The Mathematics of Inequality(now.tufts.edu)
now.tufts.edu
The Mathematics of Inequality
http://now.tufts.edu/articles/mathematics-inequality
21 comments
There is what I believe to be a common misconception about the economic term "rationality" - it is actually devoid of morality. In economic theory, rationality is defined only as: when faced with a decision over many choices, the actor always chooses the choice they value most, according to their own "utility function". Self-interest is a misleading term for this because it could be selfish for a person to give away their all their wealth since altruism gives themselves the most internal "utility" /happiness. Regardless, if a billionaire maximizes their wealth, conditional on the billionaire getting more utility from more wealth than more of other things, then they are a rational economic actor.
What you are describing is a moral judgement about what people should "value", not how they make choices conditional on what they value. Rationality is not a technically correct term here.
What you are describing is a moral judgement about what people should "value", not how they make choices conditional on what they value. Rationality is not a technically correct term here.
> In economic theory, rationality is defined only as: when faced with a decision over many choices, the actor always chooses the choice they value most, according to their own "utility function".
That definition is correct but it isn't useful which is why it is never used in models. In the end we need to assume that the actors values something and that assumption will have a huge impact for any mathematical model. So the point is that since our assumptions about what people value can have so large consequences the maths doesn't really matter, it all comes down to people choosing their assumptions such that the result verifies their own beliefs.
That definition is correct but it isn't useful which is why it is never used in models. In the end we need to assume that the actors values something and that assumption will have a huge impact for any mathematical model. So the point is that since our assumptions about what people value can have so large consequences the maths doesn't really matter, it all comes down to people choosing their assumptions such that the result verifies their own beliefs.
> A rational billionaire would realize that he have nothing to gain from more wealth
> if poor people were rational they would organize against rich people
These seem at odds. If poor people were rational, the billionaire would have something to gain from wealth; protection against the poor...
In any case, I don't think it's true: The poor are more likely to be successful aiming for poorer targets, meaning they have more to fear from other poor, and less expected success in targeting the rich. That, and acting out of self-interest when poor can turn against you when you aren't..
> irrational tendencies to hoard wealth
The more wealth you have, the lower the risk of being poor. You are only doing the calculation:
> if poor people were rational they would organize against rich people
These seem at odds. If poor people were rational, the billionaire would have something to gain from wealth; protection against the poor...
In any case, I don't think it's true: The poor are more likely to be successful aiming for poorer targets, meaning they have more to fear from other poor, and less expected success in targeting the rich. That, and acting out of self-interest when poor can turn against you when you aren't..
> irrational tendencies to hoard wealth
The more wealth you have, the lower the risk of being poor. You are only doing the calculation:
(money obtained) - (money needed)
(money obtained)(chance of keeping money) - (money needed)
(chance of keeping money) = A + B*log[(money obtained)]
(money desired) = (money needed per person lifetime) * (number of dependents)>democratically elect representatives who will distribute it for them...
good thing we live in a "republic". This line smacks of wanton theft. The poor should have a reason to be "given" money other than just being "poor" (as the standard reasoning with 'wealth distributors'), similarly, the rich should have a good reason to have their money stolen other than just being "rich".
Bezos BUILT something, Oprah BUILT something. Just because they're rich and you're not doesn't mean you deserve to be. This country (USA) - at least in theory - is about equal OPPORTUNITY - NOT "Equal Outcome".
Life Isn't FAIR. Stop trying to make everyone equal when they clearly aren't. Some people put in more work, have better ideas, better skills, attention to details, and follow through, while others do not.
You may never steal directly from your neighbor or friend, but voting for the government to do it is the same thing.
good thing we live in a "republic". This line smacks of wanton theft. The poor should have a reason to be "given" money other than just being "poor" (as the standard reasoning with 'wealth distributors'), similarly, the rich should have a good reason to have their money stolen other than just being "rich".
Bezos BUILT something, Oprah BUILT something. Just because they're rich and you're not doesn't mean you deserve to be. This country (USA) - at least in theory - is about equal OPPORTUNITY - NOT "Equal Outcome".
