Economics

[From Rick Marken (01.02.09.1100 PST)]

Just for fun, here's a letter I send to the LA Times today.
Because these letters must be short it was impossible for me
to explain in any detail my justification for some of the
statements I make. But, as those of you who followed previous
economics threads can probably tell, the ideas expressed in
the letter are based on the closed loop model of the economy
that I have been working on with Bill Powers.

Anyway, I hope this generates a discussion that gets more
people interested in doing some of the macroeconomic research
and modeling.

Best

Rick

···

----------------

In a recent letter to the editor (February 9, 2001) concerning
the preposterously regressive Bush Tax Cut proposal, Tony Evans
asks " Give the rich tax cuts? You bet! Know anyone who ever got
a job from a poor person?" I ask in reply "Do you know of any
rich person who ever manufactured and distributed a product on
their own"? The notion that the poor work at the pleasure of the
rich is an insult to the working people who make it possible for
the rich to get rich.

Capitalist production is a cooperative process with owners
and management coordinating the activities of workers. Capitalism
works best when owners and managers are free to coordinate this
enterprise as they see fit. But this freedom can be abused by
owners and managers who can take more than their fair share
because they control the finances. Advanced capitalist societies
use progressive taxation rather than central control to address
these inequities. As is evident from the economic boom of the
1990s, more progressive taxation, restored by President Clinton
in 1993, is good for the economy as well.

The Bush Tax Cut proposal is based on a misconception about
how capitalism works. It will help those most who need help
the least and it will hurt the economy in the long run. If it
passes, it will be the cruelest legacy of the Supreme Court
coup.

--
Richard S. Marken Phone or Fax: 310 474-0313
MindReadings.com mailto: marken@mindreadings.com
www.mindreadings.com

[From Stefan Balke (01.02.09)]

Rick Marken (01.02.09.1100 PST)

Just for fun, here's a letter I send to the LA Times today.

I love that you bring PCT knowledge to politics. Great post! I'm really
interested to get to know your economic model. Maybe it will be a force in
the economy.

Best,
Stefan

[From Mike Acree (01.02.09.01.1350 PST)]

Rick Marken (01.02.09.1100 PST)--

Capitalism
works best when owners and managers are free to coordinate this
enterprise as they see fit. But this freedom can be abused by
owners and managers who can take more than their fair share
because they control the finances.

Of course, as we have discussed in those previous economic threads,
"fairness" is not a PCT concept. To some people, like you and Rawls,
fairness is a statement about the pattern of holdings; to others, it is a
statement about how those holdings were acquired. PCT makes no such
pronouncements; like Mises' Austrian economics, it merely asks what works
for specified ends. But if I remove the moral language from your letter
("fair," "inequities," "abused," etc.), it is a little hard to see what is
left, as a basis for the macroeconomic research and modeling you call for.

Mike

[From Rick Marken (01.02.09.1530)]

Me:

But this freedom [to run a business] can be abused by owners
and managers who can take more than their fair share because
they control the finances.

Mike Acree (01.02.09.01.1350 PST) --

Of course, as we have discussed in those previous economic threads,
"fairness" is not a PCT concept.

Yes. I agree. What constitutes "fair" certainly differs from one
person to another. I said it this way in the letter because there
was no room to give the closed loop explanation. In the closed
loop model, maldistribution of wealth is not a moral problem; its
an economic performance problem. A closed loop economy doesn't
produce at its potential capacity when a few people have far
more money than they can use and many people have far less than
they need. (Bob Dylan has it right when he wailed: "When there's
too much a nothin' no one's in control").

But if I remove the moral language from your letter ("fair,"
"inequities," "abused," etc.), it is a little hard to see what is
left, as a basis for the macroeconomic research and modeling you
call for.

I know that the letter doesn't provide a _basis_ for macroeconomic
research. But I think it provides some _questions_ to be answered by
macroeconomic research. For example, "How does tax rate and income
distribution actually affect economic performance?" This question
can only be answered by modeling and by comparing the behavior of
the model to data.

Best regards

Rick

···

--
Richard S. Marken Phone or Fax: 310 474-0313
MindReadings.com mailto: marken@mindreadings.com
www.mindreadings.com

[From Mike Acree (01.02.09.1616 PST)]

Rick Marken (01.02.09.1530)]

I know that the letter doesn't provide a _basis_ for macroeconomic
research. But I think it provides some _questions_ to be answered by
macroeconomic research. For example, "How does tax rate and income
distribution actually affect economic performance?"

