| | On the flip-side of this poll question (i.e., Would you act so as to reward a virtuous value-producer?), a relevant study was performed in order to explain all of the unexpected trust and the unexpected, mutual benefits of trade which occurs everyday under the free market mechanics of eBay:
Coevolution of Trustful Buyers and Cooperative Sellers in the Trust Game
The study gets technical but a major point from Figure 3 can be summarized thusly:
a) If buyers get to "rate" sellers (just like we do on eBay) ...
b) and if these buyers aren't perfect, but instead -- at least 2% of the time -- they mistakenly rate sellers incorrectly (opposite to their very own experiences with them) ...
c) and if these buyers -- even when they discriminate good-reputation sellers from those with a bad-reputation -- if they still imperfectly buy from the bad sellers 10% of the time ...
d) and if good sellers make 20% (one-fifth) of the profit they would've made by being bad sellers -- i.e., by cheating others out of money (and taking the "hit" of getting a bad reputation after that)
e) and if 60% of us exercise the previously-outlined "imperfect" rationality (i.e., discriminating good sellers from bad sellers; 90% of the time)
f) then free association evolves and is stable (i.e., free market capitalism "works")
Now, if you can make 80% of the profit you'd make out of cheating others -- which, in certain fields or markets, is something that is not only possible but is extremely likely (if not totally certain) -- then only 3.8% of us would need to exercise the previously-outlined "imperfect" rationality (buying from good sellers 90% of the time and from bad sellers only 10% of the time) in order for free market capitalism to work.
Imagine if 95% of us were dolts -- buying up whatever it is that anyone, whoever they are, is selling to us -- but that only 5% of us were practicing an imperfect rationality: Free market capitalism (under the assumption that the payoff for honest-dealing is at least 80% of what the payoff for fraud is) would still work.
In post 3 above, I mentioned a study which showed that only 22% of us need to be concerned about the punishment side of justice -- in order for 100% of us to benefit from living in a just society. Now, in this study -- under a range of assumptions that is wide enough to be able to capture the "boots-on-the-ground" reality of humans trading with one another -- we can see what's required on the "reward" side of the ledger, in order for things like eBay (or free market capitalism in general) to "work":
Somewhere between 4% and 60% of us need to practice "caveat emptor" (buyer beware). If 4-60% of us can do that, then capitalism evolves and is stable -- with no major market instability or "Great Depression". If a "Great Depression" actually does occur, then that is good evidence that some statist interventionist was tinkering with the markets -- because only 6 in 10 of us (at the most) would need to be vigilant-though-imperfect consumers, in order to prevent that kind of a thing from ever happening.
Only 6 in 10 of us -- and possibly only 1 in 25 of us! -- would need to stop buying from known hucksters. This is how and why eBay "works."
Ed
p.s., Now that we've seen what it would take for reason, freedom, individualism, and free market capitalism to work, we could ask what it would take for the opposite (totalitarian dictatorship) to "work":
1) You would have to convince more than 78% of us to become totally indifferent to injustices happening right in front of our noses
2) You would have to convince more than 4 out of 10 of us -- and possibly more than 24 out of 25 of us -- to deal/trade with people who are known for having a bad reputation
Neither one of these alternatives seems possible, given the concrete evidence of successes like eBay.
(Edited by Ed Thompson on 3/15, 7:59pm)
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