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The Mathematics of Inequality

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Re: The Mathematics of Inequality

#11

Post by Klockan »

mirajshah wrote: post #10
Klockan wrote: post #2

The main problem with economic theory is that people aren't rational economic actors. 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 p…

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…

> 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.

Re: The Mathematics of Inequality

#12

Post by Chris2048 »

Klockan wrote: post #2

The main problem with economic theory is that people aren't rational economic actors. 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 p…

> 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:

    (money obtained) - (money needed)
when the truth is closer to:

    (money obtained)(chance of keeping money) - (money needed)

    (chance of keeping money) =  A + B*log[(money obtained)]
And this is before you think about how money gets divided among dependents, i.e.

    (money desired) = (money needed per person lifetime) * (number of dependents)

Re: The Mathematics of Inequality

#13

Post by trollopTheJope »

Klockan wrote: post #2

The main problem with economic theory is that people aren't rational economic actors. 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 p…

>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.

How is being a spendthrift rational? How is "donating" it rational?

Re: The Mathematics of Inequality

#14

Post by petraeus »

slamdance wrote: post #3
Klockan wrote: post #2

The main problem with economic theory is that people aren't rational economic actors. 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 p…

> 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 som…

And our goal should be to change this system.

Re: The Mathematics of Inequality

#15

Post by aqi »

"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.

Re: The Mathematics of Inequality

#16

Post by AimHere »

chongli wrote: post #5
Klockan wrote: post #2

The main problem with economic theory is that people aren't rational economic actors. 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 p…

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.

Re: The Mathematics of Inequality

#17

Post by drewrv »

slamdance wrote: post #3
Klockan wrote: post #2

The main problem with economic theory is that people aren't rational economic actors. 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 p…

> 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 som…

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.

Re: The Mathematics of Inequality

#18

Post by chongli »

AimHere wrote: post #16
chongli wrote: post #5

Earlier quoted context omitted.

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 the…

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).

Re: The Mathematics of Inequality

#19

Post by jhanschoo »

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.

Re: The Mathematics of Inequality

#20

Post by slamdance »

jjaredsimpson wrote: post #7
slamdance wrote: post #3

Earlier quoted context omitted.

> 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 som…

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.

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".

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