But terms like "economic performance" also require further specification.
As far as I can tell, most economists of most orientations use indices like
GNI or GDP. But these, being equivalent to _average_ income or domestic
product, don't say anything about income distribution. Making the rich
richer would increase per capita income, assuming the ceteris could be
paribus. The question of how tax rates and income distribution affect
economic performance is an empirical one, but the evidence doesn't favor
forcible redistribution. Sweden had the highest per capita income in the
world before instituting socialism, and it no longer does.

Mike

[From Rick Marken (01.02.09.2330)]

Me:

I know that the letter doesn't provide a _basis_ for macroeconomic
research. But I think it provides some _questions_ to be answered by
macroeconomic research. For example, "How does tax rate and income
distribution actually affect economic performance?"

Mike Acree (01.02.09.1616 PST)

But terms like "economic performance" also require further
specification.

Of course they do. And there already are many traditional measures:
inflatoin rate, growth rate, unemployment rate, poverty level, etc.
And you can invent your own if you don't like these.

But these [measures like GNI, GDP], being equivalent to _average_
income or domestic product, don't say anything about income
distribution.

Right. To measure distribution of income you have to measure the
relative number of households at different income levels. This
data is also available in the Statistical Abstracts.

Making the rich richer would increase per capita income, assuming
the ceteris could be paribus.

I don't know what "assuming the ceteris could be paribus" means but
if it means "assuming the rich get richer without the poor getting
proportionately poorer" then you are correct. But the fact is that
when the rich get richer everyone else must get poorer. There is
only a finite amount of wealth being generated by an economy at
any instant: GNP. If 1% of the population gets 70% of GNP then only
30% of GNP is left for the remaining 99% of the population. If that
1% manages to increase its share of GNP to 80% then only 20% of GNP
is left for the remaining 99%; the rich 1% got richer while everyone
else got poorer. But per capita income (GNP/population) remainewd
the same.

The question of how tax rates and income distribution affect
economic performance is an empirical one, but the evidence
doesn't favor forcible redistribution. Sweden had the highest
per capita income in the world before instituting socialism,
and it no longer does.

I would like to see the data. In fact, quite the opposite occurred
in the US. Since what I'm sure you would call "socialism" was
instituted in the US (in the early 1930's, under FDR) the average
rate of economic growth has been substantially higher than it
it was in the 40 years prior to that period.

Best regards

Rick

···

--
Richard S. Marken Phone or Fax: 310 474-0313
Life Learning Associates e-mail: marken@mindreadings.com
mindreadings.com

[From Bill Powers (2001.02.10.0352 MST)]

Mike Acree (01.02.09.01.1350 PST)--

... if I remove the moral language from your letter
("fair," "inequities," "abused," etc.), it is a little hard to see what is
left, as a basis for the macroeconomic research and modeling you call for.

I support Rick's answer: the effect to be investigated is that of some
people's pursuing goals having certain economic implications -- for
example, the goal of acquiring all the money there is. A model in which
most people treat money as a means of obtaining other ends would surely
show some interesting behavior if some of the people made the acquisition
of money the highest goal, especially if the goal is not a specific amount
but just "more." While PCT would not indicate any preferences for the
outcome, the theory would be useful as a way of predicting an outcome, and
thus giving us a basis for judging that particular goal as one to have, or
to permit.

Even if a theory offers no basis for making moral (or other) judgements, it
can be used by people who do make such judgements. Biochemistry does not
say whether we should or should not feed certain substances to our
children, but it can tell us which substances are poisons, and give us a
basis for deciding whether or not to give the baby, for example, strychnine.

Best,

Bill P.

[From Bill Powers (2001.02.10.0409 MST)]

Mike Acree (01.02.09.1616 PST)--

The question of how tax rates and income distribution affect
economic performance is an empirical one, but the evidence doesn't favor
forcible redistribution. Sweden had the highest per capita income in the
world before instituting socialism, and it no longer does.

On the other hand, the United States does employ forcible redistribution,
and it has one of the highest per capita incomes (much higher than before
the income tax was adopted). See how one can pick facts, and leave out
others, to reach just about any foregone conclusion? Maybe forcible
redistribution is not what made the difference in Sweden.

