[anonym29]

Can you codify the difference? I seem to be fundamentally misunderstanding the difference between wealth creation and wealth extraction if voluntary market activity constitutes extraction.

I'd definitionally describe all voluntary transactions free of coercion to imply the buyer values the utility of what they're buying (i.e. true wealth - piles of currency are not true wealth, they're what you exchange for true wealth) more than the currency they're trading for it, no?

Involuntary transactions featuring coercion on the other hand, like the government demanding you pay taxes under threat of imprisonment (enforced at gunpoint, if necessary) are clearly extractive, by my definition.

[LeroyRaz]

Money Extraction: fighting over a slice of pie.

Wealth Creation: creating new pie.

In practice, a lot of things that look extractive (e.g., designing better high frequency trading algorithms) potentially have some marginal utility (e.g., creating market liquidity), but the money high performing people make is likely larger than the utility they add to the system (because most of the money in having the best high frequency trading algorithm comes from beating other people's high frequency trading algorithms).

[foobar10000]

While there's many definitions, I'd concentrate on zero-sum vs non-zero-sum games. Lots of games in trading are effectively zero-sum games - if I make 100USD, you lose 100USD (there's details about transaction costs going to exchanges that make this more nuanced, but the principle applies). A chunk of financial engineering games are not : for example risk pooling games. A big part of finance for example is liquidity provisioning games - which kindof boil down to risk pooling games in the limit. But unfortunately - a _very_ big chunk of the financial markets is zero-sum.

Even in a purely digital world - most of the economy is not zero sum - i.e., it _creates_ wealth. I pay you 100USD for 1 million LLM tokens - a purely digital transaction - the net result of this is the 1 million tokes that I can consume and use - net of the transaction.

[YZF]

Financial markets are not zero sum. Wealth is created or destroyed in financial markets despite each trade having a buyer and a seller.

[foobar10000]

I mean - of course the entirety of financial markets are not zero sum - it would indeed be almost lunacy to claim that :) My point is that there's a big part of the financial markets that _are_ zero-sum - not that all financial markets are. One can argue about EMH and that the zero-sum games are in fact injecting information into the market by providing better price discovery, and that is indeed an argument - but one is left with the intellectually unsatisfying statement of "Well, anything the market does is information extraction, and the market is an information extraction machine, so prima facie, it works" - which is basically restating the EMH axiom.

For example, the added value provided by sub-millisecond arbitrage between NY and Chicago - while making the prices converge a fraction of a millisecond faster, makes the overall set of people playing that game in excess of 1B USD in aggregate. I'd argue that such a ratio of profit vs value-added gain is very bad, bordering on 0 - thus making that effectively a zero-sum game.

[YZF]

Price discovery and liquidity. But yeah, I agree sub-millisecond arbitrage maybe less so.

[philosopher1234]

Sorry but this is a shit definition.

You’ve defined scamming people, a totally voluntary error, as creative not extractive.

You’ve also defined building roads as extractive not creative.

I think you’re latching onto some very misguided principles.

[anonym29]

Building toll roads is creation of value. People voluntarily pay to drive on them because they offer superior qualities to garbage public roads. If I could exclusively drive on toll roads, I would.

Public roads, OTOH, are extractive because someone is taking money from you to build them even if you don't consent to it and deliberately avoid them at every opportunity.