4 ms·

Ah the fixed-pie fallacy... A foundational pillar for so much of today's political rhetoric (on the right and left).

Retric 10y ago
Many things like land or political power are fixed. So, income inequality really does have downsides even if the pie get's larger. How much is a 3 BR house in an area with good schools near you?
antisthenes 10y ago
It isn't a fallacy if you have even a basic understanding of economics. Unfortunately, most of the layman discourse on the internet seems to blindly follow the mantra of an infinitely expanding economy. While that may be true on an infinite timescale, in the short and medium runs (scale of economic cycles), the pie is indeed fixed.
- djschnei 10y ago
  I'm a fellow at one of the largest economic think tanks in the world. I've been studying various schools for 25+ years. I have a basic understanding. "On an infinite timescale"? That is literally meaningless. Show me ANY time scale where the pie has been fixed and I'll go away.
  - Retric 10y ago
    To two digit accuracy: Today, May 3rd 2016. This is relevant in the case of disasters as you don't have time to meaningfully increase the number of Generators available etc.
  - logfromblammo 10y ago
    Planck time. 1e-44 seconds.~ Fluctuations in the mass of the pie at shorter intervals would appear to observers within our universe as discontinuous jumps between discrete quantities of pie. Therefore, during that interval, the pie is fixed.~ Now go away.~ On a geologic timescale, pie has just appeared out of nothing, and is now covering the entire planet. On an infinite timescale, by naive extrapolation, the pie will in the future be expanding faster than the universe itself, to the point where a wafer-thin bite of pie will expand and rupture the esophagus before peristalsis can even push it into the stomach, and persons dying from attempted pie consumption will literally explode in a shower of pie.~ Clearly, the parent post was substituting a hyperbolic term for the longest possible economic timescale, where new technologies may be invented and entirely new supply chains built based upon them. It is easy to claim that at that scale, economic growth will continue without bound for as long as human ingenuity can conceive new ideas. At shorter scales, the observable size of the pie does sometimes shrink. And if there are periods when it grows, and periods when it shrinks, then logically, there must be periods when it remains the same size, even if those periods are very short.
    - djschnei 10y ago
      First off, bravo. I laughed :) I would assert that if something is constantly going up, down, or holding steady at intervals that are largely "random", than it could hardly be considered fixed.
    - deleted 10y ago
      [deleted]
  - hellogoodbyeeee 10y ago
    The pie is fixed in the short run, which is why the supply curve slopes upwards.
    - djschnei 10y ago
      [Facepalm]
fhrjfjc 10y ago
It's fallacious to assume the contrary. You can transfer billions of dollars of capital in an instant by signing on the dotted line, but it takes decades to create that kind of value. The lumped sum analysis assumption for capital is valid in this case because the rate of capital transfer is many orders of magnitude greater than the rate of capital generation.
- djschnei 10y ago
  Wow, haha... While you are able to spell "capital transfer" and "capital generation", you've proven your grasp on the ideas to be... suspect. I've never seen the relationship between arbitrary capital transfer rates and anecdotally slow CGRs as an argument trying to prove the existence of a fixed pie, so I guess that's inventive.
  - fhrjfjc 10y ago
    Lucky for both of us economics is a philosophy instead of a science, and condescending attitudes can go both ways. :^) Suppose as you say, all capital grows uniformly (which it doesn't, but that's another issue) at +x% annually. Now suppose that certain demographics experience -(x+n)% of capital transfer, in the form of housing, healthcare, and other expenses. It doesn't matter how fast the "pie" grows as along as capital transfer away from the middle class outstrips the rate of capital growth. You're cherrypicking hypotheticals here.
    - djschnei 10y ago
      Uuuuh... When did I insinuate aggregate capital grows uniformly? That's absurd. You're insinuating (I think) that if left unchecked, a market economy will perpetually syphon value/capital away from "the have nots" (as if that would be fiscally prudent). What I wish people like you would realize is that the only variable that can allow such backwards logic to work (in the short to medium term) is central planning/control which ignores market forces. In other words, you're barking up the wrong tree.
maxxxxx 10y ago
Can you elaborate what this has to do with fixed pie?
- djschnei 10y ago
  I mean, it's right there in the title... "Workers are making more, must be at the expense of the shareholders (or visa versa)".
harryh 10y ago
This has nothing to do with the fixed-pie fallacy. Of course both worker's incomes and shareholder gains can both increase by growing the pie. But at any given point in time there absolutely is a "piece" that goes to one and a piece that goes to the other. And it's interesting to look at how the relative sizes of those pieces change over time and what forces can drive those changes.
- djschnei 10y ago
  We certainly agree. The voluntary, mutual, cooperation between employer and employee which creates a wage vs. profit interaction IS certainly fascinating. However, it is clear in not only the title of this submission but also the article itself that the fixed pie fallacy is at play.

