Likewise, I was wondering. If I know I’m not a money pump, and every trade I make is beneficial to me, can I model the rest of the market as a single big agent that is a money pump?
Can I reverse this process to build a model of the world as an agent, and then find a sequence of beneficial trades?
For sure you can. This is just what traveling merchants did/do. You buy X from people with Y>X and sell it to people with X>Y while at the same time buying Y from the second group and selling it back to the first. Of course, you’re not actually hurting anyone, indeed, everyone in this scenario benefits.
If I recall, the red paper clip story involved several points at which the man was able to manage a grossly unfair trade. There’s a similarity in the sense that the man made the money by profitable trades, but he wasn’t using any theory along the lines of Armstrong’s.
Which trades seemed to you “grossly” unfair—keeping in mind that the traders got to participate in an interesting process, as well as getting whatever they traded for?
On December 8, 2005, he traded the “instant party” to Quebec comedian and radio personality Michel Barrette for a Ski-doo snowmobile.
A snowmobile for some beer & a neon sign? IIRC, snowmobiles, even used ones, cost hundreds & thousands of dollars; whereas a keg of beer is <$100 and a Budweiser neon sign probably not much more.
On or about January 7, 2006, the second person on the trip to Yahk traded Kyle a cube van for the privilege.
A cube van. I looked in the Blue Book; that was probably worth well upwards of 2000 dollars.
On or about April 11, 2006, he traded the recording contract to Jody Gnant for a year’s rent in Phoenix, Arizona.
The comments on the blog estimate the year’s rent at 5 or 7k. The recording contract was 30 hours in the studio & 50 hours of post-production. I suspect someone was ripped off here but I can’t tell whom.
On or about July 5, 2006, he traded the movie role for a two-story farmhouse in Kipling, Saskatchewan.
The movie is a straight-to-DVD film I’ve never heard of, and which still hasn’t come out. The role is described as credited & speaking, but who knows how much one actually gets. I’d say the town was the loser in that deal, unless they value the publicity that highly.
So yeah, I’d say on multiple deals the traders were financially exploited, and this says more about their willingness to participate in a well-advertised stunt than it does about whether the deals were actually fair.
Perhaps my intuitions are shaped by the feeling that it wouldn’t have been outrageous for any of these traders—assuming they didn’t want and had little to no use for the things they traded away—to give them away for free. (I’ve participated in Freecycle—that’s where I got my perfectly-functional digital camera.) Trading them for a thing of nonzero value doesn’t seem to me like it can be less smart, unless the motivations are explicitly mercenary—and even then, if the thing is hard to sell in a timely manner, it might be worth expediting by taking a weird offer now rather than a “fair” one later.
Giving stuff away is one thing, and well understood. If Warren Buffet decides to give away a few dozen billion dollars, he’s a hero. But if some guy comes up to him and trades him a red pen for a few dozen billion dollars, I suspect no one would react the same way.
And then there is the issue of truth in advertising. His website says “My name is Kyle MacDonald and I traded one red paperclip for a house. I started with one red paperclip on July 12 2005 and 14 trades later, on July 12, 2006 I traded with the Town of Kipling Saskatchewan for a house located at 503 Main Street.” He doesn’t say, ‘I started with one red paperclip, and by a combination of exploiting my friends & acquaintances and relentless self-promotion, I got a local government to give me a house.’ (And don’t forget that he’s flogging a book as well.) The implication is that he did it by sheer skill and laudably increasing economic efficiency, when he has done so little more than Madoff did.
Giving stuff away is an understood phenomenon only in limited contexts. If Warren Buffet decides to give away a few dozen billion dollars to a charity that fights AIDS in Africa, or teaches illiterate adults to read and write, or to a scholarship fund for deserving underprivileged teens to attend college, or whatever—that we understand. If he gives five hundred dollars to a guy he meets on the Internet because the guy could really use five hundred dollars, that’s incomprehensible to most people. This precise distinction is why I brought up Freecycle, which is entirely about giving your belongings to people you meet on the Internet who could really use them. But neither Freecycling, nor giving up a swell fish pen for one red paperclip, seem bizarre to me.
But neither Freecycling, nor giving up a swell fish pen for one red paperclip, seem bizarre to me.
If neither freecycling nor a bad trade like a pen for a paperclip seem bizarre to you, then why do you object to Buffet giving $500 away on the Internet? If you do not personally object, and are merely describing how you think other people would react, then what would you find bizarre?
