The PoW camp example is interesting, but the way this article talks about risk and return makes no sense. The author gives an example of a lottery with a $1m prize, funded by selling 1 million tickets at $1 each, then introduces a "Mr. Behemoth" who can buy as many tickets as he wants. Since he can buy 600k tickets to win 400k, for a 66% return at 3:2 odds, or even 900k tickets to win 100k for an 11% return at 9:1 odds, the claim is that he "has complete control over risk and return."
...No? The expected value is 0 in either case.
.6 * 400 + .4 * (-600) = 0
.9 * 100 + .1 * (-900) = 0
The ability to slice a given risk-return profile into different pieces, or different amounts of leverage, is called "finance". But Mr. Behemoth in this case has the same expected return as everyone else, so the example has nothing to do with "control of supply and demand."
It was so close to a good example, too. Increasing the payout to $1.1M would make the example make so much more sense. It's positive EV for everyone, but only Mr. Behemoth can control his variance. (This is ignoring finance.)
It shocks me that this article could be written without mentioning the phrase "price elasticity" a single time (a word I learned in a class literally numbered "econ 101").
> That “equlibrium” is an assumption that there are forces in the market that will moderate excess - that the market is self-balancing. This is the argument against regulation or government intervention.
> For example, it might be assumed that if supply shrinks, that prices will increase, which will reduce demand because fewer people can afford it, which will lead to a rebound in supply - which means prices will drop again. This seems intuitively correct.
About here would do it.
Economics terminology is important because it gives us a shared foundation for science and discussion.
So when people discuss economics but act like they have explored a novel concept that is economics 101, it tends to get mentioned.
It read more like a slight against the LToV than anything else.
The desire to extrapolate economic interpretations from toy examples is unending. See also the two-people-with-cows-on-an-island example that gets paraded around and has never existed except in the heads of the terminally marginal-pilled crowd.
One odd thing about economics is that people will be familiar with roughly half of an introductory textbook, and then think they know everything about the subject. The fact that there is such a thing as "market power" is understood by every economist, and is central to the topic of "industrial organization". Increases in market power are even one of the standard explanations for the business cycle (they call them "markup shocks). Maybe the author knows that, but it's not clear from the post.
> But instead of reducing demand, more poachers may enter the market, because the high value of the tusks means they can make more with less work. The cost of the good is not related to its real-world rareness, but to the cost of paying people to obtain it, which may be high or low.
This doesn't rationally follow at all.
The rareness (low supply) of a good is the net sum of how hard it is to obtain, due to all the possible reasons for that.
More poachers may enter the market, but with fewer elephants left alive, they cannot find elephants so easily, which means it takes more time and effort: the MTBE (mean time between elephant) goes up, making the hunt more costly. They may have to engage in increasingly hostile and violent turf wars with other poachers.
More poachers entering the market will not prevent a reduction in demand; it isn't something "instead of reducing demand".
If the market maintains the same level of interest in the good, the demand curve stays the same, and the only thing that changes demand is the current price point, which determines where on the demand curve the market is.
The author of the article doesn't seem to understand the difference between a reduced demand due to a movement of price along the same demand curve and actually reduced demand, whereby the market is less interested in the good, and buys less of it at every price point.
Readit News
...No? The expected value is 0 in either case.
.6 * 400 + .4 * (-600) = 0
.9 * 100 + .1 * (-900) = 0
The ability to slice a given risk-return profile into different pieces, or different amounts of leverage, is called "finance". But Mr. Behemoth in this case has the same expected return as everyone else, so the example has nothing to do with "control of supply and demand."
> For example, it might be assumed that if supply shrinks, that prices will increase, which will reduce demand because fewer people can afford it, which will lead to a rebound in supply - which means prices will drop again. This seems intuitively correct.
About here would do it.
Economics terminology is important because it gives us a shared foundation for science and discussion.
So when people discuss economics but act like they have explored a novel concept that is economics 101, it tends to get mentioned.
The desire to extrapolate economic interpretations from toy examples is unending. See also the two-people-with-cows-on-an-island example that gets paraded around and has never existed except in the heads of the terminally marginal-pilled crowd.
He lost his seat a few weeks ago in a provncial election where the party was reduced from three seats to one.
This doesn't rationally follow at all.
The rareness (low supply) of a good is the net sum of how hard it is to obtain, due to all the possible reasons for that.
More poachers may enter the market, but with fewer elephants left alive, they cannot find elephants so easily, which means it takes more time and effort: the MTBE (mean time between elephant) goes up, making the hunt more costly. They may have to engage in increasingly hostile and violent turf wars with other poachers.
More poachers entering the market will not prevent a reduction in demand; it isn't something "instead of reducing demand".
If the market maintains the same level of interest in the good, the demand curve stays the same, and the only thing that changes demand is the current price point, which determines where on the demand curve the market is.
The author of the article doesn't seem to understand the difference between a reduced demand due to a movement of price along the same demand curve and actually reduced demand, whereby the market is less interested in the good, and buys less of it at every price point.
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