A game theorist breaks down the effects of inequality
nautil.us
nautil.us
It sounds like you want to cooperate just enough to avoid violence but as little as possible to maximize your wealth. Seems pretty on par with history.
so, basically the stuff taleb has been touting for years.
It also ignores that redistribution results in less "private good" (GDP) for everyone, because by definition it's taking wealth from people who on average have demonstrated more ability to grow wealth and giving it to people who have demonstrated less ability to grow wealth. Imagine two otherwise identical people, one who's capable of generating 5% returns on his wealth and the other who's capable of generating 2% returns. If they both start with the same endowment, after 100 years the total amount of wealth they've generated will be much greater if they're allowed to keep their own wealth than if the 5% guy's is continuously redistributed to the 2% guy (because every dollar redistributed will earn only 2% return instead of 5%, meaning it's been used to produce less value for society).
More practical example: imagine if after Paypal, Elon Musk's entire wealth had been redistributed to all Americans. Assume generously he had 50 billion (pretty sure he had less than that). 50 billion / 300 million is around $166 per person. So now every person in America is $166 richer, and the world has no Tesla or SpaceX.
How is that a fundamental insight of economics. It's the insight of the smallest group all the way to cities and civilization. Self interest, by definition, motivates cooperation.
> From this traditional perspective the "common good" is a result of insufficient property rights: if everything is owned by something, then by everyone looking after their private good, everything will be looked after (because all "common good" is somebody's "private good").
What you are describing isn't "insufficient property rights", you are describing "insufficient property".
> It also ignores that redistribution results in less "private good" (GDP) for everyone, because by definition it's taking wealth from people who on average have demonstrated more ability to grow wealth and giving it to people who have demonstrated less ability to grow wealth.
Wealth is always "stolen". Behind every great wealth is a great crime. Wealth is generate by theft of assets ( land, oil, resources ) or theft of labor. Bill Gates didn't generate his wealth. His workers generated the wealth, he and the shareholders just siphoned the largest part of it. Look at the fundamental wealth of the US - the land and resources that provides unimaginable amount of wealth. All stolen from the natives.
Wealth = clever robbing the less clever with the protection of the law which they created. And it isn't necessarily a bad thing.
> If they both start with the same endowment
What an ideal world you must live in.
> More practical example: imagine if after Paypal, Elon Musk's entire wealth had been redistributed to all Americans.
Who is even advocating for taking all of anyone's wealth?
> and the world has no Tesla or SpaceX.
Why not? Using your argument, PayPal couldn't exist since Musk didn't have that PayPal money to fund his business.
You have an agenda and you are using obvious extremes and lies to push your agenda. The other side does the same. Instead of being driven by agenda, try to think objectively. Look at the problem from afar.
Extremes in either direction is bad for the individual and society.
You're making misleading use of language so it's hard to believe you're arguing sincerely. Offering someone compensation for doing something for you is not what most people would consider "theft". You can't just take a word meaning one thing, change its meaning, then assume all the judgements about the old meaning also apply to the new meaning.
Misleading? I thought I was being straightforward and honest, hence "stolen".
> Offering someone compensation for doing something for you is not what most people would consider "theft".
It all depends on perspective. Hence "stolen". If you were "compensating" someone "$0.10" for something worth "$1000", a lot of people would consider it "theft".
> You can't just take a word meaning one thing, change its meaning, then assume all the judgements about the old meaning also apply to the new meaning.
But that's not what I did. The reason why I wrote "stolen" is that this is complex issue that isn't black or white. The only people who think so are agenda driven opportunists. Slaves were compensated with housing and food, I'd consider it "theft".
As I said, you have an agenda and your agenda drives you thinking. Not rationality. That's the problem. As I recommended before: "Look at the problem from afar."
> You have an agenda and you are using obvious extremes and lies to push your agenda. The other side does the same. Instead of being driven by agenda, try to think objectively. Look at the problem from afar.
Pick one.
No, my last boss started with absolutely nothing after escaping the genocides in Cambodia with his family and built his company and wealth through work.
>Bill Gates didn't generate his wealth. His workers generated the wealth, he and the shareholders just siphoned the largest part of it.
I struggle back and forth with my views on this. You're not wrong, but it ignores the fact that without the capital provided by the company, there'd be no workers to generate wealth. As sad as it is, a group of independent workers isn't going to generate as much wealth as an organized company.
I though about this a lot as I worked. In a couple hours of work, I would bring in anywhere from $10,000-$20,000 for the company. My wage was far lower. But in the end, it would be impossible for me to do this without the couple million dollars worth of machines and computers I used. I could run my own shop, but I'd need customers, I would be doing a significantly lower volume of jobs and would be probably lucky to bring that much in after a few months. My expenses would be lower, I'd have to do everything by hand, but my ability generate wealth would be almost non-existent for years and years.
