A musing on markets

Discussion in 'The War Room' started by Prokofievian, Aug 18, 2018.

  1. Prokofievian

    Prokofievian Silver Belt

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    I live in the Netherlands which, as a country, has a long and storied history with markets. The first company listed on a stock exchange was the Dutch East India company, for example. By the 18th century, much of the capital stock market was held by Dutch interests. As a result, living here as a foreigner, it definitely appears as though the Dutch have a deeply ingrained belief in the market as a mechanism to resolve almost any issue. A Dutch girl actually said to me that it was the ''dutch way'' to try to make a buck off anything. Here's an example.

    Housing is in high demand in this country. This is the only country in which I have ever lived where apartment volume is important. This is because many former attics are being rented as stand alone apartments, and the slanted roofs will render much of your apartment's area unusable. As a result, the rental industry is booming. Specifically, rental agencies which manage the process of finding tenants for vacant properties are sprouting like weeds. For a while, these rental agencies would charge both the land lord for the listing of the property and the showing to prospective tenants, but also the tenants themselves once they signed. These so called contract fees were at one time absurd, usurious, and affront to common decency. It was not unheard of for contract fees, and I have heard it directly from people who have paid this amount, to be in excess of 3 months rent. The service which you get for this fee is nothing that hasn't already been paid for by the landlord. All rental agencies charged these exorbitant fees, and the jobs in the netherlands generally paid well enough in expat cities like Amsterdam, the Hague, and Rotterdam to support them. Moreover, with the insane demand for housing in this country being what it is, you'll pay whatever someone asks if you're offered an apartment you like, if only to avoid ending up in an attic.

    Now, this was challenged this in dutch court successfully: the Dutch supreme court handed down the decision that because the rental agencies were representing the landlord, they could not also charge the tenants without creating a conflict of interest. Well, surely, we are living in the Libertarian paradise. Some market perversion was addressed by the courts, and we will now all live happily ever after, free of all usurious contract fees, right? Wrong.

    Instead of actually enforcing this decision by law, and shutting down rental agencies still found to be charging these fees, the Dutch government decided to let the courts handle it. It took some time for contract fees to drop, as the rental agencies first have to lose money before they'll consider lowering their fees. In Dutch courts, you are not entitled to a translator, or to represent yourself via a translator, or a competent Dutch speaker, meaning you have to get a Dutch lawyer to file suit against the companies on your behalf: which costs money. A barnacle industry of law offices which only handle these cookie cutter cases has emerged. They'll file suit on your behalf for 200 euros. Meaning that you're still out 200 euros. This appears to be the end of the story. There's now an entire industry operating explicitly outside of the law, which you cannot avoid, and another industry whose only purpose is to sue the first industry, and unless you happen to speak fluent Dutch, there's no way to be made whole again (is it worth an additional 200 euros to you to learn Dutch well enough to function in a civil proceeding? Let's be real).

    Now, I understand that language is a bit of a confounding variable here, but let's say everyone were capable of filing suit on their own: there's still a non-zero point where it's just not worth your time and energy to go through with it. Probably somewhere around 100 euros and most people would say ''fuck it.''

    Can you imagine if not only everything were like this, but instead of a single court, you had multiple private courts? It would be a fucking nightmare, with industries temporarily sprouting up to gouge customers in cornered markets, before settling down to some minimum, annoying level of cost and time, without ever really going away.

    TL/DR: Markets do behave in a way that can be described as rational, and they do reach equilibria, but sometimes the equilibrium point they reach is retarded, and we'd all be better off with some good ol' fashioned government intervention in the form of laws on the books, jack booted thugs on the ground, and seizure of some businesses.
     
  2. therealdope

    therealdope Titanium Belt

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    A monkey saddle point is also a stable point solution, but one little push and shit hits the fan.
     
  3. ultramanhyata

    ultramanhyata Gold Belt

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    Outcomes produced by unfettered markets are always the correct and moral ones because moral and correct outcomes are always produced by unfettered markets.

    This is rock solid, inescapable logic my friend.
     
  4. ultramanhyata

    ultramanhyata Gold Belt

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    [​IMG]
     
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  5. HIMBOB

    HIMBOB Steel Belt

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    The unseen cost of this the legal system handling these cases.

    Courts awarding costs for inconvenience and chsrgich Court costs would fairly quickly sort this issue.

    I am constantly amazed how often companies caught doing the wrong thing have no worse outcome than sacrificing their ill-gotten gains.
     
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  6. curryjunkie

    curryjunkie mixed marital arts...