If there are 19 people making $1000 per year, and 1 person making
$1,000,000 per year, the per capita income is $50,950 per year. Sounds
pretty good -- what are those 19 socialists complaining about?

Best,

Bill P.'

[From Dick Robertson,2001,02.10.1320CST]

"Richard S. Marken" wrote:

[From Rick Marken (01.02.09.1100 PST)]

Just for fun, here's a letter I send to the LA Times today....

Ric,

What a great letter. I'd love to hear what response(s) you get from it.

Best, Dick R.

···

[From Rick Marken (01.02.10.1640 PST)]

Dick Robertson (2001.02.10.1320 CST) --

What a great letter. I'd love to hear what response(s)
you get from it.

Thanks, Dick! I haven't heard from the Times yet, which
means they aren't going to publish it. So about the only
responses we're going to hear are the ones we've already
heard on CSGNet.

Best regards

Rick

···

---
Richard S. Marken Phone or Fax: 310 474-0313
Life Learning Associates e-mail: marken@mindreadings.com
mindreadings.com

[From Mike Acree (2001.02.10.1737 PST)]

Bill Powers (2001.02.10.0409 MST)--

The question of how tax rates and income distribution affect
economic performance is an empirical one, but the evidence doesn't favor
forcible redistribution. Sweden had the highest per capita income in the
world before instituting socialism, and it no longer does.

On the other hand, the United States does employ forcible redistribution,
and it has one of the highest per capita incomes (much higher than before
the income tax was adopted). See how one can pick facts, and leave out
others, to reach just about any foregone conclusion? Maybe forcible
redistribution is not what made the difference in Sweden.

Right. None of us finds statistical arguments in general, or economic data
like this in particular, very compelling, and perhaps with good reason.

If there are 19 people making $1000 per year, and 1 person making
$1,000,000 per year, the per capita income is $50,950 per year.

This was exactly my point in saying that national economic indicators were
insufficient for Rick's goal of helping certain subgroups. He acknowledged
the point in saying (01.02.09.2330)

you have to measure the
relative number of households at different income levels.

Rick Marken (01.02.09.2330)--

the fact is that
when the rich get richer everyone else must get poorer. There is
only a finite amount of wealth being generated by an economy at
any instant.

The problem is this: that the economic system which maximizes the wealth of
the poorest citizens may not be the one which minimizes wealth disparities.
You keep trying to exclude that possibility as a matter of logic, but your
zero-sum arguments about a static economy or instantaneous time-slices don't
do the trick. What needs to be compared is the performance of whole
economic systems over time. We have a fair amount of such data now, but, as
I acknowledged to Bill above, they are complicated enough to leave room for
differing interpretations. But that's problem enough: However historical
data might be interpreted, any realistic model would have to allow the two
quantities--the wealth of the poorest sector and the difference between
richest and poorest--to behave differently in principle, rather than
constraining their covariation a priori. Unless they turned out to be
perfectly correlated, you would have to decide which goal you favored.

Mike

[From Rick Marken (01.02.12.2130)]

Mike Acree (2001.02.10.1737 PST)--

The problem is this: that the economic system which maximizes
the wealth of the poorest citizens may not be the one which
minimizes wealth disparities. You keep trying to exclude that
possibility as a matter of logic, but your zero-sum arguments
about a static economy or instantaneous time-slices don't do the
trick. What needs to be compared is the performance of whole
economic systems over time.

I agree. What you are saying is that the wealth disparity may be
needed to keep the economic engine running: keep GNP growing. So
the poor are better off in an economy with a huge wealth disparity
because, even though they get only a tiny percent of the wealth
generated by the economy, the amount of wealth and the rate of
increase in the wealth over time is greater than it would be in
an economy where wealth was more equitably distributed. So the
poor in an economy with a hugh wealth disparity are getting a
tiny portion of a large, fast expanding pie while the middle
class in an economy with no wealth disparity are getting a large
portion of a tiny, sluggishly expanding pie. It's easy to work
the numbers out so that the wealth of the poor person in the
large wealth disparity economy is always much larger than that
of the average person in the no wealth disparity one.

