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Monday, March 24. 2014

Some Thoughts on Incentives


Necessity isn't the mother of invention, incentives are.  Necessity, at times, is an incentive to invent or improve.


Speaking of incentives, is virtue inalienable?  Are there situations which can mitigate morally reprehensible behavior?  Broadly speaking, I'd say no, not usually.  However, context is important and always useful in developing a justifiable opinion about some very specific situations.  Along these lines, what represents an unfair advantage in making an exchange?  Would the person purchasing this egg be wrong to not disclose information he had about it?  After all, we do have laws about not disclosing information about what is being sold.  


These same laws should apply to the buyer, should they not?

Posted by Bulldog in Our Essays, The Culture, "Culture," Pop Culture and Recreation at 10:34 | Comments (13) | Trackbacks (0)

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No, they should not. Bottom line: Both parties agreed on a price and were happy with the deal when it was made. The seller received $14,000 and the buyer expected to make a "small" profit.

The laws were designed to prevent the seller from withholding information about the item being sold. That is misrepresentation or fraud.

Certainly the seller could have done more research and probably regrets that now.

I have a bunch of toys used by my children. They kids are older and I want to get rid of them. If I sell them at a garage sale for 50 cents each, I would be happy with that amount. It's certainly possible that there is a buyer somewhere who would be willing to pay a lot more, but they are not worth the time that it would take to do the research.

There are Estate Sale and/or garage sale experts who have invested their time to learn the values of certain objects and go to sales looking for undervalued things to resell. Do you expect them to tell the seller what price they expect to resell the object for? Especially when there is no guarantee that a buyer can be found.

The internet has made the research much easier and eBay has made it easier to resell these items, but someone still has to take the time to do the research.
#1 EarlW on 2014-03-24 11:47 (Reply)
I agree with you.

I posed the question because, as Dr Torch points out - what is right and just?

I, personally, would probably share the information and offer to split the gains. I would oppose instituting laws to force this behavior, however. The state doesn't belong in the middle of a negotiation.
#1.1 Bulldog on 2014-03-24 14:37 (Reply)
But sharing the information, i.e., giving it away, in no way obligates the owner to share the gains with you. You could perhaps accept the purchase on the terms offered, then share some of the gains to the original owner.

But what obligates anyone to donate their knowledge to another?

What if the knowledge that permitted one to recognize and know how to find a buyer was acquired at great cost/effort on your part? Are you then obligated to give away your knowledge capital to help this individual earn more from their physical asset? If so, how then do you justify stock brokers selling their research? Academics profiting from their works through books and speaking engagements at fees greater than the cost of marginal production?
#1.1.1 JKB on 2014-03-24 14:45 (Reply)
I agree with you - I'm not making a case for obligating anyone to share information, let alone creating a law which makes this obligatory.

However, if I stumbled upon the Faberge Egg, and made the purchase, I would then turn around and share the benefit and the information.

There were two reasons for this post - the first was the point that incentive drives invention and creativity (and sometimes necessity is the incentive). The second is that incentive also creates moral dilemmas, and moral dilemmas invariably lead to the creation of laws.

Now, the current law obligates a seller to disclose as much information as is available about what he is selling so that he does not hoodwink his purchaser. But the reverse is not true, if the purchaser knows more.

There are good reasons for having a law for one, but not the other. Yet there is also the moral dilemma of knowing, should you stumble upon that Faberge Egg at a yard sale, that you have made a tremendous profit because of somebody else's unfortunate ignorance.

Unfortunate ignorance is different, however, from willful omission of important data regarding a purchase. It still should cause us to think carefully about what our ethics are in situations - at what point do we truly draw the line?
#1.1.1.1 Bulldog on 2014-03-24 16:20 (Reply)
You could perhaps accept the purchase on the terms offered, then share some of the gains to the original owner.


That's how I envision myself doing it.

Like Bulldog, I would never want to see a law where this was compulsory. That would create perverse incentives, and people would be melting down Faberge eggs for scrap.
#1.1.1.2 DrTorch on 2014-03-24 16:48 (Reply)
There's nothing here that indicates the buyer withheld any information at that time.

But this is a question I have wondered about at times. What happens if I find Action Comics #1 for sale at a garage sale? Do I tell the owner what he has? What would Jesus expect from me?

