Lotto Economics

Deregulation and the demise of supply and demand.

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Not long ago, capitalism was a relatively straightforward affair. Sellers offered goods and services at a certain price. Whenever a buyer found that price acceptable, money in some form or other changed hands. That transaction represented an explicit contract — the seller was legally and ethically bound to provide the item or service to the buyer, as quickly as possible.

Naturally, some sellers tried to increase their profits through fraud; they sold things they didn’t have or services they had no intention of providing. When I was working on Wall Street during the 80s, a guy in my office financed a double life (mistress, second home, the works) by billing his clients for stocks he never bothered to buy. I’d love to say that his arrest was dramatic, that guns and hostages were involved, but it wasn’t. A few drab little men from the Securities and Exchange Commission took him away; he sobbed quietly and that was it.

“Idiot,” my boss mumbled as he dialed his next client. The rest of us grunted assent.

As it turns out, my former colleague was ahead of his time.

Twenty years into Reagan’s post-regulatory world, lotto economics is in many ways replacing supply-and-demand. Money no longer buys goods or services — it buys the chance to maybe possibly get a good or service.

The airlines were early pioneers of lotto economics. Until fairly recently an airline ticket was a guarantee of a seat on a flight. It might leave late, but when it did you had a seat on that plane. Some people, however, don’t make it to the airport on time. In order to keep from flying with empty seats, airlines have come up with a completely absurd remedy: They sell more tickets than they have seats on a flight.

Theoretically, they use statistical regression analysis to analyze tens of thousands of manifests to determine the average number of seats that would normally go to waste on any given flight. In reality, would-be passengers regularly find their seats have been sold to someone else. Planes sit at the gates while airline personnel try to bribe people to get the hell off.

Hotel and car reservations, which used to guarantee the key to a specific room or a car upon arrival at the registration counter, have become a similarly dicey matter. All the credit-card numbers and confirming phone calls in the world won’t protect you from losing your room or your car to someone who flew in at a moment’s notice. Many tony restaurants take reservations, but only as a quaint ritual — often, patrons wait the same amount of time for their table whether or not they have reservations.

The high-tech sector is especially notable for its advances in the field of lotto economics. I pay $89 each month for cell phone service through AT&T; roughly half of my calls go through. No one ever gets through to my voicemail — it simply doesn’t work. My wife subscribes to VoiceStream Wireless, a Washington-based company; she gets a regular “all circuits are busy” unless it’s the middle of the night. According to a wholly unscientific survey of friends, all cellular providers suck. Like the airlines, they’ve wildly oversold a service with a finite capacity. Fast busies, recorded errors, and dropped calls are the standard cell phone experience.

The Internet is the highest achievement of the post-supply-and-demand age. You pay $20 for the service every month, but you never know if you’ll get a busy signal, or whether your shared T1 is being jammed by the home-run porn site downstairs, or whether the servers at the ISP crashed and are being repaired until who-knows-when. Once online, you can get booted any second. Let’s say you successfully engage in some e-commerce; just because a company says a book will “usually ship out in 2-3 days” doesn’t mean you’ll necessarily see the sucker before it goes out of print. Taking a cue from bricks-and-mortar corporations, “just-in-time inventory” means no inventory at all. You put down your credit card and you take your chances; sometimes merchandise shows up and sometimes it doesn’t. Such is the Darwinian world of postmodern mercantilism.

Now that businesses have learned that consumers will accept the possibility of not getting stuff — even though they’ve paid for it — it’s only a matter of time before the next stage of economic evolution: You’ll pay with absolutely no chance of receiving anything in return. Of course, many people will find this depressing, but to whom will they complain? After all, the entity now pioneering all-pay-no-service economics is the one that used to handle such things: the government.

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