Life Isn't FAIR. Stop trying to make everyone equal when they clearly aren't. Some people put in more work, have better ideas, better skills, attention to details, and follow through, while others do not.
You may never steal directly from your neighbor or friend, but voting for the government to do it is the same thing.
When voters elect representatives to move money from the wealthy to themselves it is theft.
When wealthy donors, lobbyists, and corporations pour money into the political system to affect laws, distribution, incentives, outcomes it is "speech."
If life isn't fair, then why do you care about something you call theft? I'm not reading a self-consistent critique here.
When wealthy donors, lobbyists, and corporations pour money into the political system to affect laws, distribution, incentives, outcomes it is "speech."
If life isn't fair, then why do you care about something you call theft? I'm not reading a self-consistent critique here.
you're not reading it because you're looking to justify your own position and don't want to see it.
when someone CHOOSES to give money towards a cause, it IS speech. (granted, most don't agree the citizens united ruling, but mainly because it allows a corporation to have "more" speech than you or I). This is not a problem with the law, this is a problem with money in politics. Solve that problem (like only money from companies/people from within the district is allowed or something), and you solve the 'citizens united' problem.
Just because life isn't fair doesn't mean I GIVE You my money. I should have every right to keep it without being robbed at gunpoint (IRS) - by lazy socialists who don't understand how business works, have never run a business or "democratic-mob-rules-socialists-who-abuse-government-to-do-their-dirty-work".
when someone CHOOSES to give money towards a cause, it IS speech. (granted, most don't agree the citizens united ruling, but mainly because it allows a corporation to have "more" speech than you or I). This is not a problem with the law, this is a problem with money in politics. Solve that problem (like only money from companies/people from within the district is allowed or something), and you solve the 'citizens united' problem.
Just because life isn't fair doesn't mean I GIVE You my money. I should have every right to keep it without being robbed at gunpoint (IRS) - by lazy socialists who don't understand how business works, have never run a business or "democratic-mob-rules-socialists-who-abuse-government-to-do-their-dirty-work".
An economic system is an agreement to forgo violence and theft as acceptable means to get what you want, in order to establish mutually beneficial conditions for the exchange of goods and services. As soon as the system stops being mutually beneficial and instead benefits the few at the expense of the many (regardless of skill, regardless of effort), the entire moral foundation on which the system was built crumbles and what you call wanton theft can sometimes be the rational response. Does this sound revolting to you? Well, too bad, life indeed isn't fair.
> An economic system is an agreement to forgo violence and theft as acceptable means to get what you want
No, its not.
I mean, sure, an economic system is always imposed by a political system, and some modern political systems have in their theoretical background an ideal of being established through free agreement, but that ideal is never actually fully realized in those systems, and plenty of political systems don't even have that in theory; in practice, participants in an economic system mostly do not get there as part of any agreement, and especially not a free and uncoerced agreement.
And economic systems often (in practice, always) involve violence and only avoid theft in that “theft” is defined as that which defies the rules of the state.
No, its not.
I mean, sure, an economic system is always imposed by a political system, and some modern political systems have in their theoretical background an ideal of being established through free agreement, but that ideal is never actually fully realized in those systems, and plenty of political systems don't even have that in theory; in practice, participants in an economic system mostly do not get there as part of any agreement, and especially not a free and uncoerced agreement.
And economic systems often (in practice, always) involve violence and only avoid theft in that “theft” is defined as that which defies the rules of the state.
The Bezos example is interesting, he did built something, and part of it was on low wage workers on Amazon fulfilment warehouses alright.
people that willingly choose those positions. I didn't go to college. I go a job out of high school. I did what I had to do, to be able to do what I want to do. People today think a degree entitles them to $100k/yr and a new Porsche. That's not this works. That's not how any of this works...
A republican governmental structure has exactly zero to do with economic distribution. Also, people who say 'Life isn't FAIR' are choosing to make it that way. Other people think it should be fair and want to organize so as to maximize fairness. The fact that you know whether something is unfair or not (regardless of whether you approve of it) suggest that it is objectively measurable in some way.