So you're taking a high (100s-1000s) dimensional problem and projecting it onto a 2-10 dimensional space where your conclusions are based on a form of clustering which itself is purely dependent upon your (probably ideologically driven) assumptions. In such drastic oversimplifications it is extremely east to paint whatever picture you want, even unintentionally.
>So if it’s the case that only the two of us are playing and you get 99 percent of the initial endowment, then we will never get cooperation started. Simply because of the fact that you already have 99 percent of the wealth, right? You have zero incentive to cooperate with me, because there is very little you could gain from me
Case in point. Those evil fat cats simply hoard stolen money and don't interact with greater society in any other way, right? Nevermind driving social policy, producing jobs, and building indirect relationships where large and small actors do benefit from cooperation. Those evil tech CEOs wouldn't have any cash if there wasn't incentive for the poor exploited proletariat to spend their money on goods and services, and offer their time to provide the same.
This study also ignores that competent individuals can be highly socially mobile in modern Western societies, even from vastly unequal starting conditions. It further ignores that most of us aren't competing with the 1%. The pitting of one 99%er against one 1%er is totally removed from reality.
I don't understand how anyone can take modern economics seriously.
It's possible there are only a few main dimensions which matter for showing the majority of the benefit, with the error being negligible. For example, in computer graphics, to solve the rendering equation you're sampling an infinite dimensional space (all paths a photon might take), but you can do it with one dimension (direct bounces from light->surface->camera + deterministic shadow) and the error is almost negligible depending on the application, because most photons get absorbed after the first bounce.
> Case in point. Those evil fat cats simply hoard stolen money and don't interact with greater society in any other way, right? Nevermind driving social policy, producing jobs, and building indirect relationships where large and small actors do benefit from cooperation. Those evil tech CEOs wouldn't have any cash if there wasn't incentive for the poor exploited proletariat to spend their money on goods and services, and offer their time to provide the same.
Perhaps these effects are negligible? If you consider the worst case with one person hoarding all the money, it certainly would be unless he distributed it equally through the means you mention.
I'm not disagreeing with you however, you could be right. It's hard to tell without a large number of empirical studies to be done. The gain from such a change could be worth it, or the effects might be negligible.
The trouble is that the the very nature of the subjects of soft sciences is such that it isn't possible (or at least practical) to perform any kind of rigorous principle component or sensitivity analysis. The result is that dimensional reduction intrinsic to the vast majority of studies in economics, psychology, and the like is built purely on institutional bias, subject to fads and dogma. People essentially build careers around how effectively they can peddle their particular flavor of bullshit - this isn't physics or chemistry or engineering where there is a minimally ambiguous answer. We don't have the tooling (or arguably the right institutional culture) to study soft sciences with rigor and that's dangerous because the academic establishment influences social and political policy with comparatively little self awareness of it's vulnerability to bias.
In fact, I'd argue there are obvious reasons to be skeptical of this particular reduction. In the game, fantastically rich people never contributed to the public pot; in real life, most fantastically rich people toss piles of money at public goods like hospitals, schools, and charities.
It's easy to make an argument that this is negligible, and far more experienced people can make this argument quite well. The money should trickle down, but I think it might help if we had more wealth to trickle down in the first place.
Many contribute to charities do this to avoid taxes, I've had first-hand experience with this type of "charity". The people who actually want to help tend to want to pay taxes, in my experience.
So who is really donating to the charity ultimately?
I'm not saying these benevolent people don't exist, it's just that if you distributed all of Bezos's wealth to each person individually it would only be ~1000 per person once or less, a meager stimulus package. How is that wealth going to trickle down fast enough to have any meaningful effect? Money tends to accumulate towards those who value it the most, but perhaps more wealth could be accumulated if more of it could flow through the system without being trapped only in the wealthy hands.
It could be a win-win, or a win-lose, but it's not a lose for the rich at all if they can now select from a much larger workforce--charity money rarely reaches those that need it most. Just like how many homeless on the street aren't in a desperate situation, and those that are probably can't monopolize those good street corners.
Ultimately there's a feedback loop between supply and demand--any incentive to increase either helps the majority.
So if you can refute my argument, you can easily say that this criticism of this game theorist's analysis is valid, but as I said, my experience does not lie in this field at all, so you probably won't find any difficulty in doing so. It's just pretty obvious to me given my mathematical background that this criticism is meaningless without an understanding of the reasoning behind how the dimensionality was reduced. My point is just that such arguments are easy to make and probably easy to prove as well.