They have an object, but it is my knowledge that improves its relative worth to them. It's challenging.
#2 DrTorch on 2014-03-24 12:32 (Reply)
Necessity was the mother of invention and invention was slow. Even dutiful laziness was a poor mother to invention, at least in sharing those inventions.

Then in the 17th century, a little place called England came up with the idea of letting people profit from their inventions. Profit became the Super Mother of invention and a prolific mother she was. Her progeny spread at a fair pace at first, then like wildfire and has continued for centuries.

But, of course, all those are incentives. First need, then the desire to do more for less work, then to sell your idea on how to do more for less to others. The price for the latter was that monopoly on the idea/invention was term-limited whereupon the idea became the common property of all mankind.
#3 JKB on 2014-03-24 14:39 (Reply)
"Are there situations which can mitigate morally reprehensible behavior?"

Killings done in a just war.

Violence done to stop a strong attacker from hurting a weak victim.

Lying to keep from hurting my wife's feelings. ("No, dear, it doesn't make you look fat." "Yes, dear, I love your fried squid cookies.")

If the egg buyer violated some moral duty, then so does anyone who buys a stock based on research, study, and hard work. The seller of such a stock presumably holds differing views about the future value of that stock than does the buyer. But if a buyer decides, based on rigorous study, that a company's profitability will increase, while the seller of the stock does a poor job of research and thus disagrees and looks to sell, the buyer has no duty to correct the seller's conclusion.

There's no force or compulsion in such an exchange, and that's the key factor. The egg seller was always free to investigate the egg and discover what it really was, but chose not to.

Any other conclusion necessarily leads to a philosophy that ALL sales transactions are essentially theft.
#4 bobby b on 2014-03-24 17:04 (Reply)
Define a just war. I'm not saying it doesn't exist - but what is just to you may not be to others. I'm sure Nazis believed their cause was just.

I believe context defines the level of morality. HOWEVER, this seems to presume some level of moral relativism. I don't believe in moral relativism.

Like some of the examples you gave, there are situations where context mitigates the behavior involved. On the other hand some sales transactions ARE theft (think Goldman Sachs and the front-running they do, diminishing returns for legitimate clients who don't have the capabilities available to GS).

Defining which transactions ARE theft is much more difficult, though.

Context is always important, and I believe this is why God wanted Israel to have judges (to define and apply context within the social mores of the time to each situation) rather than governments (which would rather apply a set of rules that are rigid and typically benefit the ruling class).

Exchange can be done improperly and unfairly, but it's all about the context.
#4.1 Bulldog on 2014-03-24 17:16 (Reply)
I have always thought that the phrase "a just war" was awkward at best and open to interpretation. But I do believe there is such a thing as "a just defense". Most of us have defended a little brother or sister or perhaps even a fellow student in grade school that was being bullied. And of course we have all defended ourselves. Surely that is what the author really meant when they coined that phrase "a just war".
#4.1.1 GoneWithTheWind on 2014-03-26 11:48 (Reply)
No, barring some extraordinary circumstance, you may not overcome the presumption that the seller knows the worth of what he is selling. He owns it, has control of it, knows where he got it and has the time and opportunity to examine it. Therefore he is strongly presumed to know exactly what he has, including it's value. The buyer has no obligation to the seller. The buyer must only make the best deal he can and perform whatever examination he deems appropriate to protect his interests.
#5 W.C. Taqiyya on 2014-03-24 17:59 (Reply)
Necessity is the mother of strange bedfellows.
#6 Chuckles on 2014-03-25 09:12 (Reply)
Well, the Faberge egg is not a good example of what info sellers and buyers should state. Both new only that it was a weirdly expensive almost solid gold object, but the only noticeable marking was not "Faberge" but the name of the artist - and Google was not around at the time. I can assure you jewelers will make somewhat strange things. My grandfather once bought a necklace with an onyx pendant - it was several days before he discovered that the BACK of the onyx, not seen when worn, had a 1/2 carat pure-white flawless diamond set into it - apparently even the woman he bought it from did not know, as she did not point it out. Who would hide the best part of jewelry that way?

Now, on the "American Pickers" show, sometimes the seller will say the price is $20, and the buyers will reply they cannot in good conscience pay less than $70. Far from often, but it does happen if they know they will be selling the item for more than twice the offered price.
#7 John A on 2014-03-25 19:59 (Reply)

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