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In the strange economy that this simulation proposes, every economic interaction is a zero-sum game. Some or all of the participants' money is placed in a pot a

In the strange economy that this simulation proposes, every economic interaction is a zero-sum game. Some or all of the participants' money is placed in a pot and then randomly redistributed. This economy looks a lot like a poker tournament! As the game assumes that each economic interaction produces a winner and a loser, it is no surprise that simulation sorts the population into winners and losers.

fizixer 11y ago
Economy is pretty much a zero-sum game. The non-zero-sum game part (growth) is very small (2-3% even if that) if you consider a country's economy (or world economy) as a whole. I like to say if your income is consistently growing at ~10% every year, when the economy is growing at 2-3%, you're likely making someone worse off. (Although that someone might be some billionaire in which case have at it).
- bendykstra 11y ago
  > I like to say if your income is consistently growing at ~10% every year, when the economy is growing at 2-3%, you're likely making someone worse off. That is like saying, "The average age of the country is growing at 0.1% per year while my age is growing at 4% per year, therefore I must be making someone else younger." Income usually increases over the course of a career, but in the end, people retire or die and stop contributing to the average.
- oli5679 11y ago
  Wage-growth is conceptually different from the gains from trade within an economy. An isolated individual who doesn't trade(eg subsistence farmer) would produce goods of value of an order of magnitude less than current US GDP per capita. Similarly, your hypothetical individual who 'makes someone worse off' must by definition be inheriting some scarce asset, be lucky, deceptive, coercive or inflicting negative externalities. Otherwise why would anyone trade with him? This is not to say that inequality isn't a problem or greater redistribution would not be desirable. But you need to frame the problem correctly.
- yummyfajitas 11y ago
  Here is the actual graph of income growth, 1988-2008. Who were the middle class (specifically the 20'th-70'th percentile) making worse off? https://pbs.twimg.com/media/CUXo2NNUYAASTND.jpg:large https://pbs.twimg.com/media/CUXo2NNUYAASTND.jpg:large
  - fizixer 11y ago
    Middle class tends to rise off of the redistribution of rich class's wealth. Like I said, the second part of my original comment. (which is a good thing, so maybe "worse" is not the best word).
  - msellout 11y ago
    Seems like a wealth transfer from "developed country" workers to "less-developed country" workers and capital owners. The exact dynamics are of course hidden from that chart. The labels on the axes say that the peaks are gaining relative to the valleys in that chart.
    - yummyfajitas 11y ago
      A wealth transfer would cause at least one group to take losses, no? This graph shows growth for everyone.
      - msellout 11y ago
        No. There could be two phenomena occurring simultaneously: growth for everyone and layered on top of that a wealth transfer. The key term you're ignoring in my comment was relative: "peaks are gaining relative to the valleys". I know you're into finance. Are you familiar with the concept of a long-short hedge fund? If so, you should be comfortable with the idea of focusing on relative movement of two assets within an asset class, hedging against the absolute movement of the asset class as a whole.
        yummyfajitas 11y ago
        If you want to declare a delta between some hypothetical distribution and the actual distribution "wealth transfer", have at it. That is certainly irrefutable, albeit mathematically vacuous.
nabla9 11y ago
relative wealth is a zero sum game.
- bendykstra 11y ago
  Some countries have less inequality, but also have less average wealth. People do not migrate to those poorer countries seeking to be richer than their neighbors. Instead, people tend to migrate to areas of higher wealth, even though it means they will have less relative wealth. It's clear that absolute wealth is more important to people than the zero-sum game of relative wealth.
  - nabla9 11y ago
    Median wealth is what's interesting. Compare list of countries by net mean and median wealth. https://en.wikipedia.org/wiki/List_of_countries_by_wealth_per_adult https://en.wikipedia.org/wiki/List_of_countries_by_wealth_pe...
    - jbotttt 11y ago
      It's more interesting in chart form: http://imgur.com/GZxm0hD http://imgur.com/GZxm0hD
      - Retric 11y ago
        That's a rather biased chart. Net median wealth per adult. Australia 219,505 Luxembourg 182,768 Belgium 148,141 France 141,850 Italy 138,653 United Kingdom 111,524 Japan 110,294 Iceland 104,733 Switzerland 95,916 Finland 95,095 Norway 92,859 Canada 90,252 Netherlands 83,631 New Zealand 76,607 Ireland 75,573 Spain 63,306 Denmark 57,675 Austria 57,450 Greece 53,937 Sweden 52,677 Germany 49,370 Slovenia 44,932 United States 44,911 ... PS: US only has high wealth if you ignore debt. Owing 200k on a 200k house is not wealth.
        jbotttt 11y ago
ap22213 11y ago
