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This is what Voskuil wrote:
There is a theory that selling units from one side of a split coin for units of the other reduces the relative utility of the sold coin. However each sale requires a buyer. As a trade the action is symmetrical and therefore the theory is invalid.
It seems like he may be responding to an argument that was incorrect in the first place.
He's correct in saying that selling units from one side of a coin split does not change anyone's utility.
However, in order to sell more of a coin, you need to start selling it to people who gradually value it less and less. Thus, you are selling to lower marginal utility buyers when you sell more.
Simple example. Suppose Alice sells 1 BTC_A to Bob for 1 BTC_B. They both agree, and they both valued the coins at least at a 1:1 exchange ratio.
But suppose now Alice wants to sell another BTC_A. Let's say Bob is done buying BTC_A. Alice now has to go to Carol. But Carol doesn't accept a 1:1 exchange rate. Carol has a preference for BTC_B, and is only willing to buy BTC_A if Alice can give 2 BTC_A for 1 BTC_B. Suppose Alice is still willing to agree. The sale happens. The last traded exchange rate is 2 BTC_A for 1 BTC_B. Thus, the last traded price for BTC_A has gone down.
Which way the exchange rate moves depends on what the change is that drove the action in the market. If it's an increased demand for B (equivalently, increased supply of A), then the price of B (A) goes up (down). If it's an increased demand for A (equivalently, increased supply of B), then the price of A (B) goes up (down).
In the Alice example above, the changes were driven by Alice's increased demand for B.
The last few parts in the post about state subsidies and state-level dumping IMO are not relevant because I don't think we are using the word "dumping" to refer to state level action.
Why don’t sales change utilities?
Why are people making transactions then?
Utility drives action, not the other way around.
I suppose one could imagine a world in which the sale itself affects market participants' expectations or utility over an asset. But I think the burden of proof would be on the person who wants to argue from that point of view.
A simpler reason for transactions is that peoples' beliefs/utilities change, which cause demand/supply changes that then drive marketplace transactions.
I think you’re saying the utility function doesn’t change, which is probably false but also unknowable and not what I was reacting to.
I thought you were saying the participants’ utility levels are unaffected by the sale, which would be odd.
Seems like a "quantity demanded increases" vs. "demand curve increases" kind of linguistic ambiguity we're running into. Everyone gets tripped up over this!
Utility function doesn't change (necessarily). Utility levels change. Marginal utility changes due to being on a different point on the curve.
Do you normally refer to the function as “utility” instead of the level?
Not sure. Never really thought about that.
I think I was reacting to Voskuil's use of the language, and specifically "reduces the relative utility of the sold coin." The language there seems ambiguous, and in my mind I was interpreting him as referring to the utility function of either party not changing.
It’ll take a bit of work to gather my thoughts.
Your post did bring up the crucial point that we don’t really know which side is dumping, a priori. That doesn’t imply that one side isn’t dumping, though.
I've spent a lot of time thinking on this over the last year and I did always want to write one last post about it. Perhaps I'll save it for responses to your assessment though.
(I have truly enjoyed the discussions we've had on here re supply and demand, so thank you for the thought you've put into them)
It’s been great. My preference would actually be for you to put more of your thoughts forward first.
Then I can attempt to put a bow on it and you can untie that bow with your responses.
Given that you've had very well-reasoned responses for the duration, and that my side of the argument is the weird, backwards side, I believe you have had the better showing in the debate.
What is your opinion then of Voskuil's Dumping Fallacy? Is he wrong, using terms differently, or is there a third option?