PORTER ROCKWELL

Novelist trapped in a techie's body!

Articles Posted: 37 Links Seeded: 13

Member Since: 8/2010 Last Seen: 5/16/2012

"Pure" Capitalism's Built In Advantage for the Rich!!

Thu Jan 12, 2012 5:31 PM EST

politics, computer

By Porter Rockwell

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I read a message today on the Vine retelling an old urban legend which supposedly "proves" that socialism doesn't work using the metaphor of a teacher who gives an average grade to a whole class.

The story told by the message on the Vine is one I have heard before. It goes like this. A teacher is said to have offered a "deal" to an entire class. The teacher says he will give the entire class the average grade received on tests. That way, no one wins and no one loses. In other words (according to the message) "socialism". The message concludes with the claim that the good students stopped working and and poor students never did, so the entire class failed. Ayn Rand turned this simple idea into a whole series of books.

Leaving aside the whole discussion that this simple idea certainly doesn't describe socialism and people don't act that way even if it did, this simplistic story started me thinking about what is wrong with capitalism.

One glaring problem with America, and indeed the world these days is that the rich really are getting richer at an accelerating rate. The middle class is literally being destroyed by the 1%. Everybody else is being pushed into poverty.

As my bio states, I'm a techie. I tend to think of things in mathematical terms and that's the way I understand why this happens. Being rich means that you have more money than you need for the basics of life: "excess wealth". Because you don't live from paycheck to paycheck, you can invest your excess wealth and get even more wealth. So, in simple mathematical terms, once somebody gets a little wealthy - for whatever reason - they can use the excess capital to gain an advantage over the people with less wealth and get even more wealthy.

This very simplistic model leaves out a lot. But it still illustrates an important principal. All other things being equal, once somebody gets ahead, that person has an advantage in being able to stay ahead. None of this depends on hard work, intelligence, human nature or any other "equalizing" factor. It's just pure math.

Since I'm a techie, so decided to see if I could whip together a fast computer program that would demonstrate this principal. And I did. Here's the way it looks:

This program, a very simple version of the computer models that economists use, simply starts with four players with the same wealth: $1000. Everybody has fixed living expenses of $100 per "round" - you can think of it as a day or week or whatever ... this is a model, not real life.

In each round, the fixed expenses are subtracted from wealth and then a completely random (uniform distribution in this case for the techies who might read this) percentage of current wealth is added.

I was amazed to discover that when even this simple model is run, one player really does get richer while the rest just stagnate. Which player gets rich is random. It just depends on which one is lucky enough to get ahead first. In the example run shown below, Player2 has wealth of about 3 billion dollars after fifty rounds while the other 3 are struggling just to get by. Just like real life!!!!

This is one of the main reasons that governments exist.

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Public Discussion (27)

crispy2000

From the results in your illustration, it doesn't look the the rest "just stagnate". By the 19th round,

Player 1 is down to $183
Player 2 is up to $183,384
Player 3 is up to $39,818
Player 4 is up to $11,681

So even in your simplified model, most of the players have increased their wealth by orders of magnitude.

This is one of the main reasons that governments exist.

Not really:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.—That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed.

In your model, Player 2 did nothing to reduce the rights of the other players, yet you claim:

The middle class is literally being destroyed by the 1%. Everybody else is being pushed into poverty.

...with the implication that Player 2 should be punished for his/her good fortune.

Based on your description, in your model each player benefits or suffers entirely independently and purely by chance. There is absolutely no interaction between the players. In an ideal free market, however, exchange only takes place when it's advantageous for both parties. Each participant's wealth increases through a combination of his/her own work and exchange with other participants. Try simulating that to simulate the effects of capitalism, not a continuous exponential lottery.

2 votes

#1 - Mon Mar 5, 2012 5:02 PM EST

ryoushi12

But, you ignore the LUCK factor, 2 didn't EARN anything, 2 LUCKED into the top position. And of, course, in this simplistic model, the REALITY that player 2 would in fact at some point co-opt the system, so that luck no longer played a part, but MANIPULATION, derived from the POWER of having a superior economic position, WOULD determine future outcomes, is ignored.

In fact, that would be the NEXT thing to add to this little simulation, th eability after a certain point, use wealth to MANIPULATE OUTCOMES in a predetermined manner.