In contrast, what would you propose? Economics isn't always a zero-sum game, but there is usually one who gains more than the other.
- clavalle 11y ago
  It is hard to say who gains more in a transaction. What can be said is that in most transactions both parties walk away with more value. It is guaranteed to be a positive sum game -- value is guaranteed to be created. The violation of this rule tends to happen if one or both parties will lose some value if they do not make the transaction, in which case they will try to minimize loss rather than maximize gain as measured by the value they entered the transaction with. This is the essence of exploitation. These more varied classes of transactions can be a positive sum game -- where one party gets more value than the other loses, a zero sum game where they cancel out or a negative sum game where one gains less value than the other loses or they both lose but less than they would without the transaction having taken place. It is not guaranteed to be a positive sum game and value could be destroyed overall. This simulation, where wealth is maintained at a steady state not only overall but within every transaction, is not really possible.
  - msellout 11y ago
    Imagine that after each transaction, the measure of total wealth is normalized to have the original total. Whether or not actual wealth is increasing or decreasing, Norvig's simulation of nominal wealth will have the same dynamics.
    - nickff 11y ago
      How would you describe the value of being able to spend time with your children vs. being stuck far from your family? This is a trade parties could make, and could result in a Pareto improvement (e.g. if someone with no family traded jobs with someone who had children they loved).
      - msellout 11y ago
Zuider 11y ago
The assumption that the economy was a zero-sum game was characteristic of the classical economists who came after Adam Smith. While Smith set himself the task of investigating the creation of wealth, his successors such as Ricardo, and notably, Malthus focused on the distribution of wealth.
- force_reboot 11y ago
  During my PhD in economics, the first few quarters of microeconomic theory focused on what we call classical economics, which is also called partial and general equilibrium theory. These theories are definitely not zero sum games. Even though partial and general equilibrium theory don't describe economics in terms of interactions between individuals (in the classical theory, individuals interact with the market), if they did, the nature of these interactions would be that they are always strictly positive sum for all actors. E.g. consider the supply and demand curves, and imagine that for each vertical line (or horizontal, depending on how you draw the axes), you "match" the buyers and sellers along that line. Then the difference in the prices that each individual is willing to buy/sell for is the total gain for that transaction, with how the gain is distributed being determined by the equilibrium price. Your summary seems to focus too much on early thinkers, and doesn't address the full development of classical theory which took until the 1950's.
- dragonwriter 11y ago
  Most post-Smith economics -- certainly everything in the market to tradition, classical or otherwise -- views normal transactions as net positive (and positive for each voluntary participant), not zero-sum. But there's no reason to assume the degree of benefit is the same for each participant, and intuitively I think a more realistic net-positivr transaction rule with the gain randomly distributed would have distributionally similar results.
- nickff 11y ago
  Ricardo was a paradigmatic case of non zero-sum thinking; he described comparative advantage, which shows the benefit of people specializing in different things.[1] [1] https://en.wikipedia.org/wiki/Comparative_advantage https://en.wikipedia.org/wiki/Comparative_advantage
msellout 11y ago
I expect you'd find the same dynamics despite adding some positive externalities to the transactions. Depending on how large those externalities are. The nice thing about this example is the code is there for you to modify and test your theories. A good simulation tries to pare down the system, not getting distracted by other mechanisms that don't change the basic dynamics. For example, it'd be more realistic if the transactions were partially parallelized, but that wouldn't change the analysis much.
- eru 11y ago
  Please be careful: `positive externalities' are not the same thing as a `non-zero sum game'.
  - msellout 11y ago
    Sure, there could be negative externalities as well. I think the complaint that the transactions were zero-sum implied that "real" economies increase total wealth with most transactions -- positive externalities.
    - eru 11y ago
      Still: externalities is different from non-zero sum game..
nl 11y ago
Right. This is a teaching tool to show a general approach for economic modelling. The context is http://norvig.com/ipython/README.html http://norvig.com/ipython/README.html - it's part of Peter Norvig's continual exploration of machine learning and AI approaches. It isn't intended to me a comprehensive economic simulation.

