Basically much of modern economics, and life, has the following characteristics:
- Everything is intermediated through some depersonalized automated electronic exchange.
- The automated electronic exchange has a mechanism — how it actually works, what the exchange’s software allows you to do — and also rules, the terms of service regulating how you can use the mechanism, which are fuzzier than the mechanism and written in small print, things like “don’t do fraud” or “you have to be a human” or whatever.
- The mechanism is much more legible and salient than the rules, and in a depersonalized electronic world people treat the mechanism as the rules: They don’t believe that the rules exist, because the rules seem to contradict how the service works. The basic description of Spotify’s mechanics suggests Smith’s alleged arbitrage; if he didn’t do it surely someone else would.
Everything is like this. We talked last week about the “infinite free money Chase ATM glitch,” in which people on TikTok discovered that if they wrote themselves a fake check and deposited it in an ATM and then withdrew the money, they’d have “free money.” Everyone used to know that (1) one way to get free money was to write a fake check and trick someone into cashing it but (2) that was obviously a crime. But now you don’t have to trick anyone into cashing the check: You just go to a machine and put the check into the machine, and if the machine gives you back money then surely that’s just how the machine is supposed to work?