Friday, March 13, 2015

Satt's Paradox

Posted in various forums...

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Satt's Paradox (SP) - smarter people have more money to spend than dumber people... yet... the vast majority of movies/shows on Netflix are dumber rather than smarter.

This economic paradox is "fun" on so many different levels...

1. Is SP even real?  If it isn't, then there's no paradox.  And you can't resolve a paradox that doesn't exist.

1a. How is smartness being defined?

1b. Is it even true that smarter people have more money to spend?  Kinda maybe?   The huge debate/concern regarding increasing income inequality seems somewhat relevant.

1c. Is it even true that the vast majority of shows/movies on Netflix are dumber rather than smarter?  Personally, I consider The Man From Earth, which I saw on Netflix, to be a good example of a smarter movie.  It was full of history, science, philosophy and thoughtful discussion on religion.  From my perspective... it was the best (that I know of) mix of entertainment and education.  And it seems like there's a real shortage of shows/movies in this category.  If you know of any others... then please don't hesitate to mention them!  Given enough eyeballs, all Easter Eggs are shallow.

2. If SP is real, more or less, then how would you explain/resolve it?

2a.  Perhaps smarter people demand far less entertainment than dumber people do?  The opportunity cost of spending 2 hours watching a movie is far higher for a brain surgeon than it is for somebody who earns the minimum wage.  

2b.  Perhaps smarter people prefer dumber entertainment?  If you get paid to use your brain all day, then maybe you prefer your entertainment to be mindless rather than mindful.

2c.  Perhaps smarter people prefer nonfiction to fiction?

2d.  "I'm not saying that television is vulgar and dumb because the people who compose the Audience are vulgar and dumb.  Television is the way it is simply because people tend to be extremely similar in their vulgar and prurient and dumb interests and wildly different in their refined and aesthetic and noble interests." - David Foster Wallace

3. Assuming that the supply of smarter entertainment does indeed fall considerably short of demand... and assuming that this is a problem... then how could this problem be solved?

I think I might have resolved SP and come up with the logical explanation/solution (verdict)... but if I share it... then maybe it will influence your own verdict?  Of course I'd like to hear your thoughts on my verdict... but I'd also like to know what you come up with on your own.  It's entirely possible that yours will be better than mine!  This means that I'd prefer it if you allocated (at least initially) your intelligence to coming up with your own verdict.

So I'll use the spoiler feature to hide my verdict.  This way, if you're so inclined, you can post your own verdict and then come back and see how it compares to mine.  You might have to ignore the replies at first as well... just in case anybody addresses my verdict.

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Nobody's omniscient.  In both market economies and command economies, producers make educated guesses about what to supply.  The most important difference between these two types of economic systems is that, in market economies, consumers use their money to communicate which producers have made the best guesses.

When Henry Ford decided to produce cars... he couldn't truly know how consumers would respond.  Obviously he had good enough reason to suspect that the demand was there but, because he wasn't omniscient, there was no way he could know, for a fact, that it truly was there.  With perfect hindsight we can clearly see that Ford's guess was really good.

These days, there's a huge variety of cars.  There's also a very large price range.  A new car can cost anywhere from several thousand dollars to over a million dollars.  According to a quick Google search... a Lamborghini Veneno Roadster would cost you $4.5 million dollars.  At some point in car making history... some producers correctly guessed that there was a demand for nicer cars.  If anybody doubted the business model, then they no longer do so.

The question is... why isn't there a similarly large price range when it comes to movies?  The answer is because, unlike the producers of cars, movie producers can't charge more for a superior product.  If it cost $1500 to see The Man From Earth in a theater... then even if you could easily afford it... the chances would be extremely good that it would be way too easy to get an illegal copy of the movie for a lot less money.  It costs far less to create a perfect copy of a movie than it does to create a perfect copy of a Lamborghini.  

So cars and movies aren't just different goods... they are different types of goods.  A car is a private good  and a movie is a... ________ ?   Economic terminology goes *bonk*.   Is it a public good?  To be honest... I just googled the topic for inspiration and found this... Why Content Is a Public Good.

Movies can be digitized and shared for free.  Songs can be digitized and shared for free.  Books can be digitized and shared for free.  A Lamborghini cannot be digitized and shared for free.  For lack of a better term, I'm going to use the word "linvoid" to refer to anything that can be digitized and shared for free.

As we all know, in many cases it's illegal to share linvoids.  We've all heard stories of people who've been punished for breaking the relevant laws.  But whatever measures the big linvoid producers take to protect their financial interests... it doesn't change the fact that linvoids have a fundamentally different nature.  If we want the supply of linvoids to accurately reflect the demand for linvoids... then we can't treat linvoids like private goods.

One possible solution would be to create a linvoid sector.  Everybody would be required to spend 10% of their income on linvoids... but they could choose which linvoids they spent their money on.  If there truly is a demand for smarter movies... then whoever correctly guesses this and produces movies accordingly will be rewarded by smarter/richer consumers for doing so.   And with such a system there'd be absolutely no need to prosecute people for sharing linvoids.  We could freely share all our favorite books, movies and songs with all our family and friends.  In terms of logistics... whenever you spent your money on a linvoid, you'd save your receipt and submit them annually to whichever agency was responsible for ensuring that you did indeed spend 10% of your income on linvoids.

The problem with this solution is... why 10%?  Why not 40% or 1%?  Clearly we'd be screwed if we were required to spend too much money on linvoids.  We wouldn't have enough money left over to spend on more important things.  But if we spend too little on linvoids... then the supply would fall short of the demand.

The thing is, we already have a sector that's responsible for supplying the optimal amounts of public goods.... the public sector.  So why don't we just put the government in charge of supplying linvoids just like it's in charge of supplying defense, education and healthcare?  Taxes would be raised accordingly and voila!  Problem solved!  In theory, anybody who thinks that the government is competent enough to supply defense, education and healthcare should strongly support the idea of the government also supplying linvoids.  Because there's a problem if somebody thinks that the government will fail at supplying linvoids but succeed at supplying far more important things.

I'm pretty sure that to truly resolve Satt's Paradox... you have to score really high on The Satt

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See also...

Amanda Palmer vs Public Finance
Rescuing Robin Hanson From Unmet Demand

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