Everyday entropy: roadblock

When consumers shop, they don’t buy goods or services.  They buy information.  It’s information about something – a promise, a label, a memory, a reputation – and they hope that the information is accurate, but until the thing is put into service, all they have is what they think they know about it. Every country in the world has laws to penalise people who sell false information, so this is obviously a global problem. Fraud is universal. But the important thing is that nobody buys goods. The only thing that changes hands is information, and this is true from buying candy at the grocery store up through buying houses and securities. We all know that the information we are buying is too good to be true, but we hope and trust that it will be within an order of magnitude of the truth about the stuff we bring home. The difference between the information we buy and the truth about what we receive is typical informational entropy, and it is analogous to the difference between the energy you put into a machine and the work you get out.

The reason rich people can get richer is because they can take advantage of information about the average difference between the promises sold and the goods delivered. People with money can find out what goods have the largest average mark up and set up roadblocks for people without money. People without money buy coke, people with money buy shares in Coca Cola. This isn’t fraud. Coke is the perfect blend of sugar, acid, bitterness and more sugar, with a hint of salt for electrolytes, so people willingly overpay. But only people with a lot of cash on hand can get in on the game. And here’s the other thing. If you managed to make a cola that was as good as coke, the Coca Cola company would buy you out. Or make sure your drink had no shelf space at the market. Or buy out all of your suppliers. That’s what it means to have real money. It’s what happened to Tucker cars and the countless software companies that didn’t become Microsoft.

The housing bubble is another good example, where prices went through the roof for no reason other than it could. Mortgage lenders knew there was a set of people looking to move house and the buyers had no way to know how much they were overpaying. They were buying the idea of home ownership, not walls and a roof.  It wasn’t terribly important to any of those people how much they paid for their new house or received for their old house. Given that mortgages were the only way people could access the money to make the transition, and the lenders were the only people who could evaluate the risk of depreciation, they could incrementally increase the gap between the promise and the true value of the homes until the mortgage clearinghouse was essentially a roadblock where a guy with a gun demands money for passage.

A road block where a toll is required for passage is a low-end model for fake work, but any monopoly can put a premium on access to things that people do spontaneously.  The entropy of the phenomenon shows how clever people can set up constraints and then charge people for their removal. This is the essence of rent, and the reason why money accumulates entropically instead of dispersing.

Multinational companies make nothing and dispose of nothing. They control the price and place of sales, while avoiding all actions that involve labour or waste. They are design, engineering and marketing companies that take rent by owning information. They exist in a surreal bubble of plans, invoices, advertisements, boxed goods and profit. The waste of manufacture is the burden of suppliers and the waste of final disposal is the burden of the local governments. The masters of industry live in the eternal sunshine of spotless information. It is not that they generate profit without waste, it is that the waste belongs to someone less fortunate. By externalising entropy the companies appear unbound by the laws of physics and economics.

There’s nothing unethical or immoral about this behaviour. It’s not even intentional. It’s what has always happened. Entropy isn’t evil, but it needs to be managed. That’s why we have progressive taxation, and why places without it are socially, culturally, and environmentally crippled.

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