And, crispy, that model HAS been played out, with disasterous results almost invariably due to basic chaotic and random events, by a group of economists applying statistiucal analysis similar to quantum mechanics to economic behaviors, see here -http://en.wikipedia.org/wiki/Econophysics

Every NON-free market economic model ALWAYS shows that without regular intervention and controls, capitalism will invariably fly apart because the assumptions of its proponents are just that - personal opinion WITHOUT ANY GROUNDING IN REALITY.

#1.1 - Tue Mar 6, 2012 3:02 PM EST

crispy2000

ryoushi12

But, you ignore the LUCK factor,

On the contrary, the "LUCK factor" is the only thing in play in this simulation. There is zero interaction between the simulated players, zero choice in behavior by them, zero change in their "standard of living" expenses.

As you've pointed out, in reality, people change their environments, or try to.

Does the inaccuracy of the model mean that there is no unfairness in the world? Let's ask a couple of different questions:

If a simulation of gravity is inaccurate, does gravity not exist?
If a simulated pig flies, can real pigs fly?

I seeded an article that tries to explain the source of wealth inequality. It's a bit technical, but quite logical.

1 vote

#1.2 - Tue Mar 13, 2012 3:51 PM EDT

Porter Rockwell

Crispy is right about one thing (and, as nearly as I can tell, only one). The very simple model I created is based on random chance. (ie ..."luck" or, in more understandable terms, the way the Walton heirs got rich). The purpose is to very simply demonstrate the dramatic effect of having excess capital to invest over not having it.

The economic article he seeded is a bull@!$%# argument about capital formation. I used to debate these things over a beer with the head of the econ department when I was an undergrad. The zit who wrote it is basically adding two apples and getting a bowling ball.

The key to understanding that Crispy's seeded article is bull@!$%# is the phrase in it, "In order for more and more Americans to participate in the American dream, there needs to be an accumulation of wealth. Wealth is accumulated through capital formation or more simply put, saving money."

Exactly my point and very close to what I said in my article. If the 1% are taking all of it so ordinary people don't have any of it, that's very difficult.

All the stuff earlier is fairly accurate, but irrelevant (although Milton Friedman - who, incidentally, taught at the same university that President Obama used to teach at - got a Nobel Prize for his disciplined analysis of the effect on the overall economy).

Right wingers use this technique a lot. Bamboozle and change the subject.

#1.3 - Tue Mar 13, 2012 4:19 PM EDT

JayTee-3231157

It's all about how one manages to get rich in the first place.

How did Steve Jobs do it ?

First his mom decided against aborting him, that was a necessary start.

Second, he quit college because his family couldn't afford it.

Third, he succeeded in Business, and because of that, he had an advantage being RICH.

Fourth, Business competition caused him to try, try, again, and then the IPOD "happened".

Steve Jobs violated all the Liberal rules, and got RICH.

2 votes

#2 - Mon Mar 5, 2012 5:09 PM EST

Porter Rockwell

Here's a new word for you.

di·va·gate - to wander or stray from a course or subject : diverge, digress

Why is it that when right-wingers hit something they can't deal with directly, they change the subject?

The piece is about the simple mathematical fact that all other things being equal, someone who gets a little more money early on has a built in advantage that overwhelms everyone else. It's not about abortion or the constitution or Steve Jobs. It's about understanding why the 1% exist throughout history.

Thank you for your regurgitation of tea party sound bites, but neither of you touched the subject. One of the main reasons that the rich always get richer is that money that isn't required to keep bread on the table can be used to get more money. And more money. And more money. Until the 1% have nearly all of it.

All these examples that are so near and dear to your hearts clearly do exist. But for every Steve Jobs, there is an Alice Walton. In fact, the six heirs to Walmart together are worth about as much as the entire bottom 30% of Americans. (The few, the proud, the very rich)

This is off the subject too. (You did it first.) But I have never been able to figure out why right-wingers feel they have to defend the obscenely rich people who are simply taking advantage of them. They're playing you for fools. It has been described as "screw me" politics. "Sheldon Adelson is trying to buy the presidency. Screw me. The Koch Brothers are trying to buy their tax advantages. Screw me." Totally baffling.

#3 - Tue Mar 6, 2012 9:52 AM EST

crispy2000

Here's a new term for you, straw man:

A straw man is a component of an argument and is an informal fallacy based on misrepresentation of an opponent's position. To "attack a straw man" is to create the illusion of having refuted a proposition by replacing it with a superficially similar yet unequivalent proposition (the "straw man"), and refuting it, without ever having actually refuted the original position.

