4 ms·

Yes, power laws are everywhere. The exact shape of each distribution varies, however, and little is known empirically about the distribution of trading profits

by vcf 4mo ago

Yes, power laws are everywhere. The exact shape of each distribution varies, however, and little is known empirically about the distribution of trading profits in financial markets.

amelius 4mo ago
Yeah if you look at the Boltzmann Wealth Model, where every actor gives away 1 dollar to a random person, and you repeat this, then if you start with an equal wealth distribution, you end up with an exponential wealth distribution. That shows how strong exponential curves are :) A few "lucky" individuals become very wealthy, while the vast majority of people end up with very little or nothing. The effect is so strong that I'm starting to wonder if we should have laws against power laws, like we have in engineering when we try to make things stable.
- Balgair 4mo ago
  I mean, do we want the economy to be stable? Not in a 'oh the rich don't so they control the media and so we don't' sorta way. But like in a 'lets educate people on the pluses and minuses, debate a while, and then come to an informed conclusion' sorta way. Like, deep down, does the average person actually want a stable economy? Because it seems to me that there is an even split historically between the folks that want stability and a little patch of land and weekly rhythms, and the folks that just want to drunkenly burn couches in the street every full moon, or some such thing. Not to be glib here at all. I like, would actually like to know the answer. Sorry if this comes off the cuff seeming.
  - pstuart 4mo ago
    I have a dumbed down version of this question as variant of the Voight-Kampff test (Bladerunner) that goes like this. You have 2 choices for how the world is shaped, pick 1: A. You have a modest but comfortable home, a job that pays you enough so that you have what you need and can afford occasional luxuries (e.g., an annual holiday abroad), have good health insurance, access to education and childcare, etc. Everybody else has the same thing, and because of this you live in communities where the arts flourish because nobody has to worry about becoming homeless or destitute. B. You live in magnificent mansion, one of dozens you own around the world (accessible via one of your personal Gulfstream jets). You have more money then you could ever spend in a lifetime (even recklessly). Your homes are staffed with obedient servants who cater to your every desire. I mean anything. You own them. Your mansions are on palatial estates with secure walls and guards to keep out the rabble outside -- who fight for scraps and are desperate enough to do any kind of work to keep your factories humming and printing cash. I wouldn't hesitate to choose A because that's a world I'd love to live in and the world of B horrifies me. I don't say this as virtue signaling, it's my innate reaction. I think that a significant portion of the population would love to choose B. And in some ways, some already have.
    - amelius 4mo ago
      I think most people want to earn more the harder they work, and I think that is fine. However, power laws basically spoil it because it gives a hard worker an exponential advantage, where they can (and will) use that money against other people who made different life choices.
      - pstuart 4mo ago
        I agree that people want to be rewarded for their effort, and should be. But putting in 12 hour days being an EMT and saving peoples lives vs 12 hour days working with Claude to boost conversion pipelines have wildly different economic rewards. I'm not suggesting a Harrison Bergeron economy but its also clear that the current system is trending towards B and the game is rigged to ensure that. We don't live in a meritocracy -- there's a fair amount of luck involved (being in the right place at the right time).
      - mswphd 4mo ago
        there is the other (significant) issue, that wealth (and its many benefits) are inherited, and by all indications the exponential advantage seems to pass down through generations (at least recently).
      - achenet 4mo ago
