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Skepticism about whether Smith’s invisible hand works properly in the face of massive wealth inequality. Choice quotes:

In other words, the signal received by the market isn’t “preferences,” it’s “willingness to (actually) pay.” It’s startling how rarely I see the distinction made between “willingness to pay” and “ability/capacity to pay”…

…the starving have been priced out of food, while I have not been priced out of buying a MacBook Air, and the market only sees preferences in the form of the “what have people been priced out of” signal.

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    This completely skates past the question of where wealth comes from. The idea here seems to be that adequate amounts of food and/or MacBooks can just be assumed to already exist, and certain people have arbitrarily been given the power to withhold them—i.e., all economic activity is rent-seeking. But wait, the amount of food and MacBooks depends on the skill and time that people spend on making them. One could just as well make the assumption that peoples’ budgets are set by how much they can produce themselves, that trade allows them to produce things more efficiently through specialization, and that if nobody wants to trade with you because you can’t produce anything they want, that’s simply part of the “Adam Smithy magic”—i.e., no economic activity is rent-seeking. But wait, you need to occupy land in order to produce things, and land can’t be created (in significant quantities) by human effort, and is distributed, ultimately, by the command of whoever has the power to repel others by force.

    The devil is really in the details here: too many to cover in a single blog post, and also enough to reach whichever conclusion you like by selecting which details you gloss over. So I don’t think much can be usefully concluded from these kinds of all-encompassing a priori arguments.

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      Yes, this is exactly the sort of counter-consideration that I always suspect the existence of, when I read such things as the linked post, and to which I was alluding in my comment posted just before saturn’s (and this one was obvious in retrospect, too, making me feel bad for nothing thinking of it! … but of course I don’t actually have any better way of evaluating this than I do the linked post).

      The devil is really in the details here: too many to cover in a single blog post, and also enough to reach whichever conclusion you like by selecting which details you gloss over.

      I have the sense that this is true of many things, which are often discussed (on the internet at large and in “rationalist” circles in particular), and which perhaps should be discussed less blithely (and maybe just less), for this reason…

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      This seems to make sense to me, but I am not an economist, and when I read such things I always worry that it’s convincing but not true. My first thought is—has this really not been thought / written about, before? (Or maybe it has, but has been ignored, like e.g. Oskar Morgenstern’s work?)

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