Comments on: Overselling

By: Robin Hanson

Robin Hanson — Mon, 26 Apr 2010 01:21:06 +0000

Alas, many a good novel idea seem to have so far only actually been realized as attempts at fraud. Which of course makes reasonable people reasonably wary of novel ideas.

By: Harold

Harold — Tue, 20 Apr 2010 11:18:51 +0000

@ Nathan, do poker players sell percentages of themselves, or just their winnings? If they happened to come into an inheritance during the poker tournament,, would they have to pay the percentage of this?

By: Harold

Harold — Tue, 20 Apr 2010 10:05:00 +0000

PS. if you sold 95% of yourself and kept the money, your marginal cost would remain the same as your original view, so you would not work.

By: Harold

Harold — Tue, 20 Apr 2010 10:02:06 +0000

Good point Erick, how do we measure the marginal cost? If you have nothing, you will need to work enough to provide the basic necesities before the marginal cost reaches $5. Is this right? The more you work, the greater the marginal cost, and you keep going until the cost equals what you get for it. If you are used to earning $100 per hour, the marginal cost will equal $100 per hour after say 5 hours, so you stop working. At this point, the time is worth more to you than the money. However, lets say you then sell 95% of yourself and gamble it all away. On your previous view, the marginal cost would have reached $5 very quickly, so you would hardly work at all. However, under the new reality, the marginal cost of your time will not reach $5 until, perhaps 5 hours. After this amount of work you will now be able to eat and sleep in a dry place. You will just have to reduce your expectations.

By: EricK

EricK — Tue, 20 Apr 2010 06:34:13 +0000

I’m not sure Bennett’s example makes much sense. If you own 5% of yourself and earn $100 an hour you will work as much as someone who owns 100% of themselves and earns $5 an hour. I’m sure such a person works all the hours they can, probably trying to hold down 2 jobs, just to get by.

By: Nathan

Nathan — Tue, 20 Apr 2010 01:05:06 +0000

Poker players routinely sell percentages of themselves. For tournaments, it’s pretty easy to avoid the tendency toward laziness because, having entered a tournament, it’s only very slightly more work to play your best that it is to play indifferently.

For cash games, I think the incentive problem is solved by the fact that players rarely sell 80-90% of themselves. Usually it’s more in the 25-50% range.

Such arrangements were so common for the last couple decades that for most big tourneys and high stakes games, the player who owned all of himself was quite the rarity, although it’s less the case these days.

By: JLA

JLA — Mon, 19 Apr 2010 22:47:21 +0000

I remember hearing about a college student who tried to sell his future income on eBay; eBay removed the auction on the grounds that the seller violated part of eBay’s policy.

I’m not sure of the legal status of such a market, but I would guess that the market will never be very large because of the adverse selection problem.

By: Harold

Harold — Mon, 19 Apr 2010 21:24:33 +0000

I think this policy is allowed, isn’t it? If someone wanted to sell a percent of their future earnings for a fixed sum, would there be anything to prevent it? The problem arises that no-one would want to buy, as as soon as you make the purchase, you reduce the future earnings as you have reduced the incentive. Australia perhaps comes closest, with students selling a percent of future income to pay back the student loan, but I think the extra tax stops once the loan is paid off. This sort of contract would only happen if both parties thought it preferable to a straight loan. I cannot immediately see how such a situation would arise.

The case of artist / record label is perhaps illustrated well by George Michael vs. Sony. He sold a lifetime commitment to Sony when he was 18 and desparate for a record contract. He likened it to slavery, wanted out and took them to court. He lost. The wikipedia article is not the best:
http://en.wikipedia.org/wiki/George_Michael_Vs_Sony

By: Neil

Neil — Mon, 19 Apr 2010 20:37:53 +0000

I bet Dino worried the most about that 25% he owed to mobster Costello.

By: JLA

JLA — Mon, 19 Apr 2010 17:37:19 +0000

If this policy was allowed, wouldn’t we just end up with a market for lemons?