        > power laws basically spoil it because it gives a hard worker an exponential advantage s/hard worker/person with more capital/ I can make 500 euros from a day of consulting as a software engineer. That's a typical day, working remotely, 9AM to 5PM, with a nice long lunch break. Minimum wage in Bangladesh is around $133 per month. Many workers in the Bangladesh garment industry work 12 hour days. I look at what they do, and think "wow that's really hard I could never do that, glad I don't have to work that hard to live". Yet somehow, I have exponentially more money than they do. And, thanks to the beauty of our current system, I can go ahead and invest that in the stock market, and get even richer while basically doing nothing. It would be nice if we lived in a word that rewarded hard work, but as far as I can tell, we don't, and never have. Look at the institution of slavery. For literally thousands of years, there was "those who worked", and "those who had". The system rewards decision making, not hard work. Now, if you're a young tech worker working on an important project at a big company, yes, choosing to work hard, IN THAT SPECIFIC CASE is a good decision, and it'll be rewarded. But if you're a child laborer in a Third World sweatshop? No, your extra hour at the office probably won't get you anything extra. If you're a Roman Senator in the year 30BC, you don't get rewarded for your work, you get rewarded for deciding to have your slaves spend more time farming grapes for wine and less farming wheat because wine sells for a higher price, which means that with your good decision making, you can now hire more slaves, to farm more grapes, to make more wine, which you can make for more money. And if you look at rich people today, what they have is probably closer to the Roman Senator than the Third World sweatshop laborer - they find a thing that people like to buy, and invest lots of resources (their money, other people's labor) into making that thing and selling it, and are rewarded with money.
  - Aurornis 4mo ago
    If you ask people what they want, they'll request some impossible combination of attributes without consideration of any tradeoffs. They will also try to push all negative externalities on to people wealthier than themselves. Most people see themselves as middle class or lower middle class, even up to relatively high income levels. If you ask each of them where the tax rate should be increased, the answer is usually a few steps higher than their own income. UBI is a topic where this becomes very obvious. When you explain UBI to most people they assume they will be receiving the UBI and some abstract combination of billionaires and corporations would pay for it. Then you show them the math that it wouldn't work and they start to become less enamored with the idea. (Or lately: They just don't believe you and retreat to their imagined ideal free of pesky economics)
- bee_rider 4mo ago
  Sigmoid wealth tax maybe?
  - trgn 4mo ago
    that's what progressive taxation is
    - amelius 4mo ago
      Maybe, if you get the coefficients right.
- nonethewiser 4mo ago
  >The effect is so strong that I'm starting to wonder if we should have laws against power laws This is literally and unironically communism.
  - amelius 4mo ago
    Why? You want to earn exponentially more than other people the harder you work? Instead of just linear?
    - nonethewiser 4mo ago
      Let me be more specific. Communism constitutes one way to combat the power law via law. Not all forms of law combatting power law are communism.
      - amelius 4mo ago
        Hmm, I don't follow.
- skywalqer 4mo ago
  I believe a power law acts differently from an exponential distribution. I think wealth distribution is commonly approximated by a Pareto distribution. In your model, the exponential distribution is caused by the fact that you cannot go below zero; otherwise, it would be a normal distribution. I don't agree with your opinion about laws against power laws, but that is another matter.
- hammock 4mo ago
  Seems like a good argument against flat taxes
- Ferret7446 4mo ago
  That sounds semantically equivalent to legislating the value of the traditional gravitational constant.