Many things like land or political power are fixed. So, income inequality really does have downsides even if the pie get's larger. How much is a 3 BR house in an area with good schools near you?

antisthenes 10y ago

It isn't a fallacy if you have even a basic understanding of economics. Unfortunately, most of the layman discourse on the internet seems to blindly follow the mantra of an infinitely expanding economy. While that may be true on an infinite timescale, in the short and medium runs (scale of economic cycles), the pie is indeed fixed.

djschnei 10y ago
I'm a fellow at one of the largest economic think tanks in the world. I've been studying various schools for 25+ years. I have a basic understanding. "On an infinite timescale"? That is literally meaningless. Show me ANY time scale where the pie has been fixed and I'll go away.
- Retric 10y ago
  To two digit accuracy: Today, May 3rd 2016. This is relevant in the case of disasters as you don't have time to meaningfully increase the number of Generators available etc.
- logfromblammo 10y ago
  Planck time. 1e-44 seconds.~ Fluctuations in the mass of the pie at shorter intervals would appear to observers within our universe as discontinuous jumps between discrete quantities of pie. Therefore, during that interval, the pie is fixed.~ Now go away.~ On a geologic timescale, pie has just appeared out of nothing, and is now covering the entire planet. On an infinite timescale, by naive extrapolation, the pie will in the future be expanding faster than the universe itself, to the point where a wafer-thin bite of pie will expand and rupture the esophagus before peristalsis can even push it into the stomach, and persons dying from attempted pie consumption will literally explode in a shower of pie.~ Clearly, the parent post was substituting a hyperbolic term for the longest possible economic timescale, where new technologies may be invented and entirely new supply chains built based upon them. It is easy to claim that at that scale, economic growth will continue without bound for as long as human ingenuity can conceive new ideas. At shorter scales, the observable size of the pie does sometimes shrink. And if there are periods when it grows, and periods when it shrinks, then logically, there must be periods when it remains the same size, even if those periods are very short.
  - djschnei 10y ago
    First off, bravo. I laughed :) I would assert that if something is constantly going up, down, or holding steady at intervals that are largely "random", than it could hardly be considered fixed.
  - deleted 10y ago
    [deleted]
- hellogoodbyeeee 10y ago
  The pie is fixed in the short run, which is why the supply curve slopes upwards.
  - djschnei 10y ago
    [Facepalm]

fhrjfjc 10y ago

It's fallacious to assume the contrary. You can transfer billions of dollars of capital in an instant by signing on the dotted line, but it takes decades to create that kind of value. The lumped sum analysis assumption for capital is valid in this case because the rate of capital transfer is many orders of magnitude greater than the rate of capital generation.

djschnei 10y ago
Wow, haha... While you are able to spell "capital transfer" and "capital generation", you've proven your grasp on the ideas to be... suspect. I've never seen the relationship between arbitrary capital transfer rates and anecdotally slow CGRs as an argument trying to prove the existence of a fixed pie, so I guess that's inventive.
- fhrjfjc 10y ago
  Lucky for both of us economics is a philosophy instead of a science, and condescending attitudes can go both ways. :^) Suppose as you say, all capital grows uniformly (which it doesn't, but that's another issue) at +x% annually. Now suppose that certain demographics experience -(x+n)% of capital transfer, in the form of housing, healthcare, and other expenses. It doesn't matter how fast the "pie" grows as along as capital transfer away from the middle class outstrips the rate of capital growth. You're cherrypicking hypotheticals here.
  - djschnei 10y ago
    Uuuuh... When did I insinuate aggregate capital grows uniformly? That's absurd. You're insinuating (I think) that if left unchecked, a market economy will perpetually syphon value/capital away from "the have nots" (as if that would be fiscally prudent). What I wish people like you would realize is that the only variable that can allow such backwards logic to work (in the short to medium term) is central planning/control which ignores market forces. In other words, you're barking up the wrong tree.

maxxxxx 10y ago

Can you elaborate what this has to do with fixed pie?

djschnei 10y ago
I mean, it's right there in the title... "Workers are making more, must be at the expense of the shareholders (or visa versa)".

harryh 10y ago

This has nothing to do with the fixed-pie fallacy. Of course both worker's incomes and shareholder gains can both increase by growing the pie. But at any given point in time there absolutely is a "piece" that goes to one and a piece that goes to the other. And it's interesting to look at how the relative sizes of those pieces change over time and what forces can drive those changes.

djschnei 10y ago
We certainly agree. The voluntary, mutual, cooperation between employer and employee which creates a wage vs. profit interaction IS certainly fascinating. However, it is clear in not only the title of this submission but also the article itself that the fixed pie fallacy is at play.