A great story at the Wall Street Journal highlights a hopeful trend where people post tasks online and others complete them for payment. Think of it as craigslist for errands. I view this as a positive move towards a world where previously lost gains from trade are finally taken advantage of. I don’t know if it’s just me or if all economists see the world this way, but I walk around constantly surprised and saddened by missed opportunities at gains from trade. As important as the techonological innovation here, I see this as social progress in the direction of making micro-markets socially acceptable.
For instance, at a concert I’ll see someone sit in front of me with a beer, and I really want a beer but don’t want to walk to and wait in line, and I’m pretty sure his beer is worth more to me than it is to him. But a lot of people would see it as rude to tap him on his shoulder and offer to buy the beer from him. Or a guy in a movie theater is laughing loud and obnoxiously, and I feel like I’d be willing to pay him more to leave than it’s worth for him to stay. But I know that exchange wouldn’t go well.
A lot of possible exchanges in fact would be seen as lazy, offensive, repugnant, and generally low-status to offer to strangers or friends. For instance paying someone to cut in line or take their reservation at a restaurant, or paying a friend to do a simple chore for you like take out the trash or clean your bathroom.
I also sometimes comfort myself knowing I would be outbid in micro-markets. If I’m two minutes late for a train and I find myself thinking “surely the welfare gain to me of them waiting two minutes is bigger than the loss to all the other passengers for being two minutes late!”. But then I consider an auction where I had to buy off every riders’ extra two minutes, and I know I would not win that auction, which I find comforting in a way. When micro-markets like the one I imagine here are real and widespread people will have a less hard time deluding themselves like I initially do. The angry guy in line behind you in line who is mumbling about how late he is running will have less grounds to be angry if he can offer you to buy your place in line but it is not worth it to him.
“Argh! I’m so late, I should be ahead of this guy in line in front of me!”
“My place in line is worth $8 to me.”
“Oh, well being ahead is only worth $7, so I guess I shouldn’t be ahead of you”
I don’t know what it is about some exchanges that make them low-status or repugnant, but I think micro-markets will erode the stigma until everything is up for sale that should be (some people would be willing to pay a lot of money for particular markets not to exist at all, and these markets are more efficiently left non-existent, but what if the market to determine this is also more efficiently left non-existent?). It will be an economist’s world, and I’m sure some people won’t celebrate it but the world will be a better place.
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Thursday ~ December 1st, 2011 at 9:21 am
Fmb
Mostly agree, but you need a model for when something shouldn’t be for sale. (Generally has to do with bad equilibria, I think.)
For example, “that’ll be $50,000 for the Heimlich, sir.”
Micro markets will often have illdefined clearing prices, and it’s a lot of work to prevent getting gouged. A stigma does some of that work.
Thursday ~ December 1st, 2011 at 10:21 am
Becky Hargrove
I’m one who is glad you are trying to think these things through. Another illustration is the effort of two people seeking economic activity through equal time exchange. While we used to think of this as impossibly difficult compared to money use, people have a roster of skills from the 20th century that means – were they to look – they would find potential skill matches in dozens of places. Not so hard to achieve equal skills time now, given how hard it has become to find profit in a business by the weight of (decades) of social expectations attached to both the product and what money is expected to be able to do.
Thursday ~ December 1st, 2011 at 10:29 am
Curt Doolittle
I don’t think you’re thinking through the consequences of what you’re suggesting.
If a population of individuals developed to sieze opportunities that you suggest, all benefit that you seek to obtain would be lost.
For example, go to any third world airport. You will be swarmed by annoying individuals all competing for your attention — all of whom want to sell you something you’ve already estimated and planned for.
The modern economy exist in part because we have created conventions, habits and laws that DEPRIVE people of the opportunity to engage in trade of this nature.
If you want to go back to the “Bazaar Moral Code” and abandon the “Shopkeeper” moral code (which is what you’re asking for) then you’re welcome to move to the third world and leave the rest of us in peace. I”m happy to get my own beer.
