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The model is zero-sum, there are no gains from trade, the people just speculate. In this context, trading is harmful and this type of activity should be banned,
by oli5679 4y ago
The model is zero-sum, there are no gains from trade, the people just speculate. In this context, trading is harmful and this type of activity should be banned, or at least heavily taxed.
If economic activity is valuable, but leads to inequality, then you need some framework to trade off the value created vs. the social benefits of greater equality.
- wizofaus 4y agoI did think that but even if you extended the model to be one where money could be created via "successful" investments, I suspect much the same result would transpire - wealth would concentrate fairly rapidly if everyone kept re-investing %x of their wealth, such that a certain % of investments would result in wealth creation and others simple loss of funds.
- oli5679 4y agoYes, this is a great extension idea. If you make a model like this, for different parameters of speculation vs. value creation you can then test what the most socially beneficial rates of tax are. More tax will lead to smaller but more equal economies and laissez-faire shouldn’t be optimal. I would just want the model to acknowledge the non-speculation part, because many of the things I buy are from spectacularly rich companies, but that are genuinely useful to me.