Saturday, March 26, 2016

Consumer Surplus vs Consumer Honesty

Comment on: Why valuation economics are messing up the Internet, Inequality, and Productivity debates by Tim Kane


This blog entry is a digital good.  I just read it and derived $0.25 cents of value from it.  But, unfortunately, the payment costs of giving you 25 cents are too high.  So I'm not going to do so.  Which makes me a free-rider.  But... not by choice.  It's not my fault that your blog doesn't facilitate micropayments.  Therefore... I'm not a free-rider... I'm a forced-free-rider.  My consumer surplus is 25 cents... but it's not my fault!

Let's say that your blog did facilitate micropayments.  Right above the comment section would be some coin buttons... a penny, nickle, dime and quarter.  I could click the quarter button.  Doing so would instantly transfer 25 cents from my digital wallet to your digital wallet.

On the one hand... I would be accurately communicating my valuation of your blog entry.  But on the other hand... I wouldn't be getting any consumer surplus!

Which is more important?  Accurately communicating valuations... or getting consumer surplus?  The free-rider problem clearly indicates that too much consumer surplus is undesirable because it will result in goods being undersupplied.  Therefore... it should seem like goods can only be optimally supplied when consumer surplus is minimized.

If you get a chance I'd appreciate your thoughts on my solution (sectornomics)...

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