The simple math of the Yard-Sale Model shows that if everybody started out with equal money in a fair economy, the outcome tends toward one person holding all of the money. The cool graphical simulations on this page demonstrate why.
Hard work does not create wealth. The only thing that creates wealth is wealth, and we have it, and you don’t.
This quote from Horrible Bosses 2 always stood out to me.
Wealth is not the same as power. Wealth is owning money. Power is owning souls.
House of Cards… Paraphrasing Frank.
Yup! That is why salary increase always is in percentage; the more you have, the more you get! 😡
I know. Now what?
There are a lot of people out there who still believe in trickle-down, Galtism, or the primacy of hard work. Idiots, dupes, or both, we still need to recruit them, or at least stop blocking change. Easily-digestible information like this needs to become widespread.
This is why you want fewer ultra rich people in your country.
I don’t think this is as good a model as you or the oop seem to think it is. Nobody is under the impression that you can make even by buying and selling random things. And gambling your money against other people isn’t something people can afford to do unless they already have money to live comfortably. Real people have fixed needs they have to buy and usually a fixed value they can create to make money.
I don’t think a model that doesn’t share any similarities with the system can be used to prove that inequality is baked into the system. I don’t mean that it isn’t, but I couldn’t in good conscience claim so based on this alone. Please keep your standards for evidence high yall.
Also the article completely misses the reason why wealth accumulates in the model. It has nothing to do with compound ratios being confusing or the amount one can afford to wager. This is simply a normal distribution with flipped axes and a bottom cap of 0. Inequality arises even if you change the game so that richer people give more when they lose and receive less when they win.
I think there is some confusion as to what this model represents. The linked article is not bad at explaining it but some things could be clearer.
First of all, the “money” in the model is not the cash you have at hand. It is the total value of all the things you own. This model does not need money and it also works if you exchange cigarettes for candy (as long as you can assign some worth to the objects).
It is also not about gambling. It assumes that every time you exchange goods with someone else, you can become richer or poorer (I like the example from the article: if you pay $200 for a watch that is worth $150, you lose $50, someone else gains $50).
It makes the extremely optimistic assumption that the chance to gain or lose money in a trade is equal. This is often obviously not the case in the real world. If you buy something from a supermarket, the owner wants to earn money, needs to pay their employees, needs to pay rent, … so you know you pay more than the value of the goods you get.
Now this simplified and very optimistic model predicts that there is an exponential distribution of wealth and it predicts that repeated exchanges between a rich and a poor person will most likely result in the rich person getting richer and the poor person getting poorer.
What can we learn from that?
1.) even under these very optimistic conditions money trickles up. The real world is stacked much more against you, making a trickle down effect unlikely (though not impossible, this model is a simplification). 2.) rich people (in the model but imo it applies to the real world as well) are not smarter or otherwise better than the average person. They were lucky.
3.) Even if we remove a lot of the advantages rich people have in the world and construct a system that is seemingly “fair” (as in every one has the same chance) you still end up with super rich people. The only way to combat this is by redistributing money - tax the rich. Note that you still get an exponential distribution in the model but it becomes flatter.What this model says nothing about is how the real world is stacked in favor of rich people. It tries to eliminate all these factors. So using this model to argue that inequality is built into the system (as the headline suggests) is somewhat strange. The model rather suggests that the inequality always arises from simple chance - One could maybe argue from it that we need to actively combat it (depends on the personal sense of justice if earnings due to luck should be redistributed).
I agree with you on the value creation. This model treats the economy as a zero-sum game. But the real economy is typically growing and this is ignored here.
If it’s not a good model, then you are welcome to pick it apart. However, the study that applied it for the 2017 paper in Scientific American found that it matches observed data about our economy stunningly well when applied.
As the author of that study was quoted here saying, the simple Yard Sale Model here can’t begin to explain a complex economy, but its function is like an X-ray to cut through the complexity to see the bones of the thing.
In any case, we know empirically that Trickle Up is the actual effect of the capitalist system. If there’s a model that can explain the mechanism more accurately, I’d be happy to hear it.
Scientific American isn’t an academic journal and there’s no paper about this published in 2017. There’s a Scientific American article about it written in 2019 though. I think you’re referring to the part in the article that says it matched real world data remarkably after they modified it in 2017.
I don’t think this model is an x-ray that reveals the bones of the system, as its premise about how it works is plainly inaccurate. Maybe scientists can gain actual insight by studying it further but I don’t think drawing conclusions such as the title on social media is healthy.
At best the model teaches why gambling is a bad idea even if the chances are perfectly even. At worst someone looks at this and decides all anti capitalist evidence must be flimsy
Edit: Nvm found the paper you were talking about. Once again, it is based on this but it is not this. Either way it doesn’t conclude that since it is similar it must be the underlying reason.
Yes, I misrembered the year. And while Scientific American is not a journal, at least the article explained the work in some depth and provided evidence. Here, you’ve given your opinion which boils down to, “No, it doesn’t.” Totally valid, as opinions go, but not very edifying to us readers.
It is not an opinion that people don’t earn money by randomly trading with others, wtf are talking about??
I’m actually triggered about this
In real life people die.
But in real life inheritance exists
Yard-Sale model also explains the Network Effect: People will flock to where the masses are because they will have a higher access to interact with folks than in isolated networks. Thus silos will eventually emerge: See Meta+Discord, etc…
I think the fact is most people wouldn’t do certain work if they were wealthy enough to have a choice in the matter. The system relies on extreme poverty in order to coerce people into taking jobs they otherwise wouldn’t.
Any work that wouldn’t be done if we had a UBI should either be automated away or sufficiently well-paid that it would find workers even without the threat of poverty.
We don’t need to ritually kill a homeless person just so someone will pick up our trash any more than we need to do so for someone to tended to our elders dying of cancer.
Not a fact, an assumption based on an assumption baked into this economic system.
If I could live on the salary, I would prefer a manual labor job.
Oh, this is very good. Thank you for this.
Another simulation… that’s mainstream in american society… Landlords Game – IE what’s now Monopoly. By definition everyone starts with the same amount of money, and it ends with one person massively ahead and everyone else going bankrupt.
Well yes, but have you tried just throwing the board across the room when that one person gets massively ahead and you land on Pacific avenue with a hotel on it?
Yes, if you make your economy “people with money gain more money” then this is the endgame
Nah I’m built different.
You’ve demonstrated exactly how the system works. Statistically a few players will be lucky and become very rich. They’ll be looked at as “built different”. All the other poor players will try to emulate them as if they can beat the system by achieving some virtue like working hard enough or having innate skill rather than realize the system is mathematically impossible to beat.
The highest highs, the lowest lows.
I’m an idiot
And you only had to win at a 60% rate. Less than I expected
Hard not to keep reading with such a nicely built article! Thsnks bud :)
Great article thanks for sharing!
It’s baked in because we choose capitalism
Absolutely, and the headline here is
n’t(e: whoops) that extreme wealth inequality is not the result of human nature, greed, or anything. It’s actually an emergent mathematical property of the system itself. It’s unavoidable, even if everybody acts honorably. Proof by physicists that capitalism is wack.
