Re: the free software paradigm

"Duncan Rose" <duncan.rose@xxxxxxxxxxxxxxxx> wrote on 25 Jul 2006 03:2:
Apologies to students of economics -- my background is Physics where
nearly everything is a zero sum game.

You seem intelligent, educated, and interested in the topic. I bet you'd
enjoy some simple introduction to microeconomic theory. (Macroeconomic
theory, about the wealth of nations and whole economies, is a different animal.
But it sounds like you'd like microeconomics.) I recommend you grab a simple
intro book and at least skim it.

I wrote:
1. Wealth increases over time.

Duncan wrote:
True; but the relative wealth gap of the richest and poorest is
growing. The poor are "losing" compared to the rich more than they were
before (ok, economists would call this profit since in objective terms
the poorer are getting richer. I tend to think relative comparison is a
more realistic measure however).

I won't debate this part with you, but just observe that this is a far, far
different statement than you originally said. You originally wrote:

It's not possible for *everybody* to make a profit. Somebody, somewhere,
has to pay (or do) and make a *loss* (perform a service or sell goods for
'less than they're worth') in order for the economy to work.

That is expressed as though it's a law of economics ("It's not possible...").
That statement is false. It's easy to see in small examples that two (or a
few) people can possess wealth, can choose to trade with each other, and
_everybody_ will come out better (happier, richer) than they were before the
trade happened. So your original claim that someone MUST have a loss is
clearly just wrong.

But there's a long gap between that, and your new topic. For example:
1. Even if it was possible in THEORY for everybody to make a profit, that
doesn't mean that it works that way in our actual real-world economies.
No doubt there are indeed people who "make a loss" in the real economy.
2. Even if everybody made a profit, it could easily be the case that some
people made a lot more profit than others.
3. The people that made more profit might ("happen to") be the already-rich
people.
4. And the final question, for concepts of social justice, is whether one
should care about relative wealth, or absolute wealth. If "the poor"
are better off each year, but the rich are better off even more, is that
a good thing or a bad thing? Would it be a better world for there to be
less overall wealth, but for there to be a smaller gap between rich and
poor?

By the time you get to your current statements, the answers are far less clear
than they were with your original paragraph (which was simply wrong).

This isn't only measured in hard cash terms; also in mortality rates,
access to health care, access to clean and healthy food (even access to
clean water, for many), and every other metric you can think of. These
things I think should also be included in any 'profit and loss' model.

And now you've brought up another interesting wrinkle, wanting to measure
"total quality of life" instead of just liquid wealth (things of value which
can be exchanged for other things of value).

Here, let me make it even more fun for you: what if some class of people were
better off in every objective, measurable way, except: they just weren't as
happy. (This is related to your "gap between the rich and the poor" topic.)
You've heard the cliche "keeping up with the Joneses"? If finally, after ten
years, you trade in your old crappy car for a wonderful brand new car, you're
happy for a week. Then your neighbor trades in HIS old car for one that is
.... slightly better than yours. You're now jealous and unhappy. Even less
happy than you were a couple weeks ago, when you both had old cars.

Is someone at fault here? Should society be restructured so that you aren't
afflicted by this jealousy (perhaps with regulations, to prevent your neighbor
from buying a better car than you buy)? Or is the fault with yourself and your
own internal psychology?

These are hard questions to answer. Here's a related anecdote:

You are walking along the street and decide to enter a store. As you
enter a siren sounds and the manager rushes up to tell you
breathlessly that you are the 99,999th customer and have just won a
$1000 cash. You are delighted. As he counts $100 bills into your
hand, someone else enters the store and the siren goes off again. It
is the 100,000th customer. "What does she win?" you ask. The
manager replies: "$100,000". How do you feel? Ecstatic at your
$1000 windfall, or cheated out of a $100,000 prize by circumstance?
If the latter, that's regret -- something you don't want to live your
life by.

At some point economics must explain why so many people live in poverty

It's not a difficult question to resolve. Economics never says that the
world MUST get richer. Only that it is possible. World War II used up a
whole lot of world wealth, and the world as a whole was almost certainly
poorer in 1945 than it was in 1935. Some was destruction of goods and
infrastructure, some was consumption of finite bonus resources like oil.

Even leaving aside wars and famine and natural disasters, even in a regular
growing economy there is still a question of whether humans (like any other
living organism) will reproduce to the limits of their local environment to
sustain them. In any other ecosystem, talking about any other life form,
the answer is obvious: the species will grow in population size until some
external factor cuts off the growth. It may be a higher predator, it may be
fighting within the species, it may be lack of food supplies leading to death
via starvation.

But it is the TYPICAL case in an ecosystem that many individuals need to die of
something other than old age. You seem to imagine a beautiful and just society
where nobody is in pain or in need. I won't comment on whether this is
possible even in theory, but merely remark that it is against the "natural
order of things". And hence, if you wish to achieve such a society, you need
to do a lot of work to fight the natural forces that are attempting to return
to the more violent primitive state.

People living in "poverty" is how the bulk of humans lived until only the last
few centuries. Even today, if you take a very poor but large community and
toss in a bunch of free wealth, with no other changes, the main effect is that
a bit later on you have an even larger community, just as poor.

So, back to your original questions about a socially just economy, you now
ALSO need to address whether it is better to have 1000 middle-class people
live in some nice valley farmland, or 10,000 very poor people on the same
farmland. Which society would you prefer? Per-capita wealth, as a topic,
can't be separated from the topic of general population growth.

Anyway, Duncan, you seem interested in both economics and justice, but not
especially educated in either. Rather than trying to figure it all out on
your own, I bet you'd enjoy picking up a few introductory books on the subject
and seeing what other smart people have come up with in the past.

-- Don
_______________________________________________________________________________
Don Geddis http://don.geddis.org/ don@xxxxxxxxxx
As the evening sun faded from a salmon color to a sort of flint gray, I thought
back to the salmon I caught that morning, and how gray he was, and how I named
him Flint. -- Deep Thoughts, by Jack Handey
.

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