The cod-Marxism of personalized pricing
Picks and Shovels is a new, standalone technothriller starring Marty Hench, my two-fisted, hard-fighting, tech-scam-busting forensic accountant. You can pre-order it on my latest Kickstarter, which features a brilliant audiobook read by Wil Wheaton.
The social function of the economics profession is to explain, over and over again, that your boss is actually right and that you don't really want the things you want, and you're secretly happy to be abused by the system. If that wasn't true, why would your "choose" commercial surveillance, abusive workplaces and other depredations?
In other words, economics is the "look what you made me do" stick that capitalism uses to beat us with. We wouldn't spy on you, rip you off or steal your wages if you didn't choose to use the internet, shop with monopolists, or work for a shitty giant company. The technical name for this ideology is "public choice theory":
Of all the terrible things that economists say we all secretly love, one of the worst is "price discrimination." This is the idea that different customers get charged different amounts based on the merchant's estimation of their ability to pay. Economists insist that this is "efficient" and makes us all better off. After all, the marginal cost of filling the last empty seat on the plane is negligible, so why not sell that seat for peanuts to a flier who doesn't mind the uncertainty of knowing whether they'll get a seat at all? That way, the airline gets extra profits, and they split those profits with their customers by lowering prices for everyone. What's not to like?
Plenty, as it turns out. With only four giant airlines who've carved up the country so they rarely compete on most routes, why would an airline use their extra profits to lower prices, rather than, say, increasing their dividends and executive bonuses?
For decades, the airline industry was the standard-bearer for price discrimination. It was basically impossible to know how much a plane ticket would cost before booking it. But even so, airlines were stuck with comparatively crude heuristics to adjust their prices, like raising the price of a ticket that didn't include a Saturday stay, on the assumption that this was a business flyer whose employer was footing the bill:
With digitization and mass commercial surveillance, we've gone from pricing based on context (e.g. are you buying your ticket well in advance, or at the last minute?) to pricing based on spying. Digital back-ends allow vendors to ingest massive troves of commercial surveillance data from the unregulated data-broker industry to calculate how desperate you are, and how much money you have. Then, digital front-ends – like websites and apps – allow vendors to adjust prices in realtime based on that data, repricing goods for every buyer.
As digital front-ends move into the real world (say, with digital e-ink shelf-tags in grocery stores), vendors can use surveillance data to reprice goods for ever-larger groups of customers and types of merchandise. Grocers with e-ink shelf tags reprice their goods thousands of times, every day:
