Tag Archives: economics

Anti-fragility

Evolution, capitalism and science are anti-fragile. Nassim Taleb introduced the idea to my consciousness.

Top-down optimized systems are always fragile. These three phenomena are not fragile. In fact, they gain from being shocked.

Evolution, capitalism and science also share this common algorithm: systematic, brutally honest trials of proposed solutions, followed by ruthless rejection of failures and amplification of successes. The human psyche may not be well-adapted to appreciate such systems. We seldom like honesty or rejection.

 

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Income Distribution

 

There are five people at the table. One of them owns the table, the turkey, the stuffing, the salad and the pies. The other four people all pooled their resources to buy the cranberry sauce and the casserole. The richest 20% of  Americans own 84% of the wealth in America.

This graph is distribution of the Bottom 80%. This graph tops out at $100K. The people who own the vast majority of America are not even on this graph.

I got on this topic thanks to”The ‘American dream’ is actually Swedish.” Sweden is a social democracy, if I may remind the reader. http://www.thelocal.se/30008/20101103/

Data:

http://pubdb3.census.gov/macro/032007/hhinc/new06_000.htm

Girl Power Economics

The Libertarian Blog over at Reason.com had a delightful piece today on the correlation between girl band popularity and economic growth. I’m actually not sure if it is satire or not.

“Why didn’t the United States see [strong] growth during the ’60s boom? America… lost interest in [girl bands] in favor of a self-styled “invasion” of boy groups… We went off the girl standard before France did… The Go-Go’s fueled the recovery from the early 1980s recession… The effect was strongest in the 1990s… NAFTA allowed the free exchange of angry Canuck songstress Alanis Morissette. Britain maintained low inflation and low unemployment… thanks both to economic liberalization and to the rise of the Spice Girls.

Just as the decrease in piracy is correlated with the increase in global temperatures, the economic tide seems to be correlated with girl bands. Thus, we need more pirates and more girl bands, then we will have economic prosperity and stable temperatures. As satire, this is good stuff. If gender balance in music is as good a predictor as anything else, it calls into question the validity of “real” economic predictors.

But, as I said above, I’m not sure if this is satire or not.

Cheers,
Peter

our magical culture

Subrationedei brought my attention to this quote from Raymond Williams. In Culture and Materialism, p. 185:

It is often said that our society is too materialist, and that advertising reflects this … But it seems to me that in this respect our society is quite evidently not materialist enough, and that this, paradoxically, is the result of a failure in social meanings, values and ideals.

It is impossible to look at modern advertising without realizing that the material object sold is never enough: this indeed is the crucial cultural quality of its modern forms. If we were sensibly materialist, in that part of our living in which we use things, we should find most advertising to be of an insane irrelevance. Beer would be enough for us, without the additional promise that in drinking it we show ourselves to be manly, young in heart, or neighborly. A washing-machine would be a useful machine to wash clothes, rather than an indication that we are forward looking or an object of envy to our neighbors. But if these associations sell beer and washing machines, as some of the evidence suggests, it is clear that we have a cultural pattern in which the objects are not enough but must be validated, if only in fantasy, by association with social and personal meaning which in a different cultural pattern might be more directly available. The short description of the pattern we have is magic: a highly organized and professional system of magical inducements and satisfactions, functionally very similar to magical systems in simpler societies, but rather strangely coexistent with a highly developed scientific technology.

That seems highly salient to anyone who would like to live a simpler life or, indeed, merely a rational life. Our superstitious brains seem to be built to see magic even in the midst of a world crafted by our rationality. We buy objects of “value” for the same reasons and with no better justification than a cave man trading food to the witch doctor for a love amulet designed to attract affection from the prettiest cave woman.

Imagine I go buy a really nice car for a lot of money. Now, a car seems to have more value than a horse bladder pouch filled with herbs and teeth (a voodoo love amulet). You can drive the one, but the other you just hang around your neck.

But consider: the price difference between a Honda and a BMW doesn’t represent a real increase in functional utility – the one costs twice as much but it won’t get you to twice as many destinations. What are you buying with that extra money?

Social meaning. You’re buying others’ perception that you are a man (or woman) of means. Some people might even perceive themselves differently if they own a BMW. This might give them confidence. Confidence and conspicuous wealth (perceived according to our society’s measure of such things) may actually help a person get a mate… and within another society the material object that imbues its owner with those qualities might take the form of a magical charm. And it might, therefore, work.

So let me say it again: your expensive stuff is expensive because you are buying magic.

-Peter

economic value in terms of pie: an analogy for communism, capitalism, prosperity and social justice

The best kind of science science serves to advance some aspect of human endeavor (e.g. health, understanding, wonder). It is a contribution. The same can be said for art, engineering, or commercial enterprise. Work done in this manner will create a world far better than one where there is a perfect cornucopia of material prosperity. In fact, a culture of service is more idealistic than a utopic vision of material prosperity. And I believe that it’s achievable, while state-sponsored universal material prosperity isn’t.

Why do I say this? It comes down to pie. Would you rather have a disproportionately small piece of a very large pie (and get more pie), or a equal share of a small pie (and get less pie)? I think, ultimately, a lot of people would rather take the lesser quantity of pie as long as it was ‘fair’.

That doesn’t make rational sense, but we are not rational creatures. We are spiteful, semi-domesticated primates. Monkeys will do the same thing: they will give up their own small treat to see a rival denied a large one.

 

The maximal economic condition would be capital highly concentrated in the hands of those who continually invest it in labor-saving technology. This is the ‘trickle down’ notion. The workers are paid the minimum viable amount, since they will fail to invest wisely any excess. This produces a huge surplus of economic goods, but the world is divided into two groups: those who can afford to have any/all of the goods that they want, and those who can afford just enough that they are motivated to work very hard for just a little bit more. This assumes, of course, that there is a good way to catch cheaters: people who end up with a large slice without making any pie at all.

Here’s the crux: under these idealized conditions, the most people get the most pie possible (that’s good) but the distribution is not fair (and that’s bad). Even the people who are working really hard for a disproportionately small piece get a lot more than they would if the pie were smaller, but they feel disenfranchised because they have relatively little. So what do you want: a fair slice, or a large pie?

That has been the central economic question of the 20th century: communism (fair slice) or capitalism (large pie)? Could there be a third alternative? I think there is. I think that it’s possible to see past the total numerical economic value and see more fundamental needs. I think we can work on those. And that can co-exist with either system. The big upshot is this: I see the world arguing over the big pie versus the fair slice but what I want to see is people wondering if maybe they would like a different sort of pie altogether.

-Peter