Re: the free software paradigm

I did already reply to this, but I haven't got my 'copy to self' so I
have to assume I failed to send it. Bah.

Don Geddis wrote:
"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.


It's added to my TODO list...

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...").

I try to present statements I make (anywhere) as my opinion only; I
utterly failed to do that in this instance, for which I apologise.

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.


Agreed, that was phrased very poorly. I do however feel that in
monetary terms, in general, whoever is in the weaker position is likely
to 'lose out' by not maximising their return. This is a semantic
argument however, stemming from my own personal definition of 'profit'
and 'loss'.

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.

My interest is in the number of people who may be 'engineered to make a
loss' by the system rather than those who lose out either by their own
poor judgement or by betting on the wrong horse.

As an example (and unfortunately I now diverge from microeconomics
towards macroeconomics so the rules probably change; I think this is a
risk in any debate when one party is undereducted in the domain ;-)
consider the situation of the 'cash crop' and 3rd world countries; they
were driven to plant cash crops by the rich (the world bank and western
nations) -- crops that became worthless before generating any return
whatsoever. In addition many of these nations owe money in interest
that vastly overwhelms the original debt; it seems the rich want to be
paid fairly for lending money, and be paid again (and again, and
again). Because they wield the power, they are able to dictate their
own conditions to the detriment of the other party.

I seriously doubt those poorer nations planted cash crops of their own
free will; my guess is food would have been of more immediate use to
all concerned (well -- apart from the people that laid the rules down).

2. Even if everybody made a profit, it could easily be the case that some
people made a lot more profit than others.

This isn't a problem, as long as those making less profit manage to
make 'enough' profit (for some definition of enough).

3. The people that made more profit might ("happen to") be the already-rich
people.

This seems likely; it's easier to stack the deck in your favour when
you're the dealer.

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?


I consider it to be an irrelevence (if I had to choose, I'd say it was
bad; I think we should structure society in such a way that the poorer
get richer faster than the rich get richer); how much money one
posesses in dollar terms is a poor measure of wealth in my opinion. The
important thing is that 'the system' is felt to 'be fair' by all
concerned, and people's needs are met (I realise these are very vague
statements but the reason these issues are difficult to resolve is that
it is difficult to define precisely what the issues are I think).
I am concerned with the gap between rich and poor and 'relative wealth'
in so far as the weakest in society are not really benefitting by being
'better off' (since in terms of overall spending ability, they are
actually not better off since they fall lower and lower down the
'wealth' curve).

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).


I should have said "These things ARE included in MY 'profit and loss'
model'" instead; liquid wealth (above a certain point) does nothing to
increase 'wealth' by my definition of the term. Liquid wealth *below* a
certain level has a massive affect on 'wealth' by my definition
however.

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.)

These people are not wealthy in my mind.

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?


The fault is entirely with the individual who feels a superior car is a
path to happiness. We are all prone to this kind of thinking from time
to time I think (it seems to be human nature) but to be driven by it to
the extent indicated in your thought experiment is a condition of a
minority in society (I hope!).

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.


Without regret there would seem to be little reason to attempt to
improve and 'do better next time'. I think regret is essential.
For the specific situation outlined however -- I'm sure my ecstacy
would be killed PDQ in this situation, but hopefully I'd be a big
enough man to still feel grateful for my gain whilst shaking the hand
of the later customer (until I'm fortunate enough to be in this
position we'll never know for sure).

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.


I see that I confuse too many concepts; by mixing together 'economics',
'THE economy' along with 'socio-political' musings I'm unable to
coherently describe my thoughts on any individually.
I'm not convinced there's much merit in separating these things (apart
from as an intellectual exercise). They seem to be intertwined to such
an extent that without any one, all others lose meaning (if there's
one, it must be 'economics' which perhaps can be discussed in ways that
bear no resemblance to the other two).

As to the above point -- the 'human cost' of the war has been
overlooked. The world was poorer in humanitarian terms as well as in
monetary terms. I'd argue that the former is more important than the
latter.

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.


We should be past the point where as a race we progress blindly,
following our base survival and expansionist instincts. We appear not
to be past this (unfortunately) but we (as a species), I firmly
believe, have the capacity to define the impact we will have on the
ecosystem in which we live (where eco = ecological AND economic). There
seems little interest in such forethough amongst those with the power
to enact change however (and really, why should there be? The system as
it is works in their favour in all things).

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.


It should be possible to dispose of artificial pains and needs -- there
will always be those who will not be 'happy with their lot' (perhaps I
am one). Whatever society I imagine, it's not one that is ugly and
UNjust which I think is partially what we have currently.

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.


This is quite a Romanised view I think; where the only wealth of any
importance is monetary (and let's face it, it's easy to measure so it's
the kind of metric you'd expect a large organisation (such as a
government) to come up with). I do not subscribe to this point of view.
I suspect that until relatively recently the bulk of humans lived on a
reasonably equal basis (impoverished by modern standards for sure, but
relative to the wealth (by any definition) available at the time, not
impoverished. Poverty is after all a relative measure -- at least it is
when *I* define it ;-).

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.


If the farmland is able to support the 10,000 then there's no problem
there. If its a choice between 1000 in a nice valley farmland or 10,000
who have turned the farmland to dust, then the 1000 is preferable. This
is about nurturing raw materials though, rather than per-capita
(monetary) wealth.

In order for *my* economy to work, there must be population control. I
don't have a problem with that although I think the very concept makes
many uncomfortable. I think if we don't PLAN to control our population,
it will be controlled on our behalf at some point in a manner we'll all
find far less comfortable (but at least we'll be able to look at each
other and say "it wasn't my fault" and "who could have seen that
coming?").

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.


I'll certainly do that...

-Duncan


-- 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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