by vcf 4mo ago

Yes, power laws are everywhere. The exact shape of each distribution varies, however, and little is known empirically about the distribution of trading profits in financial markets.

amelius 4mo ago

Yeah if you look at the Boltzmann Wealth Model, where every actor gives away 1 dollar to a random person, and you repeat this, then if you start with an equal wealth distribution, you end up with an exponential wealth distribution. That shows how strong exponential curves are :) A few "lucky" individuals become very wealthy, while the vast majority of people end up with very little or nothing. The effect is so strong that I'm starting to wonder if we should have laws against power laws, like we have in engineering when we try to make things stable.

Balgair 4mo ago
I mean, do we want the economy to be stable? Not in a 'oh the rich don't so they control the media and so we don't' sorta way. But like in a 'lets educate people on the pluses and minuses, debate a while, and then come to an informed conclusion' sorta way. Like, deep down, does the average person actually want a stable economy? Because it seems to me that there is an even split historically between the folks that want stability and a little patch of land and weekly rhythms, and the folks that just want to drunkenly burn couches in the street every full moon, or some such thing. Not to be glib here at all. I like, would actually like to know the answer. Sorry if this comes off the cuff seeming.
- pstuart 4mo ago
  I have a dumbed down version of this question as variant of the Voight-Kampff test (Bladerunner) that goes like this. You have 2 choices for how the world is shaped, pick 1: A. You have a modest but comfortable home, a job that pays you enough so that you have what you need and can afford occasional luxuries (e.g., an annual holiday abroad), have good health insurance, access to education and childcare, etc. Everybody else has the same thing, and because of this you live in communities where the arts flourish because nobody has to worry about becoming homeless or destitute. B. You live in magnificent mansion, one of dozens you own around the world (accessible via one of your personal Gulfstream jets). You have more money then you could ever spend in a lifetime (even recklessly). Your homes are staffed with obedient servants who cater to your every desire. I mean anything. You own them. Your mansions are on palatial estates with secure walls and guards to keep out the rabble outside -- who fight for scraps and are desperate enough to do any kind of work to keep your factories humming and printing cash. I wouldn't hesitate to choose A because that's a world I'd love to live in and the world of B horrifies me. I don't say this as virtue signaling, it's my innate reaction. I think that a significant portion of the population would love to choose B. And in some ways, some already have.
  - amelius 4mo ago
    I think most people want to earn more the harder they work, and I think that is fine. However, power laws basically spoil it because it gives a hard worker an exponential advantage, where they can (and will) use that money against other people who made different life choices.
    - pstuart 4mo ago
      I agree that people want to be rewarded for their effort, and should be. But putting in 12 hour days being an EMT and saving peoples lives vs 12 hour days working with Claude to boost conversion pipelines have wildly different economic rewards. I'm not suggesting a Harrison Bergeron economy but its also clear that the current system is trending towards B and the game is rigged to ensure that. We don't live in a meritocracy -- there's a fair amount of luck involved (being in the right place at the right time).
    - mswphd 4mo ago
      there is the other (significant) issue, that wealth (and its many benefits) are inherited, and by all indications the exponential advantage seems to pass down through generations (at least recently).
    - achenet 4mo ago
      > power laws basically spoil it because it gives a hard worker an exponential advantage s/hard worker/person with more capital/ I can make 500 euros from a day of consulting as a software engineer. That's a typical day, working remotely, 9AM to 5PM, with a nice long lunch break. Minimum wage in Bangladesh is around $133 per month. Many workers in the Bangladesh garment industry work 12 hour days. I look at what they do, and think "wow that's really hard I could never do that, glad I don't have to work that hard to live". Yet somehow, I have exponentially more money than they do. And, thanks to the beauty of our current system, I can go ahead and invest that in the stock market, and get even richer while basically doing nothing. It would be nice if we lived in a word that rewarded hard work, but as far as I can tell, we don't, and never have. Look at the institution of slavery. For literally thousands of years, there was "those who worked", and "those who had". The system rewards decision making, not hard work. Now, if you're a young tech worker working on an important project at a big company, yes, choosing to work hard, IN THAT SPECIFIC CASE is a good decision, and it'll be rewarded. But if you're a child laborer in a Third World sweatshop? No, your extra hour at the office probably won't get you anything extra. If you're a Roman Senator in the year 30BC, you don't get rewarded for your work, you get rewarded for deciding to have your slaves spend more time farming grapes for wine and less farming wheat because wine sells for a higher price, which means that with your good decision making, you can now hire more slaves, to farm more grapes, to make more wine, which you can make for more money. And if you look at rich people today, what they have is probably closer to the Roman Senator than the Third World sweatshop laborer - they find a thing that people like to buy, and invest lots of resources (their money, other people's labor) into making that thing and selling it, and are rewarded with money.
- Aurornis 4mo ago
  If you ask people what they want, they'll request some impossible combination of attributes without consideration of any tradeoffs. They will also try to push all negative externalities on to people wealthier than themselves. Most people see themselves as middle class or lower middle class, even up to relatively high income levels. If you ask each of them where the tax rate should be increased, the answer is usually a few steps higher than their own income. UBI is a topic where this becomes very obvious. When you explain UBI to most people they assume they will be receiving the UBI and some abstract combination of billionaires and corporations would pay for it. Then you show them the math that it wouldn't work and they start to become less enamored with the idea. (Or lately: They just don't believe you and retreat to their imagined ideal free of pesky economics)
bee_rider 4mo ago
Sigmoid wealth tax maybe?
- trgn 4mo ago
  that's what progressive taxation is
  - amelius 4mo ago
    Maybe, if you get the coefficients right.
nonethewiser 4mo ago
>The effect is so strong that I'm starting to wonder if we should have laws against power laws This is literally and unironically communism.
- amelius 4mo ago
  Why? You want to earn exponentially more than other people the harder you work? Instead of just linear?
  - nonethewiser 4mo ago
    Let me be more specific. Communism constitutes one way to combat the power law via law. Not all forms of law combatting power law are communism.
    - amelius 4mo ago
      Hmm, I don't follow.
skywalqer 4mo ago
I believe a power law acts differently from an exponential distribution. I think wealth distribution is commonly approximated by a Pareto distribution. In your model, the exponential distribution is caused by the fact that you cannot go below zero; otherwise, it would be a normal distribution. I don't agree with your opinion about laws against power laws, but that is another matter.
hammock 4mo ago
Seems like a good argument against flat taxes
Ferret7446 4mo ago
That sounds semantically equivalent to legislating the value of the traditional gravitational constant.