A Thought Experiment
I came across an interesting thought experiment I’m going to feature first before describing where I found it. Without any introduction, The Fish Farming Story:
As a thought experiment, let’s consider aquaculture (fish farming) in a lake. Imagine a lake with a thousand identical fish farms owned by a thousand competing companies. Each fish farm earns a profit of $1000/month. For a while, all is well.
But each fish farm produces waste, which fouls the water in the lake. Let’s say each fish farm produces enough pollution to lower productivity in the lake by $1/month.
A thousand fish farms produce enough waste to lower productivity by $1000/month, meaning none of the fish farms are making any money. Capitalism to the rescue: someone invents a complex filtering system that removes waste products. It costs $300/month to operate. All fish farms voluntarily install it, the pollution ends, and the fish farms are now making a profit of $700/month – still a respectable sum.
But one farmer (let’s call him Steve) gets tired of spending the money to operate his filter. Now one fish farm worth of waste is polluting the lake, lowering productivity by $1. Steve earns $999 profit, and everyone else earns $699 profit.
Everyone else sees Steve is much more profitable than they are, because he’s not spending the maintenance costs on his filter. They disconnect their filters too.
Once four hundred people disconnect their filters, Steve is earning $600/month – less than he would be if he and everyone else had kept their filters on! And the poor virtuous filter users are only making $300. Steve goes around to everyone, saying “Wait! We all need to make a voluntary pact to use filters! Otherwise, everyone’s productivity goes down.”
Everyone agrees with him, and they all sign the Filter Pact, except one person who is sort of a jerk. Let’s call him Mike. Now everyone is back using filters again, except Mike. Mike earns $999/month, and everyone else earns $699/month. Slowly, people start thinking they too should be getting big bucks like Mike, and disconnect their filter for $300 extra profit…
A self-interested person never has any incentive to use a filter. A self-interested person has some incentive to sign a pact to make everyone use a filter, but in many cases has a stronger incentive to wait for everyone else to sign such a pact but opt out himself. This can lead to an undesirable equilibrium in which no one will sign such a pact.
Now, for how I came across this little tidbit.
The thought experiment comes from a blog called Slate Star Codex, specifically from a post titled Meditations on Moloch which opens with a look at the Moloch section of Allen Ginsberg’s poem, Howl. Before yesterday I’d never heard of this blog. I stumbled across the link at Rigorous Intuition, one of the better online communities of conspiracy theorists centered around the author Jeff Wells. The guy who posted the link is Wombaticus Rex, an interesting fellow in his own right.
I didn’t want the content to be weighed down with the baggage of how I came across it, because I know how easily certain perspectives are judged and dismissed. But for those interested in looking deeper, any one of those links is an interesting thread to follow.