I brought up no paeans to rich people and their philanthropy or lack of same. My comment was strictly limited to discussion of (1) how your model misrepresents reality - in particular, there is no interaction at all between the different players, (2) how your analysis missed the fact that 75% of the players were much better off, not 1%, and (3) how your conclusion about why governments exist was erroneous.

In response, you have chosen to make verbal attacks on commenters and to discuss

Abortion
the Tea Party
Alice Walton
right-wingers
Sheldon Adelson
the Koch Brothers

Straw men one and all.

Would you like to discuss the points I brought up?

3 votes

#3.1 - Tue Mar 6, 2012 11:34 AM EST

Porter Rockwell

"Would you like to discuss the points I brought up?"

Not at this time. I'll reserve the pleasure of doing that for some future moment when I'm more in need of an uplifting diversion.

Please note that I responded to both your comment, and the comment of the next poster in the same message. Contrary to your expectations, not everything is about you.

I didn't mention your specious reasoning about the 75% because it demonstrates nothing. This is a demonstration of why the rich get richer, not an actual case history. As such, the mathematical validity remains untouched, just as it was before.

#3.2 - Tue Mar 6, 2012 12:40 PM EST

ryoushi12

Crsipy, why do you introduce the very ATTACK on your OWN line of specious and null argumentation in post 3.1?

IT is YOU who are DEFENDING those who brought up those offtopic comments, and you know that DAMN WELL. I suggest that YOU are engaging in the activities that are generally restricted to little hairy men who live under bridges and have a taste for goat.

#3.3 - Tue Mar 6, 2012 3:08 PM EST

Porter Rockwell

A word about my personal attitude about CoH ... (Since this is my Vine site)

I believe more in the "Do unto others" rule. For example, Crispy left posts that attacked and I responded in kind. Then he left one that was reasonable and I also responded in kind.

If you want to be remembered the way Rush Limbaugh is being remembered, then be as vile as you wanna be. I think your comments will be taken for what they are worth by anyone bothering to actually read them. But if you want anything you say to actually count for something, then think a little bit before you post.

#3.4 - Tue Mar 6, 2012 3:15 PM EST

JayTee-3231157

If you want to piss off a Liberal, tell them the Truth.

If you want to piss off a Conservative, Lie to them.

Since you want to change the subject and bring up Rush Limbaugh, who is rich, lets talk about the "worst Liberal in the World", Keith Olberman, who used to be as vile as he wanted to be and make 7 million a year at NBC, and now the formerly rich Olberman is in the process of losing all his money.

Some people hate Capitalism, some hate Socialism. Guess which one has never been proved to work over time ? Think Europe, Greece, as a Prime example of failed Socialsim for the common man.

1 vote

#3.5 - Wed Mar 7, 2012 9:53 AM EST

Porter Rockwell

Think Sweden, Finland, Denmark as prime examples of where socialism has succeeded for the common man.

Good government is good government and bad government is bad government. One of the barriers that RWNJ's can't get across is that you have to actually think about issues, not just honk back bumper sticker slogans.

Never liked Olbermann much myself (spell it right ... there are two n's). But he doesn't take pleasure trips to the Caribbean with a suitcase full of Viagra.

#3.6 - Wed Mar 7, 2012 10:37 AM EST

crispy2000

Not at this time. I'll reserve the pleasure of doing that for some future moment

No worries.

A quick compliment, though: you avoided the common trap of modeling the capitalist economy as a zero-sum game.

1 vote

#4 - Tue Mar 6, 2012 1:03 PM EST

Porter Rockwell

Back atcha. Zero sum does not apply in biological or social systems in virtually all cases. In more plain language, we really can all benefit ... or go extinct ... together. Choices do count.

#4.1 - Tue Mar 6, 2012 1:13 PM EST

RexFisher

So, in simple mathematical terms, once somebody gets a little wealthy - for whatever reason - they can use the excess capital to gain an advantage over the people with less wealth and get even more wealthy.

Your utopia would result in the same greed, only it would result in power held by the elites in government.

2 votes

#5 - Tue Mar 6, 2012 1:27 PM EST

Porter Rockwell

Thank you for your evidence supported and logically reasoned missive. I will give it the sincere consideration it deserves.

