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This smells misleading / overly simplistic but I can’t quite quite put my finger on precisely why? Some thoughts - consensual trades are win win (you want a s

This smells misleading / overly simplistic but I can’t quite quite put my finger on precisely why? Some thoughts - consensual trades are win win (you want a sandwich, I want $5 let’s trade! And we both win) - something about the model is overly simplistic, like it produces a statistical distribution that looks like extreme inequality from randomness, but lots of different sorts of distributions can emerge from aggregating random (for eg a normal distribution several dice and looking at their totals).

oreally 4y ago
The thesis was an investigation into whether the super-rich are better at making money, but they just took widely known distributions to tell a story enforcing that view without diving in as to why that's the case. It's the classic case of using statistics as a method to divert blame onto something else. You learn nothing but a sense of despair from these kinds of analysis.
strstr 4y ago
Zero-sum assumption and lack of returns on bets seem suspicious. Betting is a bad deal for everyone in this model (even the rich person) since each coin flip is variance for no expected gain. Kelly betting implies you should bet nothing in this game.
- lozenge 4y ago
  If you increase the payoff of the bet, it might prevent the poorest from becoming destitute, but the relative effect (where wealth concentrates in a few people) intuitively would still be present.
  - flawn 4y ago
    That's what I meant. It just comes down to the inequality being there and rich people having more capital to bet/invest/whatever and relatively get richer just though them having a bigger starting capital.
gjulianm 4y ago
Some counterpoint thoughts: > - consensual trades are win win (you want a sandwich, I want $5 let’s trade! And we both win) Not all trades are exactly "consensual". The sandwich seller can probably live without selling a sandwich, I can't live without food, so the seller has far more power to set the price. Existing power imbalances make trades less fair, specially with essential goods (and that includes jobs, which is why a lot of poor people end up massively underpaid). > - something about the model is overly simplistic, like it produces a statistical distribution that looks like extreme inequality from randomness, but lots of different sorts of distributions can emerge from aggregating random (for eg a normal distribution several dice and looking at their totals). HPSquared said this in another comment [1] and I agree: what matters on this model is that every step is not additive but multiplicative, which is what leads to the inequality. 1: https://news.ycombinator.com/item?id=34091339 https://news.ycombinator.com/item?id=34091339
- imgabe 4y ago
  In the real world, there is more than one sandwich seller and they compete with each other. When was the last time you non-consensually bought a sandwich? Even homeless people on the street will sometimes refuse free food, so the idea that sandwich-sellers can set any arbitrary price they want or people will starve is just not something that happens in practice. Indeed, sandwiches are abundant and affordable.
  - chii 4y ago
    Switch sandwiches out with internet service provider, and do you get the same story?
    - imgabe 4y ago
      Yes? The vast majority of people are able to buy Internet service and it is not a significant percentage of income, even for people with a low income. Do you know of people taking out second mortgages on their house or drowning in debt to afford Internet service? The flip side of the equation is that if a business is to exist, it has to set a price that people are capable of paying. Yes, sometimes with supply constraints they can charge more, but charge too much and nobody will be able to buy, which means $0 revenue for the business.
wizofaus 4y ago
The most obvious omission from that model is that in a real economy people voluntarily give money to others in exchange for goods and services. If everyone was equally good at producing useful goods and services then even if the yard-sale effect was occurring due to investment/wagering behaviour it's unlikely to lead to the extreme inequality the "pure" version does. It's also fairly obvious that in the real economy there's virtually nobody in the super-rich list that's got there purely by being lucky with investments. To what degree that's true only because we do have redistributive taxation systems I don't know.
ookdatnog 4y ago
The yard sale model doesn't attempt to model an actual economy. It's a thought experiment to counter causality bias. Human minds tend to be biased towards causal explanations. So if we see huge wealth disparities, we're biased towards thinking that these disparities must exist for some deeper reason (often argued to be meritocracy). The model counters that thinking, by showing that, even in a very simple model with rules that seem fair to everyone, huge disparities can appear entirely at random. It doesn't prove that the disparities we see in the real world are fully random. It invites us to question the assumption that they aren't.

oreally 4y ago

The thesis was an investigation into whether the super-rich are better at making money, but they just took widely known distributions to tell a story enforcing that view without diving in as to why that's the case. It's the classic case of using statistics as a method to divert blame onto something else. You learn nothing but a sense of despair from these kinds of analysis.

strstr 4y ago

Zero-sum assumption and lack of returns on bets seem suspicious. Betting is a bad deal for everyone in this model (even the rich person) since each coin flip is variance for no expected gain. Kelly betting implies you should bet nothing in this game.

lozenge 4y ago
If you increase the payoff of the bet, it might prevent the poorest from becoming destitute, but the relative effect (where wealth concentrates in a few people) intuitively would still be present.
- flawn 4y ago
  That's what I meant. It just comes down to the inequality being there and rich people having more capital to bet/invest/whatever and relatively get richer just though them having a bigger starting capital.

gjulianm 4y ago

Some counterpoint thoughts: > - consensual trades are win win (you want a sandwich, I want $5 let’s trade! And we both win) Not all trades are exactly "consensual". The sandwich seller can probably live without selling a sandwich, I can't live without food, so the seller has far more power to set the price. Existing power imbalances make trades less fair, specially with essential goods (and that includes jobs, which is why a lot of poor people end up massively underpaid). > - something about the model is overly simplistic, like it produces a statistical distribution that looks like extreme inequality from randomness, but lots of different sorts of distributions can emerge from aggregating random (for eg a normal distribution several dice and looking at their totals). HPSquared said this in another comment [1] and I agree: what matters on this model is that every step is not additive but multiplicative, which is what leads to the inequality. 1: https://news.ycombinator.com/item?id=34091339 https://news.ycombinator.com/item?id=34091339

imgabe 4y ago
In the real world, there is more than one sandwich seller and they compete with each other. When was the last time you non-consensually bought a sandwich? Even homeless people on the street will sometimes refuse free food, so the idea that sandwich-sellers can set any arbitrary price they want or people will starve is just not something that happens in practice. Indeed, sandwiches are abundant and affordable.
- chii 4y ago
  Switch sandwiches out with internet service provider, and do you get the same story?
  - imgabe 4y ago
    Yes? The vast majority of people are able to buy Internet service and it is not a significant percentage of income, even for people with a low income. Do you know of people taking out second mortgages on their house or drowning in debt to afford Internet service? The flip side of the equation is that if a business is to exist, it has to set a price that people are capable of paying. Yes, sometimes with supply constraints they can charge more, but charge too much and nobody will be able to buy, which means $0 revenue for the business.

wizofaus 4y ago

The most obvious omission from that model is that in a real economy people voluntarily give money to others in exchange for goods and services. If everyone was equally good at producing useful goods and services then even if the yard-sale effect was occurring due to investment/wagering behaviour it's unlikely to lead to the extreme inequality the "pure" version does. It's also fairly obvious that in the real economy there's virtually nobody in the super-rich list that's got there purely by being lucky with investments. To what degree that's true only because we do have redistributive taxation systems I don't know.

ookdatnog 4y ago

The yard sale model doesn't attempt to model an actual economy. It's a thought experiment to counter causality bias. Human minds tend to be biased towards causal explanations. So if we see huge wealth disparities, we're biased towards thinking that these disparities must exist for some deeper reason (often argued to be meritocracy). The model counters that thinking, by showing that, even in a very simple model with rules that seem fair to everyone, huge disparities can appear entirely at random. It doesn't prove that the disparities we see in the real world are fully random. It invites us to question the assumption that they aren't.