What's interesting about T. C. Powers' book "Leakage" is that it
shows that this myth is just that: a myth. Powers shows that the
US economy has performed best (grown fastest) when wealth disparity
was lowest (due to government redistribution). It's also true that
the countries in the world with the highest standards of living
(biggest, fastest growing pies) are the one's with the most equitable
wealth distributions (the most government redistribution). The closed
loop model of the economy explains why this would be the case. It
shows why maldistribution of income is not just "unfair"; it is
completely dysfunctional. Gross wealth inequality keeps an economy
from working anywhere near its potential for generating a nice
standard of living of all.

Best regards

Rick

···

--

Richard S. Marken Phone or Fax: 310 474-0313
Life Learning Associates e-mail: marken@mindreadings.com
mindreadings.com

At 17:38 Michael wrote about Re: Economics on 12 Feb 2001,

The problem is this: that the economic system which maximizes the wealth
of the poorest citizens may not be the one which minimizes wealth
disparities. You keep trying to exclude that possibility as a matter of
logic, but your zero-sum arguments about a static economy or instantaneous
time-slices don't do the trick. What needs to be compared is the
performance of whole economic systems over time. We have a fair amount of
such data now, but, as I acknowledged to Bill above, they are complicated
enough to leave room for differing interpretations. But that's problem
enough: However historical data might be interpreted, any realistic model
would have to allow the two quantities--the wealth of the poorest sector
and the difference between richest and poorest--to behave differently in
principle, rather than constraining their covariation a priori. Unless
they turned out to be perfectly correlated, you would have to decide which
goal you favored.

Mike

Bravo and thank you!!!

Have you eer seen the Cato publication:

"Economic Forcasting -- Models or Markets?
-- James B. Ramsey

If I'm following your remarks the above book is an xlent discussion of
such problems.

Best,
nth

[From Bill Powers (2001.01.13.1635 MST)]

Mike Acree (2001.02.10.1737 PST)--

The problem is this: that the economic system which maximizes the wealth of
the poorest citizens may not be the one which minimizes wealth disparities.

An astute observation, but it's just another version of the trickle-down
theory. The basic idea that I get out of this general approach is that
unless you allow certain extraordinarily greedy people to satisfy their
avarice, they will refuse to play and the economy will go to hell. Usually
this is accompanied by a recital of the "risks" that entrepreneurs take,
which justify their demands for large rewards. But most of this is just
myth; people who want money and power aren't generally any smarter than
other people except in the area of running a con. And I have never seen an
entrepreneur who would take any risks if he could find someone else to take
them for him. That's what the stock market is for.

My general impression is that we just barely have an economic system at
all, and that the one we have is run mainly by people who have all the same
motives as the people we call criminals.

Best,

Bill P.

[From Mike Acree (2001.02.10.1737 PST)]

Bill Powers (2001.02.10.0409 MST)--

The question of how tax rates and income distribution affect
economic performance is an empirical one, but the evidence doesn't favor
forcible redistribution. Sweden had the highest per capita income in the
world before instituting socialism, and it no longer does.

On the other hand, the United States does employ forcible redistribution,
and it has one of the highest per capita incomes (much higher than before
the income tax was adopted). See how one can pick facts, and leave out
others, to reach just about any foregone conclusion? Maybe forcible
redistribution is not what made the difference in Sweden.

Right. None of us finds statistical arguments in general, or economic data
like this in particular, very compelling, and perhaps with good reason.

If there are 19 people making $1000 per year, and 1 person making
$1,000,000 per year, the per capita income is $50,950 per year.

This was exactly my point in saying that national economic indicators were
insufficient for Rick's goal of helping certain subgroups. He acknowledged
the point in saying (01.02.09.2330)

you have to measure the
relative number of households at different income levels.

Rick Marken (01.02.09.2330)--

the fact is that
when the rich get richer everyone else must get poorer. There is
only a finite amount of wealth being generated by an economy at
any instant.

The problem is this: that the economic system which maximizes the wealth of
the poorest citizens may not be the one which minimizes wealth disparities.
You keep trying to exclude that possibility as a matter of logic, but your
zero-sum arguments about a static economy or instantaneous time-slices don't
do the trick. What needs to be compared is the performance of whole
economic systems over time. We have a fair amount of such data now, but, as
I acknowledged to Bill above, they are complicated enough to leave room for
differing interpretations. But that's problem enough: However historical
data might be interpreted, any realistic model would have to allow the two
quantities--the wealth of the poorest sector and the difference between
richest and poorest--to behave differently in principle, rather than
constraining their covariation a priori. Unless they turned out to be
perfectly correlated, you would have to decide which goal you favored.