In any case, it leaves room for increasingly complex models to disagree with the results of this one.
> We can't accept any model we're presented with just because it's possible that it's correct.
I agree with this completely, but it doesn't refute this particular reduction of complexity either, which is the point of my post. I may have been too verbose.
Even if the factors that you are describing are important to the overall outcome, it may still be useful to explore a model with those factors removed.
And then there's the question of what they give to. Hospitals, schools and charities are great, but what about less glamorous targets like public works maintenance, which often is the first thing to be cut when government coffers run dry?
How can I get competent if I am poor? It is possible but I need some luck and a lot more work then someone with more money. In my case around 20 years ago in Romania my family did not had money for things like private teaching lessons, books or a computer where my colleagues that were not rich just middle class had those and had more opportunities. At least we had free higher education and I could study math and later go into computers.
Imagine how much better your lot as a poor person immediately becomes if you spend months or years saving for your first computer. Now you have internet access and somewhere to learn and maybe program. Just an example.
You did it, didn't you? So did my family, who came to the U.S. with nothing and is now comfortable upper middle class.
Wealth inequality alone is an inappropriate metric for social conditions when even your poor can afford smartphones.
The fact that fat cats drive social policy is the largest problem, since they have always driven social policy only towards their own interests. Job creation can happen without capitalists (look at large co-ops, like the Spanish Mondragon).
Also, note that this article is on the fringes of modern economics. Most modern economics absolutely supports the fat cats and their preferred models.
if i'm right, where would you draw that line, between modern and non-modern economics?
This misrepresents the scientific process the researchers have undertaken - they did not proceed by simply drawing conclusions from observations of a (high-dimensional) system. Instead, they took a simple model of reality, constrained the parameters to those they believe capture the dynamics (the endowment structure), and then validated that constrained model using observations. Their assumptions are embedded in the model structure and parameter constraints.
Except it is not. The lower class in Chile recently burned subway stations down over a five cent raise in fares. It was the last straw for those people. This is a country that has the good economic growth, but a system designed to funnel any new wealth to the 1%, and high wealth inequality. https://www.bbc.com/news/world-latin-america-50123494
You can afford the tenth car because you already contributed to the common good to earn that money! If you're supposed to also spend your money enhancing the public good then it's not really your money so how are you rewarded for the work you do?
What if I buy my 10th car, and the guy I bought it from goes out and donates that money to charity or whatever the author thinks is a moral use of money? From the public's perspective, the money still goes to enhancing the public good - the only difference is that there is now a car stored in my garage instead of some other fellows.
The price you are willing to pay should be equal to your utility of the object.
But people with a lot of money tend to spend it quite "wisely" (a survivor-ship bias, since a fool and their money is soon parted).
But that is all a different matter. The relevant discussion is not about trying to prevent people from spending their money for useless things. It is about the relationship between economic value and actual utility. Any transaction for a car seems to produce the same economic value, but can have vastly different social utility. Therefore, arguments that certain behaviors should be accepted because they produce economic value which must have social utility are wrong. So perhaps it does make sense to tax the rich, even though GDP or other economic value measurements will go down, because social utility will not go down proportionally.
The factory worker most likely doesn't care about the car. They traded time with their kids for a paycheck, to be spent on those same kids or whatever else the worker desired. Even, potentially, a trophy car they don't intend to drive.
If that car doesn't get sold then there is less work for the factory, less demand for factory workers, and fewer paychecks.
His point is that by buying your tenth car you will contribute to productivity, but the use value of your tenth car is much lower than having those same ten cars (and thus the same productivity) spread across ten people.
It is even more obvious in the extreme case: if a population of N people produced N cars, the total public good of every person having one would (I hope you would agree) be higher than the total public good of one person having all of them for their own use. However, in both cases the productivity is the same.
Thus, whilst productivity is a useful measure, it does not account for everything we might be interested in when considering the effectiveness of our economies.
You see this from economists who fail out of physics close to 100% of the time. They don't really understand anything about the private sector, they understand even less about the economy (they just want to do things that they enjoy rather than produce things for others), and they often have these very strong feelings about capitalism...without really having any evidence for these views (or any awareness of the trade-offs...again, this is the kind of thing you don't learn in physics/math class).
As for the Nautilus post itself, it is just an interview with someone who works in the field, not a rigorous scientific document, and they are free (surely?) to express their views about whatever they and the interviewer wish to discuss.