fizixer 11y ago

Economy is pretty much a zero-sum game. The non-zero-sum game part (growth) is very small (2-3% even if that) if you consider a country's economy (or world economy) as a whole. I like to say if your income is consistently growing at ~10% every year, when the economy is growing at 2-3%, you're likely making someone worse off. (Although that someone might be some billionaire in which case have at it).

bendykstra 11y ago
> I like to say if your income is consistently growing at ~10% every year, when the economy is growing at 2-3%, you're likely making someone worse off. That is like saying, "The average age of the country is growing at 0.1% per year while my age is growing at 4% per year, therefore I must be making someone else younger." Income usually increases over the course of a career, but in the end, people retire or die and stop contributing to the average.
oli5679 11y ago
Wage-growth is conceptually different from the gains from trade within an economy. An isolated individual who doesn't trade(eg subsistence farmer) would produce goods of value of an order of magnitude less than current US GDP per capita. Similarly, your hypothetical individual who 'makes someone worse off' must by definition be inheriting some scarce asset, be lucky, deceptive, coercive or inflicting negative externalities. Otherwise why would anyone trade with him? This is not to say that inequality isn't a problem or greater redistribution would not be desirable. But you need to frame the problem correctly.
yummyfajitas 11y ago
Here is the actual graph of income growth, 1988-2008. Who were the middle class (specifically the 20'th-70'th percentile) making worse off? https://pbs.twimg.com/media/CUXo2NNUYAASTND.jpg:large https://pbs.twimg.com/media/CUXo2NNUYAASTND.jpg:large
- fizixer 11y ago
  Middle class tends to rise off of the redistribution of rich class's wealth. Like I said, the second part of my original comment. (which is a good thing, so maybe "worse" is not the best word).
- msellout 11y ago
  Seems like a wealth transfer from "developed country" workers to "less-developed country" workers and capital owners. The exact dynamics are of course hidden from that chart. The labels on the axes say that the peaks are gaining relative to the valleys in that chart.
  - yummyfajitas 11y ago
    A wealth transfer would cause at least one group to take losses, no? This graph shows growth for everyone.
    - msellout 11y ago
      No. There could be two phenomena occurring simultaneously: growth for everyone and layered on top of that a wealth transfer. The key term you're ignoring in my comment was relative: "peaks are gaining relative to the valleys". I know you're into finance. Are you familiar with the concept of a long-short hedge fund? If so, you should be comfortable with the idea of focusing on relative movement of two assets within an asset class, hedging against the absolute movement of the asset class as a whole.
      - yummyfajitas 11y ago
        If you want to declare a delta between some hypothetical distribution and the actual distribution "wealth transfer", have at it. That is certainly irrefutable, albeit mathematically vacuous.

nabla9 11y ago

relative wealth is a zero sum game.

bendykstra 11y ago
Some countries have less inequality, but also have less average wealth. People do not migrate to those poorer countries seeking to be richer than their neighbors. Instead, people tend to migrate to areas of higher wealth, even though it means they will have less relative wealth. It's clear that absolute wealth is more important to people than the zero-sum game of relative wealth.
- nabla9 11y ago
  Median wealth is what's interesting. Compare list of countries by net mean and median wealth. https://en.wikipedia.org/wiki/List_of_countries_by_wealth_per_adult https://en.wikipedia.org/wiki/List_of_countries_by_wealth_pe...
  - jbotttt 11y ago
    It's more interesting in chart form: http://imgur.com/GZxm0hD http://imgur.com/GZxm0hD
    - Retric 11y ago
      That's a rather biased chart. Net median wealth per adult. Australia 219,505 Luxembourg 182,768 Belgium 148,141 France 141,850 Italy 138,653 United Kingdom 111,524 Japan 110,294 Iceland 104,733 Switzerland 95,916 Finland 95,095 Norway 92,859 Canada 90,252 Netherlands 83,631 New Zealand 76,607 Ireland 75,573 Spain 63,306 Denmark 57,675 Austria 57,450 Greece 53,937 Sweden 52,677 Germany 49,370 Slovenia 44,932 United States 44,911 ... PS: US only has high wealth if you ignore debt. Owing 200k on a 200k house is not wealth.
      - jbotttt 11y ago

ap22213 11y ago

In contrast, what would you propose? Economics isn't always a zero-sum game, but there is usually one who gains more than the other.