All political systems, and all monetary economies, rest upon the status and opportunity economies, which in turn rest upon the ultimate scarcity of time, and the limits of human cognitive ability in real time.
Lets not make economics into another phlogiston theory by believing that aggregates are a sufficient means of analysis for gauging decisions in a polity. it isn’t.
As Schumpeter warned us, public Intellectuals and their folly are the source of the decline of a civilization. Cunning is no substitute for morality. Cunning is benefitting from the asymmetry of information. Morality is a tool for prohibiting involuntary transfers despite asymmetry of information.
***If you can grasp that one idea, your interpretation of all progressive economics will change because of it.***
Money and prices are sources of temporal information. Numbers are tools for assisting in memory and comparison for the purpose of planning and calculation. Property is necessary for planning and calculation using prices and money. Manners ethics and morals are rules we must follow for forgoing opportunity costs necessary to avoid involuntary transfers, so that planning and calculating are possible.
Thursday ~ December 1st, 2011 at 10:30 am
Andy Wood
Is it really repugnance that prevents some of these markets existing, rather than, say, transaction costs? Some of your examples look like bilateral monopolies, rather than competitive markets. Maybe the effort of haggling over the price outweighs any gains from trade?
Also:
“…paying a friend to do a simple chore for you like take out the trash or clean your bathroom.”
Surely this sort of thing happens all the time? It’s just payed for by a favour at a later date, rather than in cash.
I must admit though, I always wonder why coffee shops don’t charge higher prices at lunch times, when there are long queues.
Thursday ~ December 1st, 2011 at 12:12 pm
Jeri Vespoli (@JeriVespoli)
Being all about collaboration, this article on the cover of Entrepreneur Magazine’s December 2011 issue caught my eye. http://www.entrepreneur.com/article/220716
Turns out, it’s not collaborative commerce as I see it – businesses sharing costs of everything from advertising to raw materials.
It is, though, apparently exactly what you envision here! Next time you want that beer from the guy in front of you, hop on Zaarly.com and ask for it – then just tap him and tell him to check out Zaarly?
Thursday ~ December 1st, 2011 at 12:46 pm
primedprimate
For the most part, I lament missing markets too. However, I think fairness arguments complicate matters considerably and probably help to explain at least some of the ‘missing’ trades.
I find Ernst Fehr’s and other behavioral economists’ work to be very informative in this regard.
Also, based on your example in the theater (or in the concert hall) are you concerned about other people finding your behavior offensive or are you thinking that the exchange with the other individual would not go down well because the other individual would find your behavior offensive? If it is the former, ignore others as long as there are no feedback mechanisms through which they could retaliate against you. If it is the latter, I am not sure whether such a trade would in fact be optimizing if one of the participants finds its very initiation offensive.
Thursday ~ December 1st, 2011 at 2:24 pm
Psychohistorian
Your hypothetical exchange between the lineholders indicates a pretty big flaw that is, perhaps, the largest systematic error made in applying economic reasoning to the real world. There’s a serious honesty/transaction cost issue. As a matter of basic negotiation tactics, you do not disclose your reservation price up-front, or you will never get any consumer surplus. You don’t walk into a car dealership and say, “I’m willing to pay, at most, $27,023 for this car.” First, they probably won’t believe you, and second, it’s very likely your reservation price is far higher than theirs and you now have no ability to lower the price.
This is not to say it would be a bad thing to have people bidding on each other’s spots in line. It’s just that this micro-consumption would not work out nearly as cleanly as you might think, like most economic theory that ignores the fact that a person is actually *indifferent* between transacting at their reservation price and not transacting at all. Buying something at your reservation price is not good for you; it is completely neutral for you. It’s not wise to aim to make transactions that are not valuable.
Friday ~ April 20th, 2012 at 8:41 am
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