<story><title>Is Inequality Inevitable?</title><url>https://www.scientificamerican.com/article/is-inequality-inevitable/</url></story><parent_chain><item><author>SiVal</author><text>There is a popular political perspective that rules on campus these days that treats wealth as something that just magically exists and is simply &amp;quot;redistributed&amp;quot; by one means or another like, say, a phase change in physics where no magnetism&amp;#x2F;charge&amp;#x2F;energy&amp;#x2F;etc. is ever created or consumed. I waited for a point in their model where people actually produced wealth and consumed it, made something or ate it, in addition to redistributing it. Not part of the model.&lt;p&gt;And the idea that things have a &amp;quot;true&amp;quot; value, the one put on them by enlightened campus philosophers, so a transaction not controlled by the wise and just will have a winner and a loser. I waited for the idea that I, shoeless but with ten loaves of bread, and you, hungry but with ten pairs of shoes, might reasonably value bread and shoes differently and BOTH win from the &amp;quot;redistribution&amp;quot; of bread and shoes, but it was not part of the model.&lt;p&gt;But their model (which they claim &amp;quot;reproduces inequality with unprecedented accuracy&amp;quot;) could also (they claim) be fitted to a variety of different observed power law distributions when its parameters were adjusted, and the more parameters, the better the fit became. Yes, and they could probably get their model to describe the frequency distribution of English vocabulary (also a power law), with remarkable accuracy which probably does say something about economics but maybe not as much as they seem to think.</text></item></parent_chain><comment><author>vannevar</author><text>It&amp;#x27;s not part of the model because, if you&amp;#x27;re studying how wealth gets distributed rather than how it is produced, it doesn&amp;#x27;t matter.&lt;p&gt;I&amp;#x27;m guessing that your disquiet at this notion comes from the possibility that everyone is creating their own wealth, and to some extent that is no doubt true. But if you start with the simplifying assumption that everyone&amp;#x27;s wealth creation ability is equal, and you just look at distribution, and you find that your model pretty accurately reproduces the real-world distribution of wealth, it&amp;#x27;s at least some evidence that wealth-creation ability is not that different from person to person, and what&amp;#x27;s driving inequality is the distribution mechanism.&lt;p&gt;Since virtually all human traits follow a Gaussian distribution, it seems like whatever the wealth-building factor is, it would also follow a Gaussian distribution. But wealth follows more of a power law distribution. You never encounter anyone 1000 times taller than average, but there are many people 1000 times wealthier than average. This casts some doubt that wealth accumulation is down to individual human ability.&lt;p&gt;Couple that with the micro-economic observation that someone with 1 million dollars is astronomically more likely to make another million dollars than someone with 100 dollars, even if the two people are otherwise identical, and it seems pretty unlikely that wealth creation has much to do with the distribution we see.</text></comment>
<story><title>Is Inequality Inevitable?</title><url>https://www.scientificamerican.com/article/is-inequality-inevitable/</url></story><parent_chain><item><author>SiVal</author><text>There is a popular political perspective that rules on campus these days that treats wealth as something that just magically exists and is simply &amp;quot;redistributed&amp;quot; by one means or another like, say, a phase change in physics where no magnetism&amp;#x2F;charge&amp;#x2F;energy&amp;#x2F;etc. is ever created or consumed. I waited for a point in their model where people actually produced wealth and consumed it, made something or ate it, in addition to redistributing it. Not part of the model.&lt;p&gt;And the idea that things have a &amp;quot;true&amp;quot; value, the one put on them by enlightened campus philosophers, so a transaction not controlled by the wise and just will have a winner and a loser. I waited for the idea that I, shoeless but with ten loaves of bread, and you, hungry but with ten pairs of shoes, might reasonably value bread and shoes differently and BOTH win from the &amp;quot;redistribution&amp;quot; of bread and shoes, but it was not part of the model.&lt;p&gt;But their model (which they claim &amp;quot;reproduces inequality with unprecedented accuracy&amp;quot;) could also (they claim) be fitted to a variety of different observed power law distributions when its parameters were adjusted, and the more parameters, the better the fit became. Yes, and they could probably get their model to describe the frequency distribution of English vocabulary (also a power law), with remarkable accuracy which probably does say something about economics but maybe not as much as they seem to think.</text></item></parent_chain><comment><author>wuliwong</author><text>I received a Ph.D. in physics in 2010, throughout my training, my anecdotal experience was that of an echo chamber. I didn&amp;#x27;t fully realize it until I left academia. Although, it was slowly becoming apparent as the years passed. My experience was of a relatively small and closed group of physicists who reaffirmed each other&amp;#x27;s assumption that they were at the absolute peak of intellectual thought. Most of the professors imparted this mindset onto their graduate students and post docs. It fits pretty well with my experience that physicists would ignore the history of economic thought and believe that they could create a simple model that would accomplish what economists and philosophers have been hitherto unable to in the prior thousand years. But economics (or praxeology to be more general) is not physics. And a simple model of coin flips with random pairings and one risk limiting function isn&amp;#x27;t economics. When you have such hubris and make such simple mistakes as to assume that value is objective, it should be embarrassing.&lt;p&gt;-------&lt;p&gt;I will add that I still am a physicist who likes to think about things like this. One addition I would make to the model is that the poorer a person is the larger a percentage they are willing to risk. It still doesn&amp;#x27;t get around the fact that this whole model is based around the fallacy of object value but I like playing with models.</text></comment>