Mike

···

At 05:38 PM 2/12/2001 -0800, Michael Acree UCSF wrote:

[From Mike Acree (2001.02.13.1127 PST)]

Bill Powers (2001.01.13.1635 MST)--

The problem is this: that the economic system which maximizes the wealth

of

the poorest citizens may not be the one which minimizes wealth

disparities.

An astute observation, but it's just another version of the trickle-down
theory.

I have consistently tried, in this latest economics thread, to avoid making
claims about economics per se, and to limit my points to methodology, as I
did in the Mises post. That's what I was doing in this post, in asking Rick
whether he were willing in his economic modeling to allow the wealth of the
poorest sector to vary independently of the disparity in wealth, or whether
he would constrain them a priori to covary. He didn't answer. Both he and
you, as in your response above, see, quite correctly, a substantive economic
implication lurking in the methodological question, pounce on that as
morally unacceptable, and leave the methodological point unacknowledged.

Ok. But how do you suggest we proceed? I remain as interested as ever in
understanding the differences between us. Understanding differences in
moral perspectives like this seems to me one of the most urgent, if not the
most important, problems we face, as a species. It is an especially
tantalizing task, as I've said before, with someone with whom you appear to
share such a major frame of reference. It's perfectly clear that
discussions within economic or political theory are going to accomplish
nothing, ever. Neither historical data nor toy spreadsheet models are
nearly unequivocal enough to change minds. Correspondingly, I don't think
the strength of our convictions derives from economic or political theory
per se; none of us is that much of an expert in these fields. You suggested
once that the problem was that system concepts weren't high enough to reach
where the differences between us lie, but I have, at least tentatively, a
different view. From the persistence and force with which moral arguments
intrude (I say "intrude" because they are not coming from PCT itself, as I
have twice been reminded when I made them), it is quite clear to me, at
least, that that level is what's driving the arguments, from both sides. At
the conclusion of the Anarchy thread 2 years ago, I posted a message on The
Moral Basis of Political Disputes, attempting to take the discussion up (?)
a level. That post started a long thread under that title, but the content
of my message was entirely ignored. (Rick replied with the often-repeated
accusation that I was drawn to PCT as a way of justifying my prior
anarchistic beliefs, when I had replied several times that PCT was the main
influence in persuading me of anarchy. From there the discussion remained
on the original level of politics.) Perhaps what I was saying seemed just
too silly for words--though that usually doesn't keep people from making
some sort of response. More likely, I didn't make myself clear. I'm aware
that my writing tends to be concise; more than once, including in this
thread, you or someone has made a point as if in answer to me, when I
thought it had been clearly implied in the post to which you were
responding. Not knowing what the problem was, and with no particular hope
that the response this time will be any different, I'm reposting the
relevant portion of that message. I don't believe it's impossible in
principle for us to work our way back to a point of agreement, from which we
might begin to understand our divergence, but it's something I can't do by
myself. I have ideas, but they remain speculation without a response from
you. That imposes absolutely no obligation on you; you may simply not be
interested in the same goal of mutual understanding that I am. But if you
are, and discussions within economics and politics don't work, and
restricting the discussion to methodology doesn't work, and moving to the
moral level doesn't work, I'm stymied, at least for now.

All best,
Mike

[From Mike Acree (990309.1230 PST)]

Liberals and conservatives in American culture today can be seen as
differing merely in having picked up different aspects of Christian
asceticism--as it were, the material and the spiritual. The sin of the left
is greed; the sin of the right is lust. Both sins have in common that money
and sex are things of which humans control for a rather high level. People
aspiring to either ascetic standard of morality commonly feel that they need
extra help, in the form of external controls--rewards and punishments. But
if you are to suffer such deprivation, it is intolerable to see others
unconstrained; hence the press for universalizing such proscriptions,
through the institution of the Church or the State, or preferably both.
Hence the idea of legislation making crimes of one or the other of these
sins makes sense to almost everybody, and as a result we have criminalized
both. This analysis would account for the curious indifference of both
liberals and conservatives to the hardships their laws cause others. The
typical response is one we have heard several times on the Net: "_I_'m
happy with taxation (or heterosexual monogamy); if I'm willing to suffer the
deprivation, you should be, too." But I have also heard liberals, in
unguarded moments, complain about taxes, and boast about creatively
arranging their dinner parties or their honeymoon in Bali as a tax
deduction; and for conservatives who have strayed we need look no farther
than Congress. Ascetic codes lead people to feel frustrated and deprived,
therefore commonly entitled and inclined to override others, and therefore
probably more inclined to expect that others will do the same.

