Not so fast!

How do you make out that Bob’s followers are better off as a result of his giving me 90 dots? They are interested in cats, and I can see no reason why they will get more of them if Bob can transfer the dots he’s received to me.

Based on number of dots spent, it’s a fact that Bob’s followers derive a lot more benefit from his cat stories than your followers derived from your OD stories

If you mean by this that the total amount of story-welfare is higher, certainly. By restricting the dot-giving to a fixed amount for every PragMedium reader, we calibrate their interest: 100% == 5 dots, so each dot represents 20% of any reader’s interest.

If we allow Bob to reuse the dots he received, we break that principle, and the de facto consequence is that Bob’s interest is now 450/5 considered to be 90 times as important as that of an ordinary reader.

I think you are (unwarrantedly) assuming that Bob’s interests are of interest to his readers. But all we know is that they are interested in what he writes. You make a tenuous leap: more of my Econ stories make Bob happy ⇒ Bob will make better cat videos and so his followers will be happier.

Imagine this situation. In addition to the PragMedium market, there is also a market for shoes. In the shoe market, there are lots of people making both left shoes and right shoes. Their users give them a dot if they like a shoe, and since most people (a) have two feet and (b) prefer wearing identical left and right shoes, the shoe makers end up with pretty much the same amount of dots for their left shoes and their right shoes, so they produce both in equal measure, and everybody is happy.

The shoe buying public also participates in the PragMedium market, and gives dots to people stories they write. JK Rowling writes very good stories and collects lots of dots, because her readers are very happy with her stories. She transfers her dots to other writers, so she gets to read more stories she likes, which makes her happy too, and so she writes better stories (as you argue), and therefore her readers are *even* happier: they get ever more good stories from JK, and they have nice shoes.

Now, the two markets agree that you can transfer dots between them: you can allocate dots received in the PragMedium market to shoe makers. And something intriguing happens: JK Rowling appears to have an incredibly strong penchant for left shoes, and transfers millions of PragMedium dots to the left shoes made by the shoe makers. They all start churning out left shoes and all but stop making right shoes. This makes her ecstatic, and her stories become unimaginably good. This makes her readers even happier – were it not for the fact that they no longer have right shoes to wear, which makes them very unhappy. But the shoe makers don’t care about that: the dots they receive – whether from one person or from millions – determine what they produce.

Can you see the problem with transferable dots and the assumptions of overall welfare? The dot is a carrier of utility (or welfare), but 1 million dots from one person ≠ one dot from 1 million people.

Written by

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

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