When Alvin Roth got the Nobel prize in 2012, he did so mostly for the game-theory discipline of market design/match-making etc. Most of his research agenda has been how to use economic optimization for matching buyers and sellers—when you can't use money.
Usually, this is precisely what markets and prices and private property does: we match a buyer and a seller via the price system—consumer and producer surplus, subjective value etc. I can effortlessly use money prices to compare across producers; producers can perform economic calculation to figure out whether they're making profits or losses.
Sometimes, which is Roth's claim to fame, we can't use money: often because it's not appropriate (labor market, university admissions) but also because it's strictly illegal and frowned upon (exchange of organs, marriage).
He has this story in his book Who Gets What and Why about a toy econ model with no real-world purpose... until they discovered a purpose (i.e. organ donation chains).
Anyway, yesterday Matt Levine at Bloomberg talked about another "market" where you can't really use money: to vie a client.
But you can use steak!
obviously (#905191).
“I say “steak dinners” because steak dinners — and tickets to sporting events, and fancy conferences in nice locations — are the standard currency for this sort of thing, because the more obvious currency — money — is off limits.”
Apparently, First Trust (an ETF provider) had got in legal trouble for having its sales peeps basically bribing clients to put millions in their ETFs. Not bribing with money, but all manner of things: performance coaches, luxury goods, and steak dinners, among other things! And their bosses had pushed them to take more meetings, offer more perks.
Altogether relevant slippery boundary pushing:
What if the wine is really nice? What if you send the assistant treasurer home with some extra steaks for her family? What if you just ship a case of wine to her house? What if you take her to a sporting event and don’t discuss business? What if you send her and her friends to the sporting event without you?
…what if I give you an offer you can’t refuse?!
It is so hard to have a culture of compliance: If you catch your employees doing stuff that is arguably not allowed, in some ways it reflects a good compliance culture to send an all-hands email saying “you are doing stuff that is not allowed, here are specific examples, and if you do it again you’ll be fired.” That’s the message you are supposed to send! But if you put it in email that kind of looks bad.
Sometimes money—the most liquid/salaeable good— isn't the most liquid good, and so we gotta use it indirectly. Fantastic.
nonpaywalled here: https://newsletterhunt.com/emails/168508