Also, LOL at the irony of someone proclaiming that life isn't fair while simultaneously denouncing redistribution of resources as 'wanton theft'. Don't dish it out if you can't take it.
Also, LOL at the irony of someone proclaiming that life isn't fair while simultaneously denouncing redistribution of resources as 'wanton theft'. Don't dish it out if you can't take it.
Bezos and Oprah have benefited enormously from public resources, from laws and regulations to roads and schools. To take one small example, how would a book business do in a country without widespread literacy? How would a delivery company do in a country without roads?
They're members of a society and that society has enabled them to amass tons of wealth, it's not unfair to require them to return some of it.
They're members of a society and that society has enabled them to amass tons of wealth, it's not unfair to require them to return some of it.
thus demonstrating the claim in the comment it answers
And our goal should be to change this system.
If people were rational we wouldn't need money in the first place. Everybody would simply cooperate in order to maximize the benefit shared by all. We see this sort of behaviour in eusocial insects like bees and ants.
But bees and ants have genetically determined reasons for their social structures - their genetic makeup is more strongly shared between siblings than offspring so it's in their rational self-interest to be sterile themselves and to farm their sisters (usually just one sister - the queen) so as to maximise their biological utility function - which is usually the greatest number of closely related bees or ants out there.
Most other species don't have this sort of genetic makeup, so it wouldn't be rational for most of us non-Hymenopterae to mimic the social order of such insects.
Most other species don't have this sort of genetic makeup, so it wouldn't be rational for most of us non-Hymenopterae to mimic the social order of such insects.
There are examples of eusocial animals which are not haplodiploidy. Naked mole rats are one example.
I think you're trying to make an argument based on the game theoretic definition of "rational" rather than the common definition of rational which would correspond to game theory's "superrational". That is, a rational choice based on the common knowledge that all others are following the same playbook. Sure, hymenopterans have a better genetic incentive to favour superrational behaviour but that doesn't stop upstart queens appearing in a hive (and often getting destroyed, but not always).
I think you're trying to make an argument based on the game theoretic definition of "rational" rather than the common definition of rational which would correspond to game theory's "superrational". That is, a rational choice based on the common knowledge that all others are following the same playbook. Sure, hymenopterans have a better genetic incentive to favour superrational behaviour but that doesn't stop upstart queens appearing in a hive (and often getting destroyed, but not always).
"Two people enter into a series of transactions, and both have the same probability of winning some amount of wealth from the other, just as in a free-market transaction."
I don't really think this is a great description of free market transactions at all. Do you regret the decision anywhere close to 50% of the time when you buy groceries, pay rent, or buy new boots? Does the grocer, landlord or shoe store owner regret it anywhere close to 50% if the time? The answer is no in both cases.
I don't really think this is a great description of free market transactions at all. Do you regret the decision anywhere close to 50% of the time when you buy groceries, pay rent, or buy new boots? Does the grocer, landlord or shoe store owner regret it anywhere close to 50% if the time? The answer is no in both cases.
I think that this is a pretty obvious fact, once you ignore the ideological explanations. The rich can borrow at a lower interest, the rich can have their money beget more money in riskier opportunities. Those with no money to their name can’t afford that.
A rational billionaire would realize that he have nothing to gain from more wealth and would live the rest of his life in lavish and luxury (while donating 99.9% of it if he cares about public opinion), aiming to spend all of it before he dies. So if billionaires were rational we wouldn't have such a large inequality.
Similarly if poor people were rational they would organize against rich people, forcing them to share their wealth in one way or another. This could either be via violence or they could democratically elect representatives who will distribute it for them or they could even unionize to gain power.
The question then isn't how we stop inequality when all actors are rational, but how we stop inequality when some people have irrational tendencies to hoard wealth while others irrationally prefers to vote for those who stands for some abstract ideals rather than those who would give them the most monetary rewards.