Comment author: Paul_Christiano 03 January 2018 06:04:02PM *  4 points [-]

Obviously what is optimal does depend on what we can compel the producer to do; if we can collect taxes, that will obviously be better. If we can compel the producer to suffer small costs to make the world better, there are better things to compel them to do. If we can create an environment in which certain behaviors are more expensive for the producer because they are socially unacceptable, there are better things to deem unacceptable. And so on.

More broadly, as a society we want to pick the most efficient ways to redistribute wealth, and as altruists we'd like to use our policy influence in the most efficient ways to redistribute wealth. Forcing the tickets to sell below market value is an incredibly inefficient way to redistribute wealth. So it can be a good idea in worlds where there are almost no options, but seems very unlikely to be a good idea in practice.

Comment author: Halstead 06 January 2018 01:46:30PM 0 points [-]

Yes I am not defending banning scalping. I am criticising one argument against scalping, which appears to be the main one among a significant portion of influential economists, as I show in the comment below.

Comment author: Paul_Christiano 03 January 2018 09:24:04AM 2 points [-]

In actual fact, they are appealing to preference utilitarianism. This is a moral theory.

Economists are quite often appealing to a much simpler account of betterness: if everyone prefers option A to option B, then option A is better than option B.

Comment author: Halstead 06 January 2018 01:42:59PM 0 points [-]

They may well endorse that view of betterness, but I don't see how it lets them avoid the problem here. The people who disprefer a world with scalping to a world without are the people who would like tickets but can't afford to go.

Comment author: Paul_Christiano 03 January 2018 06:11:59PM *  3 points [-]

Economists who accept your crucial premise would necessarily think that there should be no redistribution at all, since the net effect of redistribution is to move goods from people who were originally willing to pay more to people who were originally willing to pay less. But "redistribution is always morally bad" is an extreme outlier view amongst economists.

See for example the IGM poll on the minimum wage, where there is significant support for small increases to the minimum wage despite acknowledgment of the allocative inefficiency. The question most economists ask is "is this an efficient way to redistribute wealth? do the benefits justify the costs?" They don't consider the case settled because it decreases allocative efficiency (as it obviously does).

I don't think it would be that hard to find lots of examples of economists defending particular policies on the basis that those willing to pay more should get the good.

People can make that argument as part of a broader principle like "we should give goods to people who are willing to pay most, and redistribute money in the most efficient way we can."

For example, I also often argue that the people willing to pay more should get the good. But I don't accept your crucial premise even a tiny bit. The same is true of the handful of economists I've taken a class from or interacted with at length, and so I'd guess it's the most common view.

Comment author: Halstead 06 January 2018 01:38:28PM *  0 points [-]

Thanks, I agree that opposition to all redistribution is an extreme outlier position among economists. I think the explanation is that the rationale that many of them accept for ticket touting is not carried over into other domains.

Some evidence that economists do make this argument. See this paper - http://www.jstor.org/stable/3216858?seq=1#page_scan_tab_contents in the Jnl of Econ Persp. In the first paragraph, Courty says "...economists usually argue that resale increases efficiency, because it channels tickets to those consumers who value them the most"

And the box in chapter 7 of Mankiw's principles of microeconomics textbook here - https://books.google.co.uk/books?id=xoztFMavGCcC&pg=PA148&lpg=PA148&dq=mankiw+ticket+scalping&source=bl&ots=5U_xzxQZvl&sig=T9PP88ufUkIFDPpR4j8kSG37kig&hl=en&sa=X&ved=0ahUKEwiPopLst8PYAhXJtxQKHZcpCrsQ6AEISTAF#v=onepage&q&f=false. I will quote in full: "If an economy is to allocate its scarce resources efficiently, goods must get to those consumers who value them most highly. Ticket scalping is one example of how markets reach efficient outcomes. By charging the highest price the market will bear, scalpers help ensure that consumers with the greatest willingness to pay for the tickets actually do get them."

I think one should interpret that as saying that those who are willing to pay more (in the actual world, not the hypothetical world after redistribution) value the good more. And that is the main argument appealed to in favour of scalping in one of the most famous textbooks on microeconomics. The main premise used in that argument is obviously false.

If they endorsed the view you say they do with respect to scalping, wouldn't they say "provided there was perfectly equitable distribution of incomes, scalping ensures that goods go to those who value them most". Missing out the first bit gives an extremely misleading impression of their view, doesn't it?

Comment author: ThomasSittler 03 January 2018 02:58:54PM 0 points [-]

Relative to what?

Comment author: Halstead 03 January 2018 03:19:04PM 0 points [-]

relative to charging prices where demand is in excess of supply

Comment author: ThomasSittler 03 January 2018 02:27:38PM 1 point [-]

I think there's some misunderstanding going on. The argument you critique is: "In a market, goods go to those with the highest willingness to pay. Hence the resulting allocation is socially optimal (according to some social welfare function)". I don't think anyone in economics makes that argument. The only claim is that allocations that result from a market are Pareto efficient (under some strong assumptions, which I'm sure you're familiar with. See the first fundamental theorem of welfare economics). Again, the real question is: if not markets, then what?

Comment author: Halstead 03 January 2018 02:48:56PM *  0 points [-]

but people in economics do make the argument that charging prices such that supply and demand are in equilibrium improves allocative efficiency.

Comment author: ThomasSittler 03 January 2018 07:13:46AM *  4 points [-]

Carl Schulman writes:

Thus in welfare economics it is common to assume that individuals have utility functions that are proportional to the logarithm of income, i.e. with a constant change in utility per doubling of income.

