1: It sounds like in order to buy something, you have to enter the store with money in your pocket. But once you’re in the store you won’t be visible from the street, so couldn’t the storekeeper rob you and take all your money?

The storekeeper is more familiar with the terrain and might eg have a gun in the store, so probably they could successfully rob most customers. But the victims could report this to the police, the same as any other robbery. Also, a storekeeper who got a reputation for doing this would have customers stop entering their store. Over the long run it would be more profitable for them just to sell things normally.

2: If a storekeeper sells you something for $1, that means they expect to make a profit selling it to you at that price. Doesn’t that mean that you shouldn’t buy it, since it must be worth less than that?

Different items can have different amounts of value to different people. Even if a storekeeper can make a profit selling an item for $1, that doesn’t mean it can’t provide more than $1 in value to you. For example, you can make a profit selling antibiotics for $100, but if you have an infection, an antibiotic could save your life, which you value very highly.

3: Most of the items in stores are in boxes. Couldn’t the storekeeper just sell you an empty box (or a box containing only sandbags or some other weighty objects), then accuse you of having made it up if you complained later?

See the answer to (1). If a storekeeper did this regularly, they could go to jail. Also, they would get a reputation as a bad storekeeper and lose repeat customers.

4: It sounds like stores avoid shoplifting by checking for receipts. But receipts are just pieces of paper with writing on them. Couldn’t unscrupulous customers fake a receipt pretty easily?

It wouldn’t be too easy; you would need a special receipt printer and receipt ink, as well as knowing the exact way a store structured their receipt and used product codes. A very motivated person or gang could probably manage it, but at this point they would be such a big operation that the police might notice for other reasons. Even if some people got away with faking receipts, I think the overall utility of buying things from stores is big enough that the system is valuable even despite this potential exploit.

5: What if a bad store used really good advertising to attract customers, and then other customers saw it was the store that all the other customers were going to, assumed it must be good, and went there themselves, forming a self-perpetuating cycle where everyone goes to a worse store and the system never self-corrects?

This is possible in theory, but customers use many cues besides popularity before deciding what store to go to, and probably if the store was really bad these other cues would overwhelm the advantage of popularity. Even if popularity feedback cycles did make some worse stores more popular than better ones, I think the overall utility of buying things from stores is big enough that the system is valuable even despite mistakes like these.

6: Aren’t storekeepers incentivized to murder competing storekeepers, or to burn down their stores?

For a very technical definition of the word “incentivized”, yes, but as in (1) and (3), there are many counterbalancing forces, like fear of the law, reputation, and most people’s repulsion at unethical behavior. Overall I would expect this to be very rare - definitely not common enough to overwhelm all the positive benefits that buying things from stores could bring.

7: It seems like stores can only sell items that already exist, not create new items.

Yes, this is definitely a true fact about stores. It would take other kinds of institutions, like laboratories and factories, to create new items. Still, selling items that already exist is an important role, and stores would fulfill it well.

8: Wouldn’t the existence of stores inherently favor rich people? After all, they would have more money which they could use to buy things from the stores.

Stores would indeed be interested in attracting rich people, since they have more money. But other stores could cater to poor people. Overall rich people will have advantages over poor people across a wide variety of economic institutions, and it’s not clear that stores make this any worse than it was already. The main effect of stores would be to improve the lives of both rich people and poor people by giving them access to places where they can buy things.

9: Stores don’t seem to do anything better than stalls at a bazaar. Isn’t “buying things at stores” just re-inventing the wheel?

Bazaars are great, and I think of them as relatively similar to stores. Partly this FAQ is promoting all vending locations, including bazaar stalls. Still, I think that stores do have some advantages. They’re bigger, protected from the weather, easy to find, and they operate most of the week instead of just on market day. Successful stores can do things like open franchises in other areas and become nationwide chains. Overall I think both bazaar stalls and stores are useful, and the market can decide which are better suited for which locations.

10: I hate humor and demand that all jokes be explained in detail, what’s this about?

While writing the Prediction Market FAQ, I tried to respond to each common objection individually. But I felt like something was missing from this approach. See also this article on people’s fears about / objections to self-service gas stations.

I’m having trouble explaining what I mean here. It can’t quite be “don’t nitpick so much”, because many proposed institutions are actually bad ideas, and the reasons why sound like nitpicks to true believers. But as a first stab guess at some heuristics:

  • If you’re wondering why people aren’t going to get an advantage in the economy by committing horrible crimes, the answer is probably the same combination of laws, ethics, and reputational concerns that works everywhere else. It’s possible to create systems where these safeguards fail, but you have to try pretty hard.

  • If something would only work if it had regulation and a legal infrastructure, assume it will develop that regulation and legal infrastructure once it gets big enough and people are sufficiently sad about it not having it (people could resist, but that would suggest it’s not so obvious to stakeholders that it needs the infrastructure in order to succeed)

  • If you can think of some weird edge case where the institution won’t work, probably the institution just won’t operate in that weird edge case.

  • If you can think of some minor flaw in the institution, maybe that minor flaw is real, but unless there’s some reason it should scale up to destroy the rest of the institution, maybe the institution will just accept a small loss and continue going despite the minor flaw.

But there’s an even deeper heuristic, something like “try it and see!” Don’t do this with communism, unfriendly AI, or anything else with catastrophic failure modes that people can’t opt out of. But I look at Polymarket and see that it seems to run pretty well despite a dozen theoretical objections, and this makes me trust theory less. We should still debate the theoretical questions, if only for the mental tranquility of feeling like we understand what’s going on. But overall I expect these kinds of objections to be overcome by creating the thing, subjecting it to market pressure, and seeing what solutions people come up with.