Hacker News Reader

Comment by fizixer | Hacker News Reader

> ... 0-sum trades ...

I have heard this argument numerous times, and I'm sick of hearing it over and over again.

Yes, real world economy is (almost) practically a zero-sum game.

Look at GDP growth rate. A rate of 4-6% of a developed country, with population growth of 1-3% is considered a success (after accounting for inflation). Don't tell me tens of millions of individuals can get out of low-income situation, and billionaires can still keep getting rich, with a measley overall growth of 4-6%. The situation is even worse when every few years, it dips to 2%, 0%, or even goes negative.

With a total best-case growth of 4-6%, in a population growing 1-3%, you have to make many folks worse off in order to get ahead.

View on HN

As others have said, a stagnant (0% growth) economy still has many positive sum trades within it. If all trading stopped happening, you wouldn't see the GDP remain at the same level; it would crash to basically 0 as almost no one would even have access to food.

>With a total growth of 4-6%, you have to make many folks worse off in order to get ahead.

I mean, kinda, in that if you make something really good you make the person that made something slightly worse worse off, as they now don't get the money you earn instead? But this is not what you mean.

> Don't tell me tens of millions of individuals can get out of low-income situation, and billionaires can still keep getting rich, with a measley overall growth of 4-6%.

The way billionaires are rich is by controlling organisations that provide a lot of value and capture some of that value for themselves. One of them getting 10% 'richer' on paper doesn't mean that organisation grabbed some more resources from others; it's not real, current wealth, it's estimated value of total future income from that organisation.

So yes you can totally have those organisations become more valuable by more than 4-6% a year without other people losing out. You're confusing the total amount of value/utility produced in a year (which GDP is more-or-less trying to estimate) with projected total amount of value produced in all future years.

> As others have said, a stagnant (0% growth) economy still has many positive sum trades within it.

Wow, so I guess I was living with the wrong understanding of positive-sum all this time.

Positive sum doesn't just mean win-win. It also includes win-lose because the winning side actually won.

Got it.

I don't know if you're misreading on purpose or missing a point.

Suppose I each year I produce two eggs and you produce two slices of bacon. We both value these at $1 each. The total value produced this year was $4.

Next year, we produce the same, but we agree to a trade - one egg for one slice of bacon. Egg with bacon is clearly superior to just two eggs or just two slices of bacon for breakfast; so we value the combo of egg+bacon at $3, giving total value of $6.

Next year, we do the same. Total value was just $6, for 0% growth. However, that doesn't mean there was a 'winning side' to the trade. It just means the previous estimate for produced value already included the benefits of the trade, so there's been no change.

I'm neither misreading nor missing your point.

When your example is included in Norvig's simulation, it will result in two parties coming together, and instead of an interaction of (-1, +1), the interaction (+1, +1) will happen.

However, when such interactions are randomly mixed with zero-sum trades, and the simulaion is run over N (population) and t (time), it will result in net wealth W_after > W_before.

In order to mimic real-world scenario, the prob distribution has to be chosen such that the W_after is between 0.98 to 1.06 of W_before (in other words, between -2% to 6% growth, more or less). Anything far outside this bound would be highly unrealistic for a functioning economy.

However, when you impose this condition, you would realize that the (+1, +1) events have negligible impact, and that (-1, +1) type of events dominate. In other words, Norvig's conclusion pretty much does not change.

And that is my point. Mixing in a fraction of individual positive-sum interactions doesn't change the results, if the total wealth growth is capped based on real-world macroeconomic data.

>In order to mimic real-world scenario, the prob distribution has to be chosen such that the W_after is between 0.98 to 1.06 of W_before (in other words, between -2% to 6% growth, more or less). Anything far outside this bound would be highly unrealistic for a functioning economy.

No, you're missing the point.

0.98 to 1.06, to borrow your numbers, is the ratio of GDP one year to GDP the previous year. It is not the ratio of GDP accounting for positive-sum trades to GDP under only zero-some trades, and falsely equating those is disingenuous at best. The latter ratio might well be an order of magnitude larger.

But it's compounding. Exponential. 5 percent each year means doubling every 15 years.

I'm in favour of more redistribution but I think you're barking up the wrong tree.

Long term growth forecasts trail off to more like 1 percent as we hopefully stop unsustainable use of finite resources. Doubling is much slower then.

Growth over a period of time isn't even strictly necessary for all trades to be positive sum anyway. A village economy where the basket maker trades the same number of baskets for the same amount of food every year may have a zero growth rate [assuming the baskets' lifespan is limited], but those trades are positive sum because the basket maker and the farmers using broken baskets would both be worse off if those trades didn't continue to take place.

Redistribution, by whose power? Who has the right to decide what gets redistributed, and why? Is there a way to redistribute that is objectively fair?

That's a good question. The veil of ignorance concept espoused by Kant, Hobbes, Rawls among others is a good place to start imo.

The State endowed with its power by the citizens. What would be "objectively fair" ?

I'm not sure if you considered fully what I said.

Are you telling me that capital powerhouses aiming for 8-20% year over year, and consistently having it their way, in an economy of best case 4-6% with instances of 2%, 0%, and negative mixed in, and a population consistently growing by 1-3%, still leaves the rest of the population with growth?

Can I sell you a bridge?

You’re assuming the 4-6% growth is a given, and were all just fighting over our bit of it, but this is _completely_ backwards.

Where did that 4-6% growth come from? Did it rain down from heaven and were all scrabbling for our share of it? No, it came from positive sum trades where value was added. An enterprise that develops a new technology, that makes an economic activity dramatically more efficient might sell that and become very successful. It might achieve 20% growth in its industrial sector and also boost the growth of its customers due to their better technology or more efficient services.

It’s _this_ sort of activity that much of that 4-6% overall growth is coming from. It’s not draining away growth from others, it’s making the growth in the first place.

Yes. except I suspect once you take negative externalities such as carbon emission into account the true rate is currently more like 1 percent if not actually negative.

> You’re assuming the 4-6% growth is a given ...

I only assumed that to be charitable to OC's argument. If we don't assume that, then OC's criticism of Norvig's simulation assumptions is even more invalid (only slightly so though; it's already invalid enough).

Oh the OCs argument is silly, the simulation is about share of wealth not absolute wealth.

No capital powerhouse achieves 20% year over year. Some capital company maybe gets that each year, but they take losses in different years, so it's just swapping places. Berkshire Hathaway averages what, 9% a year?

It gets complicated when one is allowed to effectively "borrow from the future "...

Reply on news.ycombinator.com