Comments on: Wrong Frame

By: Ben Hyde

Ben Hyde — Tue, 16 Jun 2009 14:31:36 +0000

Surprised? Heaven’s no! People convert public and club goods into these games all the time. The entire online social networking industry is based on the idea that one can monetize the role of facilitator in these system. But, the moment you do that they are no longer public goods. Converting public goods into private commercial goods has ethical complexities. These arise because they exists in fundamentally different frames.

By: Edward Vielmetti

Edward Vielmetti — Tue, 16 Jun 2009 13:56:23 +0000

Ben – you’d be surprised to know how in how many markets these kinds of exchanges are explicitly monetized. People pay for referrals all the time – that’s a kind of exchange where someone’s recommendation gets translated directly into dollars. And people will go to great lengths cultivating and rewarding their referral networks through monetary and social favors to ensure that they get a steady stream of commerce in return.

By: Ben Hyde

Ben Hyde — Tue, 16 Jun 2009 13:25:52 +0000

Ed – I don’t think so. That’s just a patch of a flawed model. But I’ll play along for just a bit. My point is that these books don’t balance, these markets don’t clear. It’s another symptom of how broken the metaphor is that we can get more transactions under a general reciprocity model, but in turn that only makes the probablity of clearing the market much lower.

I kicked off from that quote in part because it raises yet another issue; what’s the interest rate on the ‘debts’ of this bogus market model?

If we are going to adopt a monetary model of these exchanges obviously we will need to have an interest rate. But that’s clearly not going to happen since there is no market where the transactions are clearing out fast enough to create a clear signal about what that rate is.

That one side thinks the rates is positive and another thinks it’s negative is just the tip of the iceberg.

Markets where transactions clear regularly are exceptional beasts, they require tremendous infrastucture and full time experts to manage them.

The only reason the idea has legs at all is because those who succeed in monetary markets have a stake in spreading that conceptual framework more widely.

To me this confusion is very similar to the attempt to force property rights onto information goods. Like that it’s a category error. Sure, that’s a nice hammer, but this is not a nail.

By: Edward Vielmetti

Edward Vielmetti — Tue, 16 Jun 2009 13:07:15 +0000

There’s two accounting schemes for good works. One goes under the name of “general reciprocity”, where all of the good that accrues to you from others accumulates into a single account, and you balance things out based on that. (In that system it’s OK to lend to someone and have the favor returned by someone else.) The other perspective is “specific reciprocity”, or a strict tit-for-tat to clear accounts individually with each one.