CAPTCHA Arbitrage (opens in new tab)

I went to a speech by savage earlier this fall. The point that I took away from it is that what captchas do is filter out the bad guys who haven't figured out a business model.

On the klingon point: They theorized that the particular organization was a bunch of PHDs rather than farmed labor - and that it had learned from previous 'example answers' they had submitted. That particular organization, it was noted, was also an order of magnitude more expensive than the others.

"In an attempt to learn where the solvers live, Savage et al. sent out specially fabricated CAPTCHAs with images of words in various languages. [..] But one organization showed exceptional linguistic versatility, even solving challenges in Klingon."

This is a rather surprising finding.

    This last caveat leads to an interesting economic question. As noted above, retail prices for CAPTCHA-
    solving vary over a wide range, from about $1 per thousand to $20 per thousand. This price spread, and 
    the fact that it’s technically feasible to route a CAPTCHA through the system more than once, suggests a
    major arbitrage opportunity. We can set up a high-price CAPTCHA service and farm out all the actual work to
    low-price competitors. In a free economy—and what economy could be freer of regulation than a criminal
    one?—that situation is not supposed to endure.

Well, at least until they add CAPTCHAs.

"This last caveat leads to an interesting economic question. As noted above, retail prices for CAPTCHA-solving vary over a wide range, from about $1 per thousand to $20 per thousand. This price spread, and the fact that it’s technically feasible to route a CAPTCHA through the system more than once, suggests a major arbitrage opportunity. We can set up a high-price CAPTCHA service and farm out all the actual work to low-price competitors. In a free economy—and what economy could be freer of regulation than a criminal one?—that situation is not supposed to endure."

Finack's comment on the original post was worth noting here: Arbitrage has far more to do with information transparency than the free-ness of the economy, as such arbitrage is pretty common in criminal economies where prices aren't public information.