#5.1 - Tue Mar 6, 2012 2:36 PM EST

JayTee-3231157

Here is some Evidence of what RexFisher is talking about.

http://hotair.com/archives/2012/03/07/tacking-the-nat-gas-act-onto-transportation-bill/

George Soros and other top contributors to Democrats are one step closer to making millions of dollars off their natural gas investments, thanks to tax breaks and subsidies included in the Natural Gas Act which was filed March 5 as an amendment to the highway bill…

Chief among the beneficiaries of the Natural Gas Act is Soros Fund Management, which according to federal filings, owns 6.6 percent of Westport Innovations, a Vancouver, British Columbia-based natural gas engine distributor and manufacturer. The fund’s position is worth more than $135 million at today’s stock market price. Westport, with three partner factories in China, is a global leader in fuel systems and conversion kits.

Then we have the Solyndra Tax Payer funded failure, with some Obama Bundler named Kaiser benefitting, Crony Obama Capitalism

1 vote

#5.2 - Wed Mar 7, 2012 10:57 AM EST

Porter Rockwell

And here I thought you guys liked billionaires!

Silly me!

(More seriously, this kind of onesy, twosy accusation back and forth accomplishes nothing. I could quote similar examples but I won't. The broad, overreaching facts are more things like the 1% owning everything and medical care costing far, far more in the US for quality that is less than dozens of other, more sane countries. Democrats want progress, Republicans want bumper stickers.)

#5.3 - Wed Mar 7, 2012 11:06 AM EST

JayTee-3231157

More seriously, this kind of onesy, twosy accusation back and forth accomplishes nothing

More Seriously, the "Halliburton" Liberal Talking point is a hypocritical talking point, where Halliburton hit the ABC/NBC/CNN airwaves for months as anti Bush "War for Oil" propoganda where you're supposed to hate the Rich Coporations and claim yourself as a victim.

Democrats and Marxist want "Class Warfare" and hate the rich, while they hide their "Rich connections" with the Liberal media co-operation, and Obama attends 30,000 a plate fundraisers by the dozens.

Speaking of Dozens...

medical care costing far, far more in the US for quality that is less than dozens of other, more sane countries

You couldn't name one of the Dozens above ? Also "Thank you for your evidence supported and logically reasoned missive. I will give it the sincere consideration it deserves."

1 vote

#5.4 - Wed Mar 7, 2012 12:45 PM EST

RexFisher

Point out the logical fallacy.

None of this depends on hard work, intelligence, human nature or any other "equalizing" factor.

Yet the 1% is evil in your eyes. And, the government, made up of men, is always good? Had you simply asserted that the results were interesting you could have accomplished something.

1 vote

#5.5 - Wed Mar 7, 2012 12:56 PM EST

Porter Rockwell

JayTee ...

"You couldn't name one of the Dozens above ?"

I want to sincerely thank you for asking. See my latest article.

http://porterrockwell.newsvine.com/_news/2012/03/07/10601784-the-best-health-care-system-in-the-world

#5.6 - Wed Mar 7, 2012 1:21 PM EST

Porter Rockwell

Rex

I don't think rich people are necessarily evil. I have a great deal of admiration for both Bill Gates and Warren Buffet. Like people everywhere, there are good and bad ones. I just think they should pay their fair share.

#5.7 - Wed Mar 7, 2012 1:24 PM EST

JayTee-3231157

#5.6 Your Article fails the smell test...........infant Mortality as a measurement of Health care

It's all about how infant mortiality rates are counted....

Another challenge to comparability is the practice of counting frail or premature infants who die before the normal due date as miscarriages (spontaneous abortions) or those who die during or immediately after childbirth as stillborn. Therefore, the quality of a country's documentation of perinatal mortality can matter greatly to the accuracy of its infant mortality statistics. This point is reinforced by the demographer Ansley Coale, who finds dubiously high ratios of reported stillbirths to infant deaths in Hong Kong and Japan in the first 24 hours after birth, a pattern that is consistent with the high recorded sex ratios at birth in those countries. It suggests not only that many female infants who die in the first 24 hours are misreported as stillbirths rather than infant deaths, but also that those countries do not follow WHO recommendations for the reporting of live births and infant deaths.^[20]

Another seemingly paradoxical finding is that when countries with poor medical services introduce new medical centers and services, instead of declining the reported IMRs often increase for a time. This is mainly because improvement in access to medical care is often accompanied by improvement in the registration of births and deaths. Deaths that might have occurred in a remote or rural area, and not been reported to the government, might now be reported by the new medical personnel or facilities. Thus, even if the new health services reduce the actual IMR, the reported IMR may increase.

