## Money as Reward, Money as Vote

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### Money as Reward, Money as Vote

In an idealized market economy, money serves two distinct functions:

First, it acts as a reward for value creation. If a person provides a good or service that others find valuable, that person is compensated with some of the surplus value created in the form of cash. In that way, it rewards the provision of goods or services that others find valuable; the more value (and the greater the portion of that value one can capture), the greater the reward.

Second, it acts as a mechanism for 'voting' about what matters. When a person spends money, it amounts to a statement of values: "this good or service is worth more to me than these X dollars". Each exchange of money for a good or service is thus effectively a vote about how valuable a good or service is, as it signals to the market that the good or service is worth more than its current price to some people.

Both roles are present in any exchange: producers are being rewarded for the value they add (including the value in connecting people with products and services they value), and buyers are voting for that value with their dollars. And both roles are an important part of a market economy, producing the effects that make markets useful. The votes incorporate information about what everyone wants, and the rewards draw productivity towards those valuable things. Together, the effects resolve issues of scarcity, providing an answer to the question, how can we produce the most value using the resources we have?

In an idealized economy, where every participant starts with equal resources, this makes sense and is efficient in the early rounds: people are incentivized to allocate resources to the most socially valuable pursuits*. But in subsequent rounds, when the allocation of resources is unequal, it isn't obvious that the people who provided value in the past should have more say in what gets rewarded in the future.

One argument is that people who successfully produce value in the past are more likely to provide more valuable information with their votes, i.e. in the past they have voted that certain investments will produce value for others, and their profits show that they were right (again, in a toy economy), so we might expect their subsequent votes will reliably point to future value for others. That argument is not entirely without merit: certain attributes that would make someone a better voter for what's valuable also make someone a better producer of value: appropriate risk weighting, accurate expectations about the future, the ability to delay gratification and invest for the long term, the ability to see alternative possible uses of resources. Conversely, the corresponding shortcoming would be expected to reliably waste resources. A habit of hedonistic spending will see you worse off in subsequent rounds, while a habit of investment and longer-term planning will see you better off. So, up to a point, this allocation of votes tracks ability to vote.

But it's not clear that the effect is always dominant: much of market success is arbitrary, and giving more say to people who essentially win a lottery for economic success is not justified by this rationale. Moreover, over many many rounds, the allocation of starting 'votes' is likely to be severely misallocated. The lottery effects will build over time, as those with more 'votes' get to play the lottery for market success more times. Heirs to previous lottery winners will often not inherit the traits that, by hypothesis, make it reasonable to allocate past winners more votes. And the market information will incorporate more and more idiosyncratic values, as the influence with those with orders of magnitude more 'votes' will dominate the voting, and ignore the votes of large swaths of the market which, combined, have less vote than the very wealthy.

This framing suggests that 1) an unregulated market will degrade over time, and 2) redistributive intervention is necessary to maintain a market economy. Despite relying on an ideal market and a favorable framing, and ignoring other problems inherent in market economies, it shows that the major justifying functions of the market fail without some function to nudge the distribution of votes toward the initial conditions.

This provides support for treating proposals such as a wealth tax, estate tax, and basic income as pro-market policies that strengthen the ability of market forces to allocate scarce resources. At some margin of inequality, the rewards and votes no longer serve their initial function, and there is no market.

*I'm ignoring special cases where markets don't work, e.g. public goods, non-rivalrous goods, etc., because the issue I'm trying to isolate is not one of market failure, but of self-defeating market success.
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Carleas
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### Re: Money as Reward, Money as Vote

I know that you're not counting companies like debeers.

But I would add additional content to non rivalrous goods, price fixing:

Prescription eye glasses only cost 50 cents to produce. The mark up is about 2000%

There are dozens of major eyewear places that all collude for price fixing... technically, they're "competing". Eye glasses is one of the most well known.

Ecmandu
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### Re: Money as Reward, Money as Vote

Yes, I agree. Price fixing, monopolies, asymmetric information. There are a lot of ways the market fails. My point here is more that, even where it succeeds, it undermines itself without countervailing regulation/policy.
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Carleas
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### Re: Money as Reward, Money as Vote

Carleas wrote:Yes, I agree. Price fixing, monopolies, asymmetric information. There are a lot of ways the market fails. My point here is more that, even where it succeeds, it undermines itself without countervailing regulation/policy.

It's a compelling idea "constantly pushing votes back to initial conditions"

In many cases with market forces, such as innovation, once the cats out of the bag, it's gone.

So, the regulation would even need to be more sophisticated than your initial offering.

The easiest way to solve the problem is that nobody can make more than x number percent of GDP per year. From there, you're looking at investment redistribution.
Ecmandu
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### Re: Money as Reward, Money as Vote

Carleas,

I hope you saw my edit, I made it just at the time you may have been constructing a reply, and then decided not to reply.

Ecmandu
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### Re: Money as Reward, Money as Vote

Ecmandu wrote:
Carleas wrote:Yes, I agree. Price fixing, monopolies, asymmetric information. There are a lot of ways the market fails. My point here is more that, even where it succeeds, it undermines itself without countervailing regulation/policy.

It's a compelling idea "constantly pushing votes back to initial conditions"

In many cases with market forces, such as innovation, once the cats out of the bag, it's gone.

So, the regulation would even need to be more sophisticated than your initial offering.

The easiest way to solve the problem is that nobody can make more than x number percent of GDP per year. From there, you're looking at investment redistribution.

So, for example Carleas!

Who truly needs relative to our current GDP, more than 5 million dollars a year?

So, in a very successful company, every employee makes 5 million a year, and the rest goes to redistributive investment.

What this forces capitalism to do, is to make it more democratic.

Want to build something for a billion dollars?

You need the consent of a billion divided by at most 5 million.

That's the perfect capitalist system.
Ecmandu
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### Re: Money as Reward, Money as Vote

Feel free to offer your rejoinders.
Ecmandu
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### Re: Money as Reward, Money as Vote

Carleas wrote:In an idealized economy, where every participant starts with equal resources, this makes sense and is efficient in the early rounds: people are incentivized to allocate resources to the most socially valuable pursuits*. But in subsequent rounds, when the allocation of resources is unequal, it isn't obvious that the people who provided value in the past should have more say in what gets rewarded in the future.

I am reminded of sports, particularly pre-commercialised sports.

In tennis, for example, all your previous successes and failures will seed you accordingly, but come a new tournament you are all back to ground zero. If anything, success makes it harder for you in future as you qualify to be placed against similarly successful players. This is a pure form of truly