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    rental agencies/realtors/auctioneers/estate agents ,call em what you will according to country, have to be one of the biggest cons out there, in a just world they should all be made homeless themselves.
    how you justify charging 1 or two percent of a homes value for essentially taking a few photos putting an ad in the local paper, and saying to people " isnt this room lovely" is beyond me, i was "shown" a country property in ireland once, when i enquired where the boundary was ( always a bit vague in rural ireland) the auctioneer waved his hand in the distance and said over there, i asked him to show me, he replied he didnt want to get his shoes muddy. the cunt is an auctioneer in the countryside, drives a range rover, and doesnt keep a pair of wellingtons in the boot.
    we are essentially subsidising their bad suit and cocaine habit, and they drive the market up to collect a bigger commision, fuck em.
     
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  7. MadSquabbles500

    MadSquabbles500 Steel Belt

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    Manhattan RE market was once so hawt, that brokers were charging 15% of annual rent to clients to place them in apt. That is almost two months rent. And as a property Mgmt, I was charging the broker half his commission for letting his client live in one of my apts. Those were good times. Right when gentrification was beginning in mid-late 2000s. And I was just using craigslist to advertise. I did not need to offer any exclusives to brokers.

    Then the GFC happened, and all that went away. Now LL need to offer to pay a fee to broker just to get them to bring people in.
     
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  8. MadSquabbles500

    MadSquabbles500 Steel Belt

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    For very high value items anything over $100K, I say, should not really be that liquid. It is hard to market something like that. Actively seeking out buyers, or sellers and putting them together is not worth it if all you only need to do it once. Brokers actively seek buyers, and sellers all the time, so they are more efficient at selling what you have, or getting you what you need when that something isnt not something that is meant to change hands often.

    Actually this is not only for high ticket items. Retailers provide the same service for consumers. Wholesalers perform same function for producers. If RE brokers are useless than so is Amazon.
     
  9. HockeyBjj

    HockeyBjj Putting on the foil

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    Solid quotable post here
     
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  10. HIMBOB

    HIMBOB Steel Belt

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    I have no love for them but 1 or 2% for promotion and sale isn't overly high for a unique item.

    Hell most sales and marketing expense/commissions in any business are higher than that.
     
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  11. JonesBones

    JonesBones Excuse my contraflow

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    Jaron Lanier has interesting points on this. The quest to find the golden ratio or whatever. Now it is a computer algorithm. People think that they can create a Maxwell's demon that can create the perfect system of money. And always comes out on their side and they can discard what they don't like. The poor and uninsurable always get kicked into one door by the demon. It is a way to sort the desirables from undesirables. These models can create equilibrium as has been said, but is a mere tautology and not empirical. We are overmodeling things and holding up the models as holy and real.

    The Maxwell's demon analogy applies to all these algorithms used in markets, social media/advertising, etc.



    So what I’m proposing is that finance, and indeed consumer Internet companies and all kinds of other people using giant computers, are trying to become Maxwell’s demons in an information network. The easiest way to understand it is to think about an insurance company. So an American health insurance company, before big computing came along, would hire actuaries to set rates. But the idea of, on a person-by-person basis, attempting to decide who should be in the plan so that you could only insure the people who need it the least on an individual basis, that wasn’t really viable. But with big computing and the ability to compute huge correlations with big data, it becomes irresistible. And so what you do is you start to say, “I’m going to…”—you’re like Maxwell’s demon with the little door—“I’m going to let the people who are cheap to insure through the door, and the people who are expensive to insure have to go the other way until I’ve created this perfect system that’s statistically guaranteed to be highly profitable.”

    And so what’s wrong with that is that you can’t ever really get ahead. What you’re really doing then is you’re radiating waste heat. I mean, for yourself you’ve created this perfect little business, but you’ve radiated all the risk, basically, to the society at large. And if the society was infinitely large and could absorb it, it would work. There’s nothing intrinsically faulty about your scheme except for the assumption that the society can absorb the risk. And so what we’ve seen with big computing in finance is a repeated occurrence of people using a big computer to radiate risk away from themselves until the society can’t absorb it. And then there’s some giant bailout and some huge breakage. And so it happened with Long-Term Capital [Management] in the ’90s. It happened with Enron, and we saw a repeat of it in the events leading to the Great Recession in the late aughts. And we’ll just see it happening again and again until it’s recognized that this pattern is just not sustainable.
     
  12. RockstarChris

    RockstarChris Dwight Belt Banned

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    you had me at TL;DR
     
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