Prices aren't just about supply and demand, but control over supply and demand (opens in new tab)

The PoW camp example is interesting, but the way this article talks about risk and return makes no sense. The author gives an example of a lottery with a $1m prize, funded by selling 1 million tickets at $1 each, then introduces a "Mr. Behemoth" who can buy as many tickets as he wants. Since he can buy 600k tickets to win 400k, for a 66% return at 3:2 odds, or even 900k tickets to win 100k for an 11% return at 9:1 odds, the claim is that he "has complete control over risk and return."

...No? The expected value is 0 in either case.

.6 * 400 + .4 * (-600) = 0

.9 * 100 + .1 * (-900) = 0

The ability to slice a given risk-return profile into different pieces, or different amounts of leverage, is called "finance". But Mr. Behemoth in this case has the same expected return as everyone else, so the example has nothing to do with "control of supply and demand."

It shocks me that this article could be written without mentioning the phrase "price elasticity" a single time (a word I learned in a class literally numbered "econ 101").

I'll never understand why people decide to blog about topics in which they don't have any background studies.

One odd thing about economics is that people will be familiar with roughly half of an introductory textbook, and then think they know everything about the subject. The fact that there is such a thing as "market power" is understood by every economist, and is central to the topic of "industrial organization". Increases in market power are even one of the standard explanations for the business cycle (they call them "markup shocks). Maybe the author knows that, but it's not clear from the post.

Really interesting to see Dougald Lamont trending here on Hacker News: he was most recently the leader of Manitoba's Liberal party.

He lost his seat a few weeks ago in a provncial election where the party was reduced from three seats to one.

> But instead of reducing demand, more poachers may enter the market, because the high value of the tusks means they can make more with less work. The cost of the good is not related to its real-world rareness, but to the cost of paying people to obtain it, which may be high or low.

This doesn't rationally follow at all.

The rareness (low supply) of a good is the net sum of how hard it is to obtain, due to all the possible reasons for that.

More poachers may enter the market, but with fewer elephants left alive, they cannot find elephants so easily, which means it takes more time and effort: the MTBE (mean time between elephant) goes up, making the hunt more costly. They may have to engage in increasingly hostile and violent turf wars with other poachers.

More poachers entering the market will not prevent a reduction in demand; it isn't something "instead of reducing demand".

If the market maintains the same level of interest in the good, the demand curve stays the same, and the only thing that changes demand is the current price point, which determines where on the demand curve the market is.

The author of the article doesn't seem to understand the difference between a reduced demand due to a movement of price along the same demand curve and actually reduced demand, whereby the market is less interested in the good, and buys less of it at every price point.

Case in point when someone should take an Econ 201 course rather than try to explain something from their incorrect first principles.

OPEC knew this for ages.

Related: https://en.wikipedia.org/wiki/Veblen_good

> It’s very clear that large companies do abuse their market power (price-fixing and collusion)

Can we get some examples of this? (not implying otherwise)

Nothing that this article discusses is particularly noteworthy or novel - Literally chapter 7 of the most common Econ 101 book (Paul Krugman's) covers "Imperfect Competition" in much better, less circular detail.

However, the mental gymnastics the author performs to reach these conclusions is impressive on its own right. "You are not buying an apple, but the property rights to an apple" is just the sort of non-parody content I have come to expect from Substack writers at this point.

If you are actually interested in how supply and demand work in non-monetary markets (like the POW camp example), I cannot recommend enough "Who Gets What and Why" by Alvin Roth, the father of Kidney exchange programs.

Nice description. Completely free markets are rarely efficient, but well regulated ones can be. All sorts of risks and externalities can substantially increase transaction costs. Crypto currencies show that even the most basic (store of value and currency exchange) economic transactions have substantial overhead. Most people end up using exchanges that have lower cost transactions with acceptable risk (most of the time).

Freakonomics, 'sellers will charge the maximum amount they can'.

Markets have been glorified in the modern political discourse, at least in the West. It's one of the core tenets of neoliberalism: markets for everything. Side note: markets actually have nothing to do with capitalism. If you think they do, you don't know what capitalism is.

All of this stems from the idea that independent actors will create an "efficient" market to reach a price equilibrium in the most Econ 101 way possible with an awful lot of hand waving. This ignores the desire and ability for actors to put their thumbs on the scales.

Markets exist to extract wealth from participants to support the current economic order. This is done through lobbying, rent-seeking, putting up barriers (or enclosures if you prefer), restricting competition, using market power to crush competitors and reaching a monopoly or oligopoly to maximize wealth extraction.

This is called friction.

It is part of the Supply & Demand model. Governments and other factors add friction which impact the elasticity of supply and demand curve.

Modern Capitalist societies are not pure, governments can drive friction through regulations, fees, taxes, codes, and a million other factors.

Let's not forget that the narrative behind scarcity will also drive prices.

Nonsense. He who can destroy a thing, can control a thing.

There is no practical difference between the two.