clavalle 11y ago
It is hard to say who gains more in a transaction. What can be said is that in most transactions both parties walk away with more value. It is guaranteed to be a positive sum game -- value is guaranteed to be created. The violation of this rule tends to happen if one or both parties will lose some value if they do not make the transaction, in which case they will try to minimize loss rather than maximize gain as measured by the value they entered the transaction with. This is the essence of exploitation. These more varied classes of transactions can be a positive sum game -- where one party gets more value than the other loses, a zero sum game where they cancel out or a negative sum game where one gains less value than the other loses or they both lose but less than they would without the transaction having taken place. It is not guaranteed to be a positive sum game and value could be destroyed overall. This simulation, where wealth is maintained at a steady state not only overall but within every transaction, is not really possible.
- msellout 11y ago
  Imagine that after each transaction, the measure of total wealth is normalized to have the original total. Whether or not actual wealth is increasing or decreasing, Norvig's simulation of nominal wealth will have the same dynamics.
  - nickff 11y ago
    How would you describe the value of being able to spend time with your children vs. being stuck far from your family? This is a trade parties could make, and could result in a Pareto improvement (e.g. if someone with no family traded jobs with someone who had children they loved).
    - msellout 11y ago

Zuider 11y ago

The assumption that the economy was a zero-sum game was characteristic of the classical economists who came after Adam Smith. While Smith set himself the task of investigating the creation of wealth, his successors such as Ricardo, and notably, Malthus focused on the distribution of wealth.

force_reboot 11y ago
During my PhD in economics, the first few quarters of microeconomic theory focused on what we call classical economics, which is also called partial and general equilibrium theory. These theories are definitely not zero sum games. Even though partial and general equilibrium theory don't describe economics in terms of interactions between individuals (in the classical theory, individuals interact with the market), if they did, the nature of these interactions would be that they are always strictly positive sum for all actors. E.g. consider the supply and demand curves, and imagine that for each vertical line (or horizontal, depending on how you draw the axes), you "match" the buyers and sellers along that line. Then the difference in the prices that each individual is willing to buy/sell for is the total gain for that transaction, with how the gain is distributed being determined by the equilibrium price. Your summary seems to focus too much on early thinkers, and doesn't address the full development of classical theory which took until the 1950's.
dragonwriter 11y ago
Most post-Smith economics -- certainly everything in the market to tradition, classical or otherwise -- views normal transactions as net positive (and positive for each voluntary participant), not zero-sum. But there's no reason to assume the degree of benefit is the same for each participant, and intuitively I think a more realistic net-positivr transaction rule with the gain randomly distributed would have distributionally similar results.
nickff 11y ago
Ricardo was a paradigmatic case of non zero-sum thinking; he described comparative advantage, which shows the benefit of people specializing in different things.[1] [1] https://en.wikipedia.org/wiki/Comparative_advantage https://en.wikipedia.org/wiki/Comparative_advantage

msellout 11y ago

I expect you'd find the same dynamics despite adding some positive externalities to the transactions. Depending on how large those externalities are. The nice thing about this example is the code is there for you to modify and test your theories. A good simulation tries to pare down the system, not getting distracted by other mechanisms that don't change the basic dynamics. For example, it'd be more realistic if the transactions were partially parallelized, but that wouldn't change the analysis much.

eru 11y ago
Please be careful: `positive externalities' are not the same thing as a `non-zero sum game'.
- msellout 11y ago
  Sure, there could be negative externalities as well. I think the complaint that the transactions were zero-sum implied that "real" economies increase total wealth with most transactions -- positive externalities.
  - eru 11y ago
    Still: externalities is different from non-zero sum game..

nl 11y ago

Right. This is a teaching tool to show a general approach for economic modelling. The context is http://norvig.com/ipython/README.html http://norvig.com/ipython/README.html - it's part of Peter Norvig's continual exploration of machine learning and AI approaches. It isn't intended to me a comprehensive economic simulation.