Arbitrage on the holodeck
May 28, 2017 § 40 Comments
Context and subjectivity are not the same thing.
Context is objective: water is objectively more valuable in the desert. It is also more costly to ship water to the desert than it is to use it where and when it is already abundant.
Preferences are subjective, though even preferences are rooted in objective reality. Preferences are not reducible to nothing but pure subjectivity, because man himself is not reducible to nothing but pure subjectivity. In the absence of disorder fresh water is preferred over seawater as drink, because the former satisfies the objective needs which give rise to thirst while the latter does not.
Objective truth always trumps subjective preferences. A subjective preference which is contrary to the objective truth is an intrinsically disordered preference.
Prices reflect an equilibrium in preferences between counterparties in the exchange of goods and services. The reason for exchange in the first place is because different objective contexts obtain for each counterparty: the baker has ample bread and few candles, while the candle maker has abundant candles and little bread. So ten candles are exchanged for a loaf of bread.
An actual exchange represents a preference equilibrium: a subjective meeting of the minds in bringing together two different objective contexts for putative mutual benefit.
But perception is not always reality.
When the controlling preferences of either party to an exchange are intrinsically disordered, the price is an unjust price. The mutual benefit (or its lack) in any exchange is ultimately an objective property of the actual exchange, not a meeting of minds in an intersubjective preference space.