7 ms·

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.

by ap22213 11y ago

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
      One can generally convert all things to dollars. There's generally a price you can offer to convince someone to do most things, such as your example of spending time away from family. Sure, money can't buy happiness, humans are weird about non-transitive preferences (if a is preferred to b and b is preferred to c, it turns out that sometimes c is preferred to a), and some things like ethics end up at infinite dollar value... but whatever, this is just a model. You can make it as complex/realistic as you think is necessary.
- ap22213 11y ago
  You're just restating what I said with just more words. But, you don't propose an alternative simulation model. I would say that the simulation is actually generous. Wealth is correlated with power. Power creates opportunities for exploitation. I know of very few examples where this is not the case.
  - clavalle 11y ago
    The alternative simulation model would allow transactions to create wealth or destroy wealth. Wealth is correlated with power but that power is not necessarily only directed against other rational actors but the environment and circumstance, too. So it makes sense to see power as an increasing or decreasing value overall with time. 100% power in 1500 A.D. is very different than 100% power now (if percentage of power makes sense at all considering how dependent it is on circumstance). The other thing about power is that there are power singularities. If I can cause the death or pain of another as part of a transaction either actively (gun to the head) or passively (they will starve without the transaction taking place), that person will spend almost any amount of value to avoid that fate. This kind of exploitation should be taken into account. Power does not always, or even most of the time, create opportunities for exploitation. If someone has some base level of power to avoid the singularities as described above they can have transactions with more powerful entities that are not exploitative at all but of mutual value gained benefit. Hitting a perfect zero sum game is a very simplified case and only useful as a rough approximation because most transactions are merely /close/ to zero sum with some value add otherwise the market would rush in to narrow the gap. So, a more interesting model would take both the creation and destruction of wealth into account as well as the opportunities for exploitation (since, while those are not the bulk of transactions, in today's world they are still incredibly common). This would be more interesting because it would show 1) how various levels power changes over time beyond the relative measure and 2) how prone each group is to exploitation. If certain conditions lead to the lowest tier group having increasing power over time and reduce their exploitation potential but lead to large increases in the gap of relative power, that would be a much better outcome than if they have less overall power and are in more exploitable conditions but their gap of relative power is smaller, for example.
- kriro 11y ago
  An important addition to this: it's usually only assumed to be a positive sum game at the time of the exchange and for the expected outcomes. It's very possible to see in retrospect that you wouldn't do the trade on a do over. Asymmetric information, fraud etc.

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.

by 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
    One can generally convert all things to dollars. There's generally a price you can offer to convince someone to do most things, such as your example of spending time away from family. Sure, money can't buy happiness, humans are weird about non-transitive preferences (if a is preferred to b and b is preferred to c, it turns out that sometimes c is preferred to a), and some things like ethics end up at infinite dollar value... but whatever, this is just a model. You can make it as complex/realistic as you think is necessary.
ap22213 11y ago
You're just restating what I said with just more words. But, you don't propose an alternative simulation model. I would say that the simulation is actually generous. Wealth is correlated with power. Power creates opportunities for exploitation. I know of very few examples where this is not the case.
- clavalle 11y ago
  The alternative simulation model would allow transactions to create wealth or destroy wealth. Wealth is correlated with power but that power is not necessarily only directed against other rational actors but the environment and circumstance, too. So it makes sense to see power as an increasing or decreasing value overall with time. 100% power in 1500 A.D. is very different than 100% power now (if percentage of power makes sense at all considering how dependent it is on circumstance). The other thing about power is that there are power singularities. If I can cause the death or pain of another as part of a transaction either actively (gun to the head) or passively (they will starve without the transaction taking place), that person will spend almost any amount of value to avoid that fate. This kind of exploitation should be taken into account. Power does not always, or even most of the time, create opportunities for exploitation. If someone has some base level of power to avoid the singularities as described above they can have transactions with more powerful entities that are not exploitative at all but of mutual value gained benefit. Hitting a perfect zero sum game is a very simplified case and only useful as a rough approximation because most transactions are merely /close/ to zero sum with some value add otherwise the market would rush in to narrow the gap. So, a more interesting model would take both the creation and destruction of wealth into account as well as the opportunities for exploitation (since, while those are not the bulk of transactions, in today's world they are still incredibly common). This would be more interesting because it would show 1) how various levels power changes over time beyond the relative measure and 2) how prone each group is to exploitation. If certain conditions lead to the lowest tier group having increasing power over time and reduce their exploitation potential but lead to large increases in the gap of relative power, that would be a much better outcome than if they have less overall power and are in more exploitable conditions but their gap of relative power is smaller, for example.
kriro 11y ago
An important addition to this: it's usually only assumed to be a positive sum game at the time of the exchange and for the expected outcomes. It's very possible to see in retrospect that you wouldn't do the trade on a do over. Asymmetric information, fraud etc.