Can't this be rewritten in plain English as "unsophisticated (dumb) people don't know how to use credit cards in their own interest?". Isn't that just the free in free market?
Why is a principled objection to a paternalistic state intervening to protect dumb people from making bad decisions seen as unethical? What entitles dumb people to such protection?
What’s dumb is the statement or implication, which is made constantly, that the typical person is dumb. I don’t mean to pick on you personally, who I have no grievance with, but rather to heap scorn on an idea both illogical and presented in bad faith frequently, a practice I always aspire to.
The typical person is the result of ruthless selection pressures over millions or billions of years depending on how one sets their watch, a chain of the fittest, savviest, toughest, and hardest to kill members of the most dangerous life form we know about.
Most people, more than half, are unsophisticated by the definitions implied, which would make people of above average intelligence “dumb”. Dubious, to put it mildly.
A much more plausible theory, and one not laden with all the trim and tackle of a bigoted agenda, is that the typical person receives a poor education, leaving them ill-equipped to outmaneuver operations research PhDs whose entire job is to use the very efficient frontier of mechanism design, dark patterns writ large, to outfox individuals who (in the typical case) didn’t have wealthy parents or some other greased path into an advanced degree.
And the real kicker to me, as someone who has spent serious time with seriously high-profile people in technology, is that for whatever combination of reasons (one watches out for post hoc ergo propter hoc type fallacies, cause and effect are nuanced in human affairs), I’ve found that the higher someone’s station in life is, the less formidable they seem. I don’t know if power corrodes the necessity to stay sharp, or if privileged positions emphasize some other set of traits at the expense of basic competencies, but if half the big shots I’ve met started from scratch in my neighborhood, they’d have been an easy mark for the unscrupulous and/or hungry.
Being ill-served by an education system that is broken by design, and being outfoxed by fraudsters with sophisticated mathematics who all but write their own laws doesn’t make someone stupid.
The typical person is typical, and from the perspective of an atypically smart person that's dumb(er). I'm not saying I am such a person, only that they inevitably exist.
> is that the typical person receives a poor education
Uneducated, unsophisticated, and dumb are interchangeable for the purposes of this argument. People should navigate the world on their own merits, not have the state intervene on their behalf. That's the point of a free market and society.
Whether or not you're of "above average intelligence", if you use your credit card like a bank account, you deserve every bit of "wealth transfer" to people who know better that entails.
Understanding the difference between borrowing and earning doesn't require any sophisticated mathematics. Neither does understanding compounding interest payments. The only skill required is basic arithmetic. I don't see why folks feel the need to defend plainly bad decisions made by others, or advocate that they be protected from the full extent of their obvious consequences.
If you’re not saying that you’re an atypically smart person, then how would you know what such a person would think about this?
Understanding modern finance at any level of sophistication sufficient to even speculate about the incentives and constraints and therefore the implied utility payoff structure for anyone requires a great deal more than simple arithmetic: even your example of calculating compound interest in the most charitable interpretation of how you could have meant that, which is a stationary risk-free return discounting a zero-coupon bond with neither default nor prepayment risk (because now we’re into IO and PO strips and that’s a TED talk all by itself) is a differential equation.
Its big brother, the Black-Scholes-Merton equation, is wildly more complicated under any faux-realistic “risk neutral expectation”: that’s Ito calculus. And it’s all but useless (arguably worse than useless in times of significant pressure in repo markets among other stresses): it’s basically a security blanket that Mandelbrot had demolished conclusively in the 1970s, it was all but conclusively discredited in “interesting times” in markets the moment it was posed. And we can do VAR, and all that, I’ll make time for this.
I'm sure opinions of people in any category vary widely. I'm simply pointing out that the curse of knowledge/competence exists. If you're an unusually capable anything, the average person will be incapable by comparison.
None of the deep understanding of finance you're postulating is required to make decisions adequate to avoid being taken advantage of by a credit card. Pay your bill every month in full and you'll be a net beneficiary.
Trying to optimize your investment strategy is a full time profession. Simple, functional, strategies are readily available for unsophisticated (but not dumb) consumers (eg. buy and hold index funds). Stepping off the beaten path is always done at one's own risk, and over the proverbial corpses of your predecessors who thought they knew better. So much is true in all areas of life.
You've not addressed my main question: Why defend obviously unconsidered, unsound, and plainly bad, decisions made by others?
I have addressed your question: the realities of life in a financially precarious situation have utilitarian payoff structures and attendant mechanism design that consist of a basket of utilities that are often signed if not complex scalars even at course approximation.
