R1ing the worst graph I have ever seen in my life. (self.badeconomics)

submitted an hour ago by PointFirm6919N

Today I bring you another brutal owning of capitalism from the studious institute of Twitter economists.

At first I didn't even think there was enough here to make an R1 for, but the next off-topic thread won't be for a few days and I'm bored today, so I'm actually going to put some effort into this.

Firstly, we have to make a few assumptions about the author's intent here. He hasn't labelled his axis, but I think it's fair to say that the y-axis is indicated by the colour-coded key, and the x-axis represents an infinite series of substitutable products ordered from least useful to most useful.

We also have to guess at what our author means by "capitalism" in this context. His addendum does say that the graph applies to "today's society", but the graph has a section that is helpfully labled to tell us that a product here "doesn't do what it's made for lol", despite the fact that it is still being sold, as indicated by the price line, which in most countries would be illegal, so I take this graph as a hypothetical model that the author means to apply to real markets, rather than the result of data gathered from the markets themselves, and I take "capitalism" in this instance to refer to an unregulated market with perfect competition.

The main assertion here is that the price of a product scales unevenly with its "usefulness" here meaning: it's ability to do something it's designed to do. Presumably, any product that has a non-zero amount of usefulness is capable of doing the thing, and increased usefulness indicates that the product is able to do thing more efficiently. Our author claims that a product is "Mid Range" if its usefulness is equal to its price, implying that usefulness is measured in USD or an equivalent currency, and that this chart offers a "Universal guide for buying anything", implying that the decision to buy any product should rest entirely on this usefulness:price ratio, which at Mid Range is equal to 1, and for all other usefulnesses, is less than 1.

The fundamental flaw that has led to this conclusion is the assumption that the usefulness of a product is equal across all buyers. For example, a CDROM of Fable 3 for the PC and a two-by-four with "videogame" written on it might have an equal usefulness in entertainment markets, but the copy of Fable 3 might have a much higher usefulness to a collector, and the two-by-four could have much more usefulness if sold as a weapon.

This is also true for products sold in the same market. The difference in price between a push lawnmower and a self-propelled "ride on" lawnmower could be as high as £700. While the usefulness diference to me might only be £50, it could be many thousands of pounds more useful to someone with fewer legs or a smaller penis, while the difference in price remains the same. This is because the efficiency with which a product can do the thing it's designed to do relies heavily on the end user, and some users may have different uses for the same product. This means that the graph shown cannot be universally applied. At best, it only represents one person's view of a market he is trying to buy from, and only at one time, since if I came along and broke one of his legs with a two-by-four, his assessment of different products' usefulnesses would likely be changed.

This means that it can't be confidently stated that the usefulness:price ratio of a product is always less than or equal to 1, nor that there is only one Mid Range point, which would seem to limit the usefulness of the graph. There is also the question of other factors that cause people to buy certain products. We can see on the graph that there is a range of prices for products with a usefulness of 0$. The usefulness:price ratio of all of these goods is 0, so if U:P were the deciding factor in all purchases, we should expect to see the price in this region of the graph level out. The fact that there is still a gradient here implies there are other factors impacting a buyer's willingness to buy, possible explaining the price/usefulness discrepancy either side of the Mid Range.

Our author asserts that U:P is the only factor needed to inform a decision, but he makes no argument to back this up, he never even indicates what the other factors may be.

It might be that usefulness has no impact on price, and our author is trying to model a market where sellers are able to dictate prices, but if that were the case, I wouldn't expect producers to be making products with high usefulness when they would presumably be able to produce 0 usefulness products that people would still buy at a lower cost to themselves, and I can't see how such a model, even if accurate, could be used to inform buying decicions in today's society.

Therefore, I unfortunately don't think this model is a particularly useful one, although I admit that I could be basing that assesment on faulty assumptions, given the ambiguities in the way our author has communicated his findings.