The pragmatarian model isn’t based on the sacrifice of time though, it’s based on the sacrifice of money. A penny that I spend on your story is a penny that I can’t spend on other stories. So I’d better consider my valuation of the alternatives.

Does that strictly matter? Money is just a carrier of information — of the signal from the buyer, and provided it can be measured accurately, so is time.

If I did decide to spend a penny on your story… it’s very interesting that you aren’t sure that it would count as a trade! When people make donations to non-profits do you consider it to be a trade? Non-profits generally don’t sell things.

Let’s look at it from my personal perspective. If I donate £100 to Comic Relief, then indeed they don’t strictly sell something to me, yet it is important for me that the money I donate ends up with Comic Relief. Giving £100 to my neighbour, or even simply burning it, would leave me economically in the same position, but not emotionally and morally. The value to me is that Cancer Research UK is £100 richer and can spend that on funding work to find better therapies. And while there is clearly a trade-off here (presumably the £100 donated represents an optimum between cost and benefit of sorts), I don’t think we can really talk of a WTP here.

And that is not the only difference with our hypothetical meal (perhaps it will be a real one one day :-)). My WTP to go for a Mexican meal is unrelated to who might benefit from my payment — it is in practice no more than a measure of my relative preference, and therefore it should be placed in the context of what my WTP (which, if negative, would be a WTA) would be to go for an Indian one.

Getting back to the coasian restaurant scenario… you didn’t think that you should have to pay your $25. Well… let’s say that Medium implemented the pragmatarian model. If your WTP for my story was 25 cents… then how much should you spend on my story?

I should still be spending as little as possible in order to maximize my consumer surplus — unless it is no longer “my” 25 cents, but Medium’s, and what I was being asked to do was to allocate my contribution according to the value everything I read provides me with.

So real and true and genuine benefit maximization is a function of optimal incentives. With this in mind, you should pay your true valuation of my story. And your true valuation of my story is your perception of my story’s relative scarcity.

I don’t see it that way: why should the transaction surplus go wholly to the supplier? Would that lead to maximum overall benefit? I don’t think so.

Therefore, the ant should be honest. It should accurately report, via the sacrifice of its limited pheromones/calories, the true value of its find. Then, and only then, will the optimal amount of ants be allocated to the cookie. Then, and only then, will the colony’s resources (ants) be efficiently allocated. Then, and only then, will the colony’s benefit be truly maximized.

I don’t think the analogy works. If you are willing to write your story for 10 cents, but it’s worth 25 cents to me, the distribution of the surplus seems moot to me. There seems to me to be a complete symmetry: if I pay less than my WTP I am better off than if I pay all of it; if you get more than your WTA then you are better off than if you sell at rock bottom.

Perhaps we are getting confused because we are looking at unconstrained transactions? If the context is that you pay a certain aggregate amount up front (like a fee to Medium), and the question is then how to allocate that fee to a various stories or kinds of stories, then I don’t think we are really talking about a WTP. Say Medium introduces a fee of $5 per month, then what I would get is some finite amount of an internal currency (let’s call them Mollars), that I could allocate, but this is far removed from the notion of WTP.

This seems to me not to be much different from giving citizens school vouchers. They don’t have any real monetary value (you cannot use them for anything else), but they do allow them to express preferences in respect of what school they prefer. People are not spending pennies, they’re signalling what their preferences are.

(And as I said before, that is not necessarily a signal that they individually need more of it.)

Accidental behavioural economist in search of wisdom. Uses insights from (behavioural) economics in organization development. On Twitter as @koenfucius

Accidental behavioural economist in search of wisdom. Uses insights from (behavioural) economics in organization development. On Twitter as @koenfucius