To your later points - I don't know what "understanding the private sector" or "understanding the economy" mean to you, but I would suggest that the person in question does have _some_ understanding of the economy (at least), inasmuch as they have contributed to a formalised understanding of the dynamics of the economy as we (humanity) currently understand them. I'm not entirely sure what else you want - perfect predictions or go home?
Frankly it just sounds like you disagreed with what they said, but, as I already mentioned, you are as entitled to your opinion (as they are to theirs).
It means the object of scorn does not share certain assumptions about the underlying purpose of economics. To be roughly as unfairly sweeping as the gp, you get that a lot from Chicago school types.
1. Do you believe that all economists are engaged in distributing propaganda, or just some?
2. To what end is the propaganda distributed (or maybe on whose behalf)?
3. Are other academic fields similarly concerned with distributing propaganda?
I'm saying that the narrative produced from the status quo in economics has been, for almost all of my life, very conducive to the interests of the powerful.
Do other fields have people doing that? Of course. The petroleum industry has been able to pay for people to push their agenda. That's a thing that happens.
There are some historical, political, and material reasons for the state of economics and academia in general.
Lots of academia is literally just job training for corporations, so don't front like it's above the fray. Even genuine, and valuable, research gets prioritized over less research that isn't as valuable in the private sector. So, again, I'm not the one saying that academia has a problem. Lot's of academics have said these things.
Also, from an argumentative perspective it always seems like economics starts from something like a thought experiment and then go on to use the results of that "experiment" as a evidence in its own right.
Yes, Einstein used thought experiments, but he used known physics as the starting point. I hear economic arguments that start with a premise that isn't a settled thing like "lets assume that we are hunter gatherers on the savanna and you have some beads and I have an arrowhead." It's not based on a measurement that other people have made and agree on. It's not even based on an archaeological dig where the bones of two people were found.
I realize that isn't what actually goes into a phd thesis. Its economics used as a force of nature that bothers me. It's inevitable. Maybe I'm just calling economics the pseudo-ish stuff that I get presented as a layman. Maybe every economics school in every university has a healthy group of people who are critical of basic assumptions. I hope so.
If you are an economist and I offended you, then please accept my apology. That wasn't my intention, really.
But the point is that any (however small) value for the person who earned it is justified, while whatever value it might have for other people is irrelevant, since it's not theirs.
In the same way you could argue that buying a car in the first world is immoral because buying it for someone else in the third world would provide them with higher value.
Earned wealth is not public wealth, unless we live in communist utopia where nobody earns or owns anything.
A government can certainly form policies and implement changes that attempt to distribute wealth more equitably. Its kinda 101 stuff.
That isn't new, is done all the time to varying degrees, and is many, many times removed from "communist utopia".
We just don’t think about it and most of us just don’t care. I did care more when I was younger, but rose glasses tend to fall when you grow up. I now leaning towards capitalism when I will treat you as bad as the law allows me and extract as much money is possible as it is a fair game.
Welcome to corporate America.
> We just don’t think about it and most of us just don’t care. I did care more when I was younger, but rose glasses tend to fall when you grow up. I now leaning towards capitalism when I will treat you as bad as the law allows me and extract as much money is possible as it is a fair game.
> Welcome to corporate America.
Why is it that kids in Africa are going to die but not kids in the U.S.? How has such an incredible disparity in wealth come to be? Isn't the incentive structure of private capital ownership a pretty big part in this?
And yes, the structure has everything to do with it.
> And yes, the structure has everything to do with it.
So, why are those humans over there struggling while the humans over here are not? What lead to this? The humans in the U.S. used to be very poor. How did they grow so rich?
enjoy it while it lasts. there will be more bloodshed soon
Here is interesting read for you: Dictator’s handbook. Helped me to finally put the puzzle together.
What does any of that have to do with "corporate" America? When the Eastern Bloc still existed, people there also bought stuff for themselves when they could afford it, instead of buying more stuff for people starving in Africa, where goods would have been "more productive".
There is no morality involved. The assertion is only that's it's more _productive_ to distribute resources this way. Productivity might be a multiplier but can not be innately good itself.
We are able to at best apply a light touch to the tiller of the massive, complex ship into which we were born that we cannot claim any credit for making. Indeed, no one can.
This doesn’t mean we shouldn’t credit people for making good choices, but the idea that every penny we get we completely deserve is certainly not an established fact. It is at best an opinion, and a poorly justified one at that.
How does he know that? That isn't an obvious thing at all. I know a bloke who owns 5 cars; his family has 5 people in it. They are a very productive family and they get a lot done for the public good as a family with those cars. The quoted example only works because the premise is that the money is going to be wasted and then the conclusion is that the money is being wasted. A weak example.
