer to the last question was very obvious. Granted, he took a fraction of the time alloted, but it still seems like they acted like that one was supposed to be by far the most difficult.
I also thought that the approach he took on that one didn’t make much sense. I thought the answer would have to do with how much people would pay to live in equivalent conditions. When the cambist found that the king’s days were worth less, I assumed at first that this was a result of his responsibilities, not his vices.
If I understand the story correctly, his metric was effectively “what fraction of the remaining life in the man’s body is expended in a day?”
At first blush, it does sound rather difficult. And naturally, it appeared difficult to Lord Iron. If it were as difficult as it appeared, I imagine it would shock our suspensions of disbelief that the cambist should solve it in such a brief span.
The ending in particular was very well done. I can’t easily think of a better way it could have been resolved.
Thanks for linking this. I’d like to read more fiction like it.