1 vote

#5.8 - Wed Mar 7, 2012 3:40 PM EST

Porter Rockwell

Wow! You had to dig deep to find something to criticize there! I'm impressed.

1 - You found just one of a whole range of indicators
2 - It doesn't even mention that particular indicator as applied to the US
3 - Nothing in your obscure little factoid says whether our rate is lower or higher than it should be, just that maybe in some cases this statistic might not be completely accurate

Do you have to strain this hard when you do other things?

#5.9 - Wed Mar 7, 2012 4:09 PM EST

Porter Rockwell

Here's some more ... chew on this too. I wrote this a few years ago but it's still all true.

Artificial joints and the role of government in health care.

President Obama’s hard won victory in passing some sort of national health care is a good first step. But it’s only a first step. The main fact that everyone should remember is that health care costs way more than twice as much in the US as in any other country. And we get substandard care for all that money.

Insurance companies, pharmaceutical companies, hospital management companies, and doctors have concocted the lie that, “it’s not about the money – it’s about your freedoms”. There’s one thing you can be sure of: “It’s about the money!” There are billions of dollars of excess profit at stake. They’re not going to give up all that money easily. They have bought and paid for a lot of legislators.

Recently, The New York Times printed one of their great investigative journalism articles about how American patients get a raw deal from the companies that manufacture artificial joints. (Makers of Artificial Joints Rarely Offer Warranties). The main thrust of the article is that, unlike a toaster oven or a lawn mower, if an artificial joint manufacturer makes a shoddy product in the US, you (or the government) get to eat the cost. As a patient, you also get the suffering and risk of dying from a second operation to replace the shoddy product. As one authority quoted in the article puts it, the companies have no skin in the game. In fact, they get more profit by selling TWO joints instead of just one when they screw up the first one.

In other countries (Britain is quoted in the article), the very same manufacturers do offer a warranty. So the question naturally comes up, “Why don’t they offer a warranty in the US?” As a news source with some journalistic ethics (they’re not Faux News), the New York Times doesn’t reach conclusions in their news reporting. They just report facts. The most likely conclusion isn’t much of a reach, however. It’s a great example of how we pay more and get less in the US.

The real question that needs to concern us is, “Why? Why do we get this rotten deal?”

The answer is that corporations (who, thanks to the recent Supreme Court decision, can now spend as much money as they like buying legislators) have a lot of power to set the terms of a deal when we buy an artificial joint. You and I have almost none. In fact, there’s only one way that we’re going to be able to bargain with these guys on anything like equal terms. We have to band together. There’s a name for that process of banding together: “democratic government”. Only our elected representatives can force corporations to do what’s right. The problem is that they’re not our elected representatives; they are the corporations’ “bought and paid for” legislators.

People die from unnecessary multiple joint replacement operations. Always remember, the executives who reap obscene profits in their positions of power in corporations don’t care if you live or die. They only care about the money.

#5.10 - Wed Mar 7, 2012 4:17 PM EST

JayTee-3231157

#5.9 My Obscure Factoid is from Wikipedia........where it discusses the problem with "Comparability" of Infant Mortality rates.

Wikipedia wasn't the only "obscure" slap down of comparing infant mortality rates, there were plenty more choices, since it's obvious to the most casual Observer that America is THE place to get the best medical care.

For your OWN personal verification, next time you need a Serious Doctor's Appointment, go to England or somewhere in Europe and wait in line....Please.

As for Coporations buying legislators, I think Exxon should and could own a few, after all, Obamacare demonstrated just how many legislators can be bought.

1 vote

#5.11 - Thu Mar 8, 2012 1:15 PM EST

Porter Rockwell

<sic>

#5.12 - Thu Mar 8, 2012 1:56 PM EST

PORTER ROCKWELL

"Pure" Capitalism's Built In Advantage for the Rich!!

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PORTER ROCKWELL

"Pure" Capitalism's Built In Advantage for the Rich!!

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