I can guarantee all investment is done by wealthy people; poor people can't invest by virtue of having no money. Practically all investment is done by the middle- and upper- classes. It isn't really possible to make a pithy point about this sort of thing because there needs to be discussion of things like investment outcomes; some subjects can't be simplified. "Public Good" isn't an instant thing, it takes place over time.
It is not the case that all investment is done by wealthy people - large amounts of investment is carried out and directed by governments. Indeed, my understanding is that, if one properly accounts for failed enterprises, there is no significant evidence for greater efficiency in private markets than public ones, both in terms of time-averaged economic growth, and in terms of generating large technological improvements.
You don't need to "contribute to the common good to earn that money", in fact you can actively undermine it (exploit monopoly, form a cartel, rent-seek and hog resources, buy political influence, fool people with BS ads and sponsored "research" to buy your shit, pollute and in general ignore all kinds of toxic externalities from your products, and so on...
In a free society, someone can spend their money on an extra toy if they want. Nothing wrong with that. It's a strange expectation to impose on others this notion of "spending only on the common good." It's not black and white what the common good is, and that is why an educated free market is a good proxy or mechanism for figuring that out.
Rather than top-down centralized planning.
"educated" is pretty vague. For instance, some people think that a 75% tax rate on high income is reasonable. The "market" doesn't have the right answer on what the right tax rate should be, and how everyone should contribute to the common good. This (and many parameters that already restrict the mythical free market) should be decided by the society.
Besides, someone can earn money only if they live in a country that gave them the opportunity to do so. If the hypothetical doctor was born in the jungle somewhere, it's unlikely that he or she would have been able to make any money. In that sense, it's hard to argue that a high-tax rate is confiscatory, and I don't find it outrageous if they can only afford 5 cars instead of 10, if that can give more people access to health care.
If I've earned the money I have honestly, it isn't anyone else's business what I do with it. Buy an 100th car or light it on fire. Anyone who wants to tell me what to do with my money (that I've earned and paid all the taxes on) can take a long walk off a short pier.
My point is that they could tell you to pay more tax for instance (which may prevent you from buying 100 cars).
No matter that homelessness is rising, life expectancy is falling, debt is increasing to catastrophic levels, the planet's ecology is becoming increasingly hostile to life (ask the Australians...) - and counter-evidence is piling up on all sides.
The suggestion that aggressively acquisitive small-minded personal selfishness ought to be the one true motivator of a healthy economy should be obvious laugh-out-loud nonsense to anyone capable of rational thought.
And yet, mysteriously, it's not just taken seriously, it's elevated to a near-mystical principle of omniscient collective market wisdom. (With the caveat here that markets need to be "educated" - an interesting thing to define.)
It's really quite strange.
Not so sure. For one, doctors can't usually afford a "tenth car".
But assuming they could, or going for the medical industry at large, they are probably a net monetary loss to society, adding the costs of BS needless operations, being wined and dined by the big pharma to push BS drugs, the opioid overperscription-crisis, and of course, overcharging 3x-10x for the same treatment compared to Western Europe. Net monetary loss in the sense that you could get the same services for much much less, and not of course in the sense that you don't get better health compared to not having doctors.
Same for engineers. People making great contributions -- the transistor, new building techniques, cars, etc, sure. People making BS time-sucking social apps (who seem to get the most money) are also a net loss, if not for anything else, for the huge loss of productivity (e.g. employees slacking on social media) and personal development (people wasting hours on end on social media on dopamine feedback loops).
>In a free society, someone can spend their money on an extra toy if they want. Nothing wrong with that.
Beyond some degree there's "something" wrong with that.
"But assuming they could, or going for the medical industry at large, they are probably a net monetary loss to society, adding the costs of BS needless operations, being wined and dined by the big pharma to push BS drugs, the opioid overperscription-crisis, and of course, overcharging 3x-10x for the same treatment compared to Western Europe. Net monetary loss in the sense that you could get the same services for much much less, and not of course in the sense that you don't get better health compared to not having doctors"
So yeah, you make decent living by writing awful code, good for you. If you think you don't deserve it, feel free to overtip your waiter. The alternatives are much much worse.
We don't know that. We know that some of the explored alternatives had different sets of trade-offs, in some cases making them pretty terrible.
I'm not trying to offend you, but the notion that your compensation is necessarily proportional to your contribution to public good is terribly naive.
Surely you can agree that there are an endless number of unscrupulous ways to acquire money that don't contribute to public good, in fact, the opposite is often true. Take a corrupt public official, for instance, their contribution towards society is usually many times inversely proportional to their compensation.