A trivial, tinker-toy reductio absurdium is that if someone believes they are likely to die soon (not an uncommon thing for the left behind in the 2020s, my brother drowned himself in a bathtub a few years ago under a level of crushing poverty that I would have subsidized dramatically more had I understood his situation, even being substantially tapped out myself) they have little if any incentive to worry about how a fucking credit card is going to look 20 years down the road.
I speak from a lot of lived experience here: when I got a job in my late teens sufficient to arbitrary calories, I gained 30 pounds. I was 150 at 6’4” prior.
I speak from experience on education: I have what rounds to none, and somehow discuss the nuances of complex derivatives pricing, which is tangential at best to my core expertise.
I’ve addressed your argument: you can’t easily dollarize all of the externalities, and even if you could, compound interest remains a differential equation.
I’ll kindly thank you to address the substantial points regarding mechanism design, semistable Nash equilibria, the role of open market operations in wage manipulation, the recurring socialization of losses and privatization of profits via a long discredited notion that anything in finance is long or even medium-run Gaussian distributed that I’ve raised before saying the word “dumb” again?
So it sounds like you're saying that modern life is too complex to effectively navigate? There are many examples of rather simple people from humble beginnings navigating it successfully.
Your straightforward example consists of someone who consciously makes a short-term decision on the basis they won't be around to deal with the consequences. In your specific example, why should we externalize their risk? Isn't it theirs to take, and aren't the consequences theirs to own? If their assumption turns out to be wrong, don't they already have more than enough to be happy about?
You're basically suggesting we subsidize the short-term thinking of people who for whatever reason are not planning for their own future? What is the moral reason that entities them so such a subsidy?
I'm also speaking from lived experience. I was born into a single parent household of very poor recent immigrants. I'm also not a financial expert, but my thesis is you don't need to be to avoid falling into obvious debt traps.
> the left behind in the 2020
I am sorry about your brother. Do you think he was not personally, individually responsible for his decisions and actions? I've not met any employer who isn't clamouring for someone that will: 1) be sober 2) show up on time 3) work hard. Anyone who can do these three things can excel. There are countless instances of careers that span from entry level to executive. This is substantiated by research that shows "grit" as the key determining factor for economic success.
> I’ll kindly thank you to address the substantial points
Your thesis is that not all individuals have the same capacity to manage risk due to systemic inequalities or immediate crises. I agree with that. I simply disagree that this is a morally unacceptable status quo. I see society as a liberal ecosystem, where organisms are continually succeeding and failing. The authority required to mount a collective response to these inequalities is too susceptible to corruption, and represents injustice in its departure from liberalism. Not to mention that well-meaning interventions by federated authority have an abysmal track record.
My brother was also cursed by epilepsy, which was likely in large part due to the lead poisoning all of us received living in a house that should be condemned as young children.
I wish people like you faced anything like the consequences you so gleefully dole out for others.
I’m going to forget your username. Make sure I don’t have cause to remember it.
As I said, I'm sorry about your brother, truly. That doesn't take away from the fact that all our curses and all our blessings are fundamentally ours to bear. I'm not doling out any consequences, just advocating for individualism and voluntary association. These are the principles that underpin our prosperity. I've lived through plenty of misfortune and suffering. All of that is mine though. I would rather die screaming in agony than pry greedily into the pocket of an unwilling stranger. I'm somewhat disappointed we cannot disagree about this in a friendly manner.
The average person is average. 50M Americans (16%) have IQs below 85.
In general, whatever their station in life, smarter people are going to locally optimize their situation better than someone who is dumb. As a society, we tend to overemphasize social class — we assume rich people are smart and poor people are dumb.
You make good points. Many high status people are good at manipulating the levers of power and influence, just as a machinist is good with wielding his tools. Money is just a tool. Fancy clothes or whatever is just a tool. Both people may possess a poor understanding of how their tools actually work.
Truly successful people know themselves and their limits. Rich people get to hire smarter people to do stuff for them. Poor people have to find a niche to maximize their value and minimize their faults.
You put me in an awkward position because I’m describing an observed trend of people I’ve known personally, and while I’ll call out flagrant malfeasance by name, I try to not just call people soft or incompetent by name without an adjacent example of serious wrongdoing.
I don’t think it takes hard hitting investigative journalism to find catastrophic fuckup after catastrophic fuckup among the elite in the last month alone.
That’s a Google search away, if your objection is made in good faith, Google it.
Why is a principled objection to a paternalistic state intervening to protect dumb people from making bad decisions seen as unethical? What entitles dumb people to such protection?