So far we’ve established that you don’t find:
a fair trade bizarre
an unfair trade bizarre
a non-trade (gift/charity) bizarre either
Which would seem to suggest you find no voluntary exchange bizarre, and so I don’t think you’re in a mental position to have any opinion one way or the other about the red paperclip scheme.
(As for actually giving away $500 online: happens all the time. I’m sure you read webcomics or blogs that are funded in part by readers donating. Not to mention little things like Wikipedia or all the online microlending sites like Kiva.)
I find no paradigmatic voluntary exchange bizarre. There are sometimes factors that bizarre-ify exchanges of any of the three types you divide up. I don’t think that these factors were at work in the red paperclip “scheme”, but could be mistaken—I haven’t done extensive red paperclip related research.
I know people sometimes give away substantial amounts to content producers they want to support, which looks like a hybrid of gift and either fair or unfair trade (depending on the content). I don’t find it bizarre. I’m sure many people would, but I’m willing to be proven wrong.
But what do you mean by “fair trade” here. It’s not like any party didn’t know what the deal was. This just means there’s something else at play which was determining the value of the goods to both participants. What is “unfair” about this type of exchange?
Well, if you’re going to assume that any deal which seems unfair to a mere outsider will have ‘something else at play’ rendering the deal actually fair, then there’s nothing I can say about that. Such assertions are like that of the Austrians—no mere evidence can falsify it. (After all, who knows what evil lurks in the hearts of men? Er, I mean, differing preferences.)
Ok I’m going to re-read this article again. I thought I saw a similarity in there. But I tend to agree with Alicorn below me. If both parties agree to a free trade, can it really be characterized as “unfair” just because the normal market values don’t seem to line up?
It’s all about personal expected utility after all, not what the market thinks.
I really don’t know what I should say that hasn’t been said. My point isn’t that Kyle MacDonald hoodwinked any of the people whom he traded with—my point is that he wasn’t using money pumps. The story has negligible relevance to Stuart Armstrong’s post.
Is this anything like the Red paper clip trade story?
Likewise, I was wondering. If I know I’m not a money pump, and every trade I make is beneficial to me, can I model the rest of the market as a single big agent that is a money pump?
Can I reverse this process to build a model of the world as an agent, and then find a sequence of beneficial trades?
For sure you can. This is just what traveling merchants did/do. You buy X from people with Y>X and sell it to people with X>Y while at the same time buying Y from the second group and selling it back to the first. Of course, you’re not actually hurting anyone, indeed, everyone in this scenario benefits.
As you asking “can I money pump the world”?
If I recall, the red paper clip story involved several points at which the man was able to manage a grossly unfair trade. There’s a similarity in the sense that the man made the money by profitable trades, but he wasn’t using any theory along the lines of Armstrong’s.
Which trades seemed to you “grossly” unfair—keeping in mind that the traders got to participate in an interesting process, as well as getting whatever they traded for?
http://en.wikipedia.org/wiki/One_red_paperclip
A fish-shaped pen for such a doorknob? (For that matter, who would want a red paperclip instead of a perfectly good pen?)
From Boy Scouts, I remember that camp stoves were expensive. Even the smallest cheapest ones, for backpackers, are no less than 60$ new: http://www.coleman.com/coleman/ColemanCom/subcategory.asp?CategoryID=2005 And from the picture, he traded for one of the big ones.
A snowmobile for some beer & a neon sign? IIRC, snowmobiles, even used ones, cost hundreds & thousands of dollars; whereas a keg of beer is <$100 and a Budweiser neon sign probably not much more.
A cube van. I looked in the Blue Book; that was probably worth well upwards of 2000 dollars.
The comments on the blog estimate the year’s rent at 5 or 7k. The recording contract was 30 hours in the studio & 50 hours of post-production. I suspect someone was ripped off here but I can’t tell whom.
The movie is a straight-to-DVD film I’ve never heard of, and which still hasn’t come out. The role is described as credited & speaking, but who knows how much one actually gets. I’d say the town was the loser in that deal, unless they value the publicity that highly.
So yeah, I’d say on multiple deals the traders were financially exploited, and this says more about their willingness to participate in a well-advertised stunt than it does about whether the deals were actually fair.
Perhaps my intuitions are shaped by the feeling that it wouldn’t have been outrageous for any of these traders—assuming they didn’t want and had little to no use for the things they traded away—to give them away for free. (I’ve participated in Freecycle—that’s where I got my perfectly-functional digital camera.) Trading them for a thing of nonzero value doesn’t seem to me like it can be less smart, unless the motivations are explicitly mercenary—and even then, if the thing is hard to sell in a timely manner, it might be worth expediting by taking a weird offer now rather than a “fair” one later.