See also Wikipedia on cardinal social welfare functions.

Comment author: Halstead 03 January 2018 02:24:37PM 1 point [-]

I agree, but I think this often gets forgotten as the touting example shows.

Comment author: Paul_Christiano 03 January 2018 09:13:52AM *  6 points [-]

Here is a stronger version of the pro-market-price argument:

  • The producer could sell a ticket for $1000 to Rich and then give $950 to Pete. This leaves both Rich and Pete better off, often very substantially.
  • In reality, Pete is not an optimal target for philanthropy, and so the producer could do even better by selling the ticket for $1000 to Rich and then giving to their preferred charity.
  • No matter what the producer wants, they can do better by selling the ticket at market price. And no matter what we want as advocates for a policy, we can do better by allowing them to. (In fact the world is complicated and it's not this clean, but that seems orthogonal to your objection.)

This is still not the strongest argument that can be made, but it's better than the argument from your crucial premise. I think there are few serious economists who accept your crucial premise in the way you mean it, though many might use it as a definition of welfare (but wouldn't consider total welfare synonymous with moral good).

Comment author: Halstead 03 January 2018 12:19:04PM 0 points [-]

Thanks for this. Option 3 "No matter what the producer wants..." is the only relevant world to consider because in almost all cases, the producer will not in fact compensate consumers or donate to charity. Could you then say more about why we as advocates for policy can do better by allowing the producer to sell at market prices?

Comment author: ThomasSittler 03 January 2018 07:44:18AM *  1 point [-]

It's generally agreed that Pareto efficiency is a very weak criterion; for any economy, there are always infinitely many Pareto efficient points and only one (or a few) allocatively efficient point(s). Wikipedia:

It is possible to have Pareto efficiency without allocative efficiency: in such a situation, it is impossible to reallocate resources in such a way that someone gains and no one loses (hence we have Pareto efficiency), yet it would be possible to reallocate in such a way that gainers gain more than losers lose (hence without such a reallocation, we do not have allocative efficiency).

The difficult problem of resource allocation is to get people to reveal their preference honestly. As you point out, someone's willingness to pay is a pretty poor proxy for marginal benefit to the person. But you do need a mechanism for deciding who will get the tickets. Price ceilings (underpricing the tickets) are generally thought to be a very bad way to do so. (In a very simple model, people will queue, or otherwise signal their willingness to "pay", until the costs to them are just as high as the market equilibrium price. Hence in real terms a price ceiling would be like the ticket company selling the tickets at market prices, but then using part of the revenue to pay people to stand in line uselessly. Something like this happened with the oil price ceiling.)

Comment author: Halstead 03 January 2018 12:14:27PM 0 points [-]

Thanks, yes I agree with all of that. My post was a critique of one argument for market prices, not an argument against market prices.

Comment author: Paul_Christiano 03 January 2018 09:13:52AM *  6 points [-]

Here is a stronger version of the pro-market-price argument:

  • The producer could sell a ticket for $1000 to Rich and then give $950 to Pete. This leaves both Rich and Pete better off, often very substantially.
  • In reality, Pete is not an optimal target for philanthropy, and so the producer could do even better by selling the ticket for $1000 to Rich and then giving to their preferred charity.
  • No matter what the producer wants, they can do better by selling the ticket at market price. And no matter what we want as advocates for a policy, we can do better by allowing them to. (In fact the world is complicated and it's not this clean, but that seems orthogonal to your objection.)

This is still not the strongest argument that can be made, but it's better than the argument from your crucial premise. I think there are few serious economists who accept your crucial premise in the way you mean it, though many might use it as a definition of welfare (but wouldn't consider total welfare synonymous with moral good).

Comment author: Halstead 03 January 2018 12:07:50PM *  0 points [-]

On your last point about whether there are economists who hold this view, I'm not sure I agree. For example, if you look at that IGM poll of economists' views on scalping, of the eight people in favour of touting who gave a reason, one of them appeals to allocative efficiency, and Caroline Hoxby of Stanford says "Classic example in which good (tickets) are not allocated to those who value them most. Only exception:ticket-holder's identity matters." The remaining six don't say anything incompatible with the allocative efficiency argument.

I don't think it would be that hard to find lots of examples of economists defending particular policies on the basis that those willing to pay more should get the good.

Comment author: rohinmshah  (EA Profile) 03 January 2018 03:44:51AM 4 points [-]

Crucial Premise: Necessarily, the more someone is willing to pay for a good, the more welfare they get from consuming that good.

It seems to me that this premise as you've stated it is in fact true. The thing that is false is a stronger statement:

Strengthened Premise: Necessarily, if person A is willing to pay more for a good than person B, then person A gets more welfare from that good than person B.

For touting/scalping, you also need to think about the utility of people besides Pete and Rich -- for example, the producers of the show and the scalper (who is trading his time for money). Then there are also more diffuse effects, where if tickets go for $1000 instead of $50, there will be more Book of Mormon plays in the future since it is more lucrative, and more people can watch it. The main benefit of markets is mainly through these sorts of effects.

Comment author: Halstead 03 January 2018 11:55:40AM *  0 points [-]

Incidentally, I think the Crucial Premise as understood in the single person sense is also false. There are cases in which someone would be willing to pay more for something which is bad for them. e.g. drug addicts, tools to commit suicide with (in some cases) etc.

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