A game theorist breaks down the effects of inequality

http://nautil.us/issue/79/catalysts/how-the-rich-imperil-cooperation

by dnetesn • 7 years ago

149 90 7 years ago

blondin• 7 years ago

off-topic but omg he is kevin spacey's lookalike!

allovernow3• 7 years ago

cooperation dynamics too complex to model realistically. “We want to distill the essence or the logic of this problem, make it as simple as possible, and then understand this very simple model

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.

solinent3• 7 years ago

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.

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.

allovernow3• 7 years ago

You are entirely correct in that the crux of the issue is determining which of the initial dimensions are most responsible for the effect you are trying to explain.

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.

SpicyLemonZest2• 7 years ago

It's possible there are only a few main dimensions, but the article doesn't describe anything in particular Hilbe did to evaluate that possibility. We can't accept any model we're presented with just because it's possible that it's correct.

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.

simion3142• 7 years ago

This study also ignores that competent individuals can be highly socially mobile in modern Western societies, even from vastly unequal starting conditions.

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.

allovernow3• 7 years ago

I don't deny that you started from a disadvantage. And because our time is finite it strongly affects your ultimate probabilistic outcome. However those with the right mix of ability and character are able to better their lot, and the growth is potentially exponential, especially if maintained over generations.

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.

tsimionescu5• 7 years ago

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.

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.

maximente• 7 years ago

so are you a believer in non-modern economics (whatever that means)? because i'm getting a sense from your post that you to some extent ascribe to what seem to be some shades of economics e.g. capital offers jobs, capital trickles down to labor, etc.

if i'm right, where would you draw that line, between modern and non-modern economics?

mrow847• 7 years ago

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.

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.

logicchains4• 7 years ago

It's not a scientific process if they can't make testable predictions. I'm a quant, and anyone in this field will quickly realise it's super easy to build all kind of fancy models that look perfect when looking at the past but fail completely at predicting the future. Predictions that haven't been tested and survived falsification are no more scientific than astrology.

qndreoi• 7 years ago

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.

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

lopmotr• 7 years ago

What an arrogant narrow minded ideology this researcher has "If you just use your money to, I don’t know, buy the tenth car for your garage, that will only stay in your garage. [...] there are just way more effective ways of enhancing the public good than being, in layman’s terms, “economically productive.”"

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?

googlryas• 7 years ago

Not only that, but it isn't like the money just disappears when you buy that car.

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.

tsimionescu5• 7 years ago

The whole point is that that is not a minor difference. That same personal car, for that same money, would be much more useful if it was someone's first car instead of 10th. The money given for the car is the same either way, but the real utility that the car brings is not.

blurbleblurble• 7 years ago

Look deeper than the money, at the relationships and realities it facilitates. Somewhere a factory worker traded time with their kids to work on that car, all so it could sit in a garage to satisfy some alienated rich guy's ego? At some point it's just waste and sacrifice.

mrow847• 7 years ago

The researcher is not expressing ideology, but rather making a point about the issues of using productivity to assess public good.

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.

hogFeast• 7 years ago

This is one of the most ideological interviews I have ever read with an economist. Economists are unusually unaware of ideology, this is extraordinary: conducts limited research with limited applications (i.e. how people behave in lab conditions under unequal endowments), makes sweeping conclusions about tangentially related areas, makes sweeping conclusions about unrelated areas (most of the questions are unrelated to his research), and most of what he says just appears to totally random ideological musings about who adds value in society (this isn't even a question that economics can answer).

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).

lazyjones2• 7 years ago

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.

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.

roenxi• 7 years ago

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.

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.

coldtea3• 7 years ago

You can afford the tenth car because you already contributed to the common good to earn that money

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...

throwlaplace• 7 years ago

i was going to respond with something like this but people who post like what you responded to willfully ignore such obvious things (because they are obvious after all). they argue that they're exceptions according to free market theology, or they argue that it's still ethical in some way, or they perform some other sort of acrobatics.

wait-a-minute• 7 years ago

You can definitely do bad things to earn money. But a doctor, an engineer, etc, would've already contributed to the common good even if they buy a tenth car that sits in their garage. So simply buying a tenth car that sits in your garage (and employs the people building the car) isn't in itself a bad thing or an indication that you're not contributing to the common good.

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.

runninganyways• 7 years ago

I earn $100,000 a year writing god awful code for a doomed software company. Am I contributing more to the public good than the restaurant worker who cooks my food, the guy who changes my car's oil, or the guy who hauls all of my garbage away?

kgantchev• 7 years ago

You may not be, but it seems that your employer is already doomed and they won't be around for long unless they do something to contribute to society. That's generally what happens to those that don't contribute: doomed to fail in the long-run.

kofejnik2• 7 years ago

It doesn't really matter; the system works by everyone working for their benefit; and history consistently shows that it works better than alternates such as communism, where some powerful dude decides what's good for everyone (and will shoot you if you don't enthusiastically agree 100%)

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.

gentaro• 7 years ago

You can afford the tenth car because you already contributed to the common good to earn that money!

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.

awb• 7 years ago

How can cooperation remain stable when people have unequal wealth? It depends on your explanation for why cooperation can evolve at all. What makes cooperation work, in our paper, is direct reciprocity, which means that we play repeatedly. I can hurt you next round if you hurt me this round, even if you are slightly more wealthy than I am. And, depending on how much I can hurt you next round, this might still be enough to make you cooperate in the present round.

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.

platz• 7 years ago

we play repeatedly

so, basically the stuff taleb has been touting for years.

tomrod• 7 years ago

Taleb has an economics background, and is often seriously discussed by economists.

bo1024• 7 years ago

This setup goes back at least to Axelrod 1984. Not sure what the link is to any of Taleb's ideas.

monkeydreams• 7 years ago

The fact people feel so strongly about this article, taking it as an apparent threat or attack, goes a long way to proving the intractability of the problem.

logicchains4• 7 years ago

This ignores the fundamental insight of economics that people can cooperate motivated entirely by self interest. Poor person needs food and housing to survive, so they cooperate by working for someone. Rich person needs people to work their factories, so they cooperate by hiring poor people. 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").

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.

Neeek2• 7 years ago

That is assuming that the person that owns the wealth is the sole driver for growth of that wealth. Can we stop pretending that being wealthy is empirical evidence that you know how to grow an investment?

logicchains4• 7 years ago

It doesn't matter what the driver is, if A over time has continuously demonstrated the ability to achieve higher returns on their wealth than B has, absent other evidence (ceteris parabis) it's reasonable to assume this trend will continue in future. Yes there are some people who got wealthy only through inheritance, but the money they inherited still had to be originally created by someone capable of generating wealth.

elfexec2• 7 years ago

This ignores the fundamental insight of economics that people can cooperate motivated entirely by self interest.

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.

logicchains4• 7 years ago

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.

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.

bimbambem1337• 7 years ago

Wealth is always "stolen". Behind every great wealth is a great crime.
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.

grawprog• 7 years ago

Wealth is always "stolen". Behind every great wealth is a great crime.

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.

A game theorist breaks down the effects of inequality

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