This typology is obviously not exhaustive; there is plenty of room for
people who want to punish both sins. Al and Tipper Gore come famously to
mind, but so do many conservatives. There are also those who, largely under
the influence of Rand, reject both standards of morality. For them, it
might be said, with the same crudeness as the previous characterizations,
the fundamental sin is power. Like Rand, these libertarians remain
fiercely, often obnoxiously, moralistic. (In each case, of course, it is
the exercise of the respective capacity that is the sin, rather than the
feeling itself--making money, making love, making war.) It is fair to ask
whether this view constitutes a third ascetic standard (one also with some
Christian roots), and the answer seems to me pretty clearly affirmative.
The ideal of minimal-government (as opposed to anarchist) libertarians is a
government that would punish only their sin--coercion (understood in a more
specific sense than Rick's, which seems to equate it with force or violence
per se). And it is not unknown for libertarians to give the impression of
being frustrated dictators. The fondness for military metaphors may be one
indication: years ago Rand had a feature in her newsletter called the
"Intellectual Ammunition Department," and the continuing popularity of the
phrase suggests that few of her followers felt any discomfort with it.

There is also, especially among the young, a kind of punk nihilism which
cynically rejects all standards. I have some sympathy with their
conclusions, tending myself toward Nietzsche's cynical characterization of
ethics as the invention of the weak for the control of the strong. But this
position is missing for me, even more conspicuously, the same element as the
others: an orientation to the positive connections between people. Even as
things stand, the reason why most people do not rob or murder each other is
not the fear of being caught and punished (and, conversely, that fear is
often ineffective against those who are so inclined). A sense of respect
for others as autonomous beings survives to some degree--the quality I'm
struggling to articulate may be contained in what Bill has referred to as
"grace"--but our systems of legal and ethical rules go far toward
undermining it. Bill has written in various places of the phenomenon of
extrinsic motivation, a kind of Gresham's law of motivation. An interesting
example of how we relax our own efforts at control as it is taken over for
us is the ethics of research. We responded a few decades ago to some
egregious abuses by creating the ubiquitous bureaucracy of Institutional
Review Boards; now, as a result, people have come to treat research ethics
as a matter of complying with the paperwork. Practices not explicitly
covered by the rules, such as talking about research participants in
restaurants, go on as before, but with perhaps even less sense of awareness
and responsibility. In the general case I'm concerned with, surely the
greatest obstacle to a felt sense of respect for others is simply childhood.
The best most children can hope for is to be treated like pets--to be owned,
controlled, trained, protected, perhaps to be cuddled when young--but to be
consistently regarded with respect, as autonomous human beings, is rare.

I don't think the political ideas I've advocated depend on the universal
achievement of any such attitude; such an achievement would surely never be
more than partial, anyway (as it already is). But neither is the vision
utopian in the sense of being unworkable in principle; there is much that
could actually be done, at least over the long run, and different political
arrangements vary in the degree to which they promote that outcome.

To my claim that the basis of political disputes may lie at a lower level
than system concepts--namely, people controlling for a perception of
themselves as moral, by a standard they feel incapable of meeting unaided,
while controlling simultaneously for a sense of justice, which requires that
everyone be subject to the same constraints--it might reasonably be objected
that moral concepts are system concepts, too. To this I have no important
objection; I have merely shifted the system concept from political or
economic to ethical. I'm not especially pleased with this conclusion, but
it does look to me as though focusing on the political or economic concepts,
to the exclusion of the moral, will miss the fundamental source of the
resistance. I intend these comments, I hasten to add, as a possibly useful
observation about political conflicts, not as an invitation to an ethical
debate.