Giving stuff away is one thing, and well understood. If Warren Buffet decides to give away a few dozen billion dollars, he’s a hero. But if some guy comes up to him and trades him a red pen for a few dozen billion dollars, I suspect no one would react the same way.
And then there is the issue of truth in advertising. His website says “My name is Kyle MacDonald and I traded one red paperclip for a house. I started with one red paperclip on July 12 2005 and 14 trades later, on July 12, 2006 I traded with the Town of Kipling Saskatchewan for a house located at 503 Main Street.” He doesn’t say, ‘I started with one red paperclip, and by a combination of exploiting my friends & acquaintances and relentless self-promotion, I got a local government to give me a house.’ (And don’t forget that he’s flogging a book as well.) The implication is that he did it by sheer skill and laudably increasing economic efficiency, when he has done so little more than Madoff did.
Giving stuff away is an understood phenomenon only in limited contexts. If Warren Buffet decides to give away a few dozen billion dollars to a charity that fights AIDS in Africa, or teaches illiterate adults to read and write, or to a scholarship fund for deserving underprivileged teens to attend college, or whatever—that we understand. If he gives five hundred dollars to a guy he meets on the Internet because the guy could really use five hundred dollars, that’s incomprehensible to most people. This precise distinction is why I brought up Freecycle, which is entirely about giving your belongings to people you meet on the Internet who could really use them. But neither Freecycling, nor giving up a swell fish pen for one red paperclip, seem bizarre to me.
If neither freecycling nor a bad trade like a pen for a paperclip seem bizarre to you, then why do you object to Buffet giving $500 away on the Internet? If you do not personally object, and are merely describing how you think other people would react, then what would you find bizarre?
So far we’ve established that you don’t find:
a fair trade bizarre
an unfair trade bizarre
a non-trade (gift/charity) bizarre either
Which would seem to suggest you find no voluntary exchange bizarre, and so I don’t think you’re in a mental position to have any opinion one way or the other about the red paperclip scheme.
(As for actually giving away $500 online: happens all the time. I’m sure you read webcomics or blogs that are funded in part by readers donating. Not to mention little things like Wikipedia or all the online microlending sites like Kiva.)
I find no paradigmatic voluntary exchange bizarre. There are sometimes factors that bizarre-ify exchanges of any of the three types you divide up. I don’t think that these factors were at work in the red paperclip “scheme”, but could be mistaken—I haven’t done extensive red paperclip related research.
I know people sometimes give away substantial amounts to content producers they want to support, which looks like a hybrid of gift and either fair or unfair trade (depending on the content). I don’t find it bizarre. I’m sure many people would, but I’m willing to be proven wrong.
But what do you mean by “fair trade” here. It’s not like any party didn’t know what the deal was. This just means there’s something else at play which was determining the value of the goods to both participants. What is “unfair” about this type of exchange?
Well, if you’re going to assume that any deal which seems unfair to a mere outsider will have ‘something else at play’ rendering the deal actually fair, then there’s nothing I can say about that. Such assertions are like that of the Austrians—no mere evidence can falsify it. (After all, who knows what evil lurks in the hearts of men? Er, I mean, differing preferences.)
Well the Austrians are right in that the traditional assumptions of rationality (and therefore fairness) don’t make much sense.
Although I think the behavioral economists are doing a decent job of backing up these type of assertions: the point that “fairness” is subjective.
Can someone engage in a trade they don’t believe is fair? Yes of course.
But if both parties say a trade is fair, who is an outside observer (with all the market data in the world) to tell them otherwise?
“Fairness is not agreement, fairness is symmetry.”
That’s what I meant, actually—the only reason for many of the trades is to buy participation in the media exercise.
Ok I’m going to re-read this article again. I thought I saw a similarity in there. But I tend to agree with Alicorn below me. If both parties agree to a free trade, can it really be characterized as “unfair” just because the normal market values don’t seem to line up?
It’s all about personal expected utility after all, not what the market thinks.
I really don’t know what I should say that hasn’t been said. My point isn’t that Kyle MacDonald hoodwinked any of the people whom he traded with—my point is that he wasn’t using money pumps. The story has negligible relevance to Stuart Armstrong’s post.
fair enough, I was getting off track.