Open Response To Nicholas Decker Regarding Non-linear Pricing
When I tried to explain on X, I was giving "crackpot", so I'll try long-form
Your reaction to the Bornstein and Peter paper captures something profound—that moment when established mental models crack open to reveal deeper patterns. What if I told you that the "shaking up" you experienced wasn't just about economics, but about glimpsing how memetic value creation actually works beneath the surface of market transactions?
The Hidden Memetic Architecture of Markets
When you write about firms using product quality to "smoke out" consumer tastes, you're describing something far more fundamental than pricing strategy. You're witnessing memetic filtering in action—communities (in this case, market segments) using quality differentiation as a mechanism to sort ideas, products, and ultimately, human connections.
Traditional economics sees this through the lens of utility maximization and deadweight loss. But memetic economics reveals what's really happening: markets are sophisticated recognition systems where value emerges not from the products themselves, but from the match between offerings and the communities that can recognize their worth.
Why Variety Proliferation Makes Memetic Sense
Your surprise at the welfare-reducing effects of variety proliferation under nonlinear pricing becomes clarity through the memetic lens. Here's why:
1. Variety as Memetic Noise
When monopolists create excessive product varieties to extract consumer surplus, they're not creating genuine memetic value—they're generating noise. Each unnecessary variant represents:
Cognitive load without corresponding recognition value
Artificial complexity that obscures rather than reveals genuine contribution
Fragmentation of communities that could otherwise cohere around meaningful distinctions
The 2% welfare reduction isn't just about misallocation—it's about the cognitive cost of navigating artificial distinctions that serve extraction rather than genuine value creation.
2. The Recognition Gap at Scale
You noted that Mussa-Rosen predicts no distortion at the top but considerable distortion at the bottom. Through the memetic lens, this reveals a fundamental truth about recognition systems:
High-willingness-to-pay consumers (often wealthy) exist in dense recognition networks where their preferences are well-understood and catered to
Low-willingness-to-pay consumers exist in recognition deserts where their genuine needs remain unseen by the market's filtering mechanisms
The distortion isn't just about price—it's about whose memetic contributions the market recognizes as valuable.
Jaravel's Findings Through the Memetic Framework
Your initial intuition about Jaravel—that it might overestimate inequality—transforms when viewed memetically. The proliferation of products for the wealthy isn't necessarily creating meaningful variety. Instead, it represents:
Hypercompetitive Memetic Homogenization
As you astutely connected, rising market power creates what memetic economics calls "hypercompetitive homogenization":
Apparent variety masks fundamental similarity
Products optimize for the same wealthy recognition networks
True innovation (memetic value creation) gets replaced by positioning games
This explains your insight about "meaningless variety for the lower classes"—these aren't genuine attempts to recognize and serve diverse needs, but extractive positioning within a distorted recognition system.
The Complexity Management Failure
Your observation about firms using nonlinear pricing to "smoke out" preferences reveals a critical failure in what memetic economics calls "atomic complexity management." Instead of:
Creating clear, comprehensible value propositions that communities can evaluate
Maintaining transparent boundaries between genuine product differences
Enabling efficient recognition and matching
Markets have evolved toward:
Deliberate obfuscation through overwhelming variety
Artificial complexity that serves extraction rather than matching
Cognitive overload that impairs genuine value recognition
Why This Shook Your Understanding
The paper disturbed your mental models because it revealed the gap between how we think markets work (efficient matching of products to preferences) and how they actually function (extraction through complexity and recognition failure).
Through the memetic lens, this isn't surprising. When economic systems optimize for extraction rather than recognition, they naturally evolve these distortions:
Recognition systems get captured by those already recognized (the wealthy)
Filtering mechanisms distort to serve extraction rather than genuine matching
Cognitive resources get wasted on navigating artificial rather than meaningful distinctions
The Path Forward: Memetic Market Design
Your conclusion—that you now have "less confidence that I understand precisely how the world works"—is exactly right. But this uncertainty opens space for better understanding. Memetic economics suggests that markets could be redesigned to:
1. Optimize for Recognition Rather Than Extraction
Products designed to clearly signal their genuine value propositions
Variety that serves real community needs rather than price discrimination
Transparent quality distinctions that reduce rather than increase cognitive load
2. Create Multi-Level Recognition Markets
Different communities with different values having their own recognition systems
Cross-community bridges that allow value to flow between recognition networks
Prevention of recognition capture by already-recognized groups
3. Measure True Memetic Value
Beyond consumer surplus to community flourishing
Accounting for cognitive costs of artificial complexity
Recognizing the value of simplicity and clarity
Your Role in This Recognition
Your response to this paper—the careful analysis, the connection-making, the honest acknowledgment of shifted understanding—represents exactly the kind of memetic value creation that current markets fail to recognize. You're:
Translating complex economic theory into accessible insight
Synthesizing across papers to reveal deeper patterns
Creating bridges between academic economics and practical understanding
This is memetic value creation in action—taking ideas, filtering them through your unique perspective, and generating new insights that help others navigate complexity.
The Bottom Line
The Bornstein and Peter paper shook your mental models because it revealed a fundamental truth: markets as currently structured are failing at their most basic function—not allocation of scarce resources, but recognition of abundant human value.
When firms use product variety for extraction rather than genuine service, when innovation serves positioning rather than real needs, when complexity obscures rather than clarifies—we're witnessing the failure of markets as recognition systems.
But understanding this failure through the memetic lens points toward solutions. Markets that recognize memetic value creation, that manage complexity transparently, that serve communities rather than extract from them—these aren't just theoretical possibilities but practical necessities for human flourishing.
Your intellectual journey with this paper exemplifies why we need memetic economics: to understand not just how resources flow, but how recognition shapes everything from product variety to human potential.
Keep questioning, keep synthesizing, keep creating memetic value. The world needs more minds willing to let their models be shaken.
P.S. - The fact that you found this paper "extremely impressive" and that it "considerably shook up what I know about the world" suggests you're exactly the kind of thinker who should be recognized and supported by economic systems—yet current markets have no mechanism to value this kind of intellectual contribution. That's the recognition gap memetic economics aims to bridge.
For more on memetic economics, check out my paper here.