[From Rick Marken (01.02.14.1200)]

Mike Acree (2001.02.13.1127 PST)--

That's what I was doing in this post, in asking Rick whether he
were willing in his economic modeling to allow the wealth of the
poorest sector to vary independently of the disparity in wealth,
or whether he would constrain them a priori to covary. He didn't
answer.

Well, I thought I did. The answer is "Of course I am willing to
allow the wealth of the poorest sector to vary independently of
the disparity". I put no "a priori" constraints in to make them
covary. The only constraints are the usual mathematical ones: if
r + p = w then there are constraints on the values r and p can
take simultaneously, as they vary, to produce w. Even with w
varying over time, r and p will covary, not because I have done
anything to constrain them to covary but because they _must_
covary if they are to sum to w.

Best regards

Rick

···

--
Richard S. Marken Phone or Fax: 310 474-0313
MindReadings.com mailto: marken@mindreadings.com
www.mindreadings.com

[From Mike Acree (2001.02.14.1232 PST)]

Rick Marken (01.02.14.1200)--

That's what I was doing in this post, in asking Rick whether he
were willing in his economic modeling to allow the wealth of the
poorest sector to vary independently of the disparity in wealth,
or whether he would constrain them a priori to covary. He didn't
answer.

Well, I thought I did. The answer is "Of course I am willing to
allow the wealth of the poorest sector to vary independently of
the disparity". I put no "a priori" constraints in to make them
covary. The only constraints are the usual mathematical ones: if
r + p = w then there are constraints on the values r and p can
take simultaneously, as they vary, to produce w. Even with w
varying over time, r and p will covary, not because I have done
anything to constrain them to covary but because they _must_
covary if they are to sum to w.

But this equation is nowhere near a model of a working economy. Time
doesn't even appear. Obviously it will be true at any given instant, in any
economy, that r + p = w. But if we're comparing two economic systems, or
the same system at different times, it's entirely possible to have both p1 >
p2 and (r1 - p1) > (r2 - p2). That's the possibility you appeared to be
denying, but it would take an extra constraint to rule it out. So I still
see you as not having answered my question, but I can also see that my
question may not have been very clear.

Mike

[From Rick Marken (01.02.14.1330)]

Mike Acree (2001.02.14.1232 PST) --

But this equation [w=r+p] is nowhere near a model
of a working economy.

That's correct.

Time doesn't even appear.

How about w(t) = r(t) + p(t)

But if we're comparing two economic systems, or the same system
at different times, it's entirely possible to have both p1 > p2
and (r1 - p1) > (r2 - p2). That's the possibility you appeared
to be denying

No. I'm denying the possibility that r(t) and p(t) covary because
of some constraint I impose. If we assume that w(t) (wealth
varying over time) is the sum of the wealth held by the rich (r(t)
and poor (p(t)) at time t, then r(t) and p(t) will covary;
indeed, they will covary _negatively_. As the rich get richer
(r(t) increases over time) the poor necessarily get poorer
(p(t) decreases over time) and vice versa.

In fact, I just ran this on a spreadsheet to prove it to myself.
I made the time changes in w(t) sinusoidal. I let r(t) increase
over 40 time units. And I set p(t) = w(t) - r(t). The results
depend on the period of the sinusoidal variations in w(t). The
correlation (covariation) over a 40 unit period between r(t)
and p(t) was -.94 when the period of the sine wave was 40 units.
When the period of the sine wave was 100 units the correlation
was -.97. When the period was 10 units the correlation was -.87.
I'm sure a mathematician could prove this but this numerical
example should suffice to get the point across: in an economy
that generates a finite amount of wealth over time (w(t)), as
the rich in this economy get richer the poor necessarily get
poorer, and vice versa.

So I still see you as not having answered my question

Does this answer it?

Best

Rick

···

--
Richard S. Marken Phone or Fax: 310 474-0313
MindReadings.com mailto: marken@mindreadings.com
www.mindreadings.com

[From Mike Acree (2001.02.14.1400)]

Rick Marken (01.02.14.1330)--

So I still see you as not having answered my question

Does this answer it?

No. But it confirms my impression that you don't understand the question.
I'm mildly interested in what it would take to get you unstuck, but not
enough to continue the thread right now. Sorry. Maybe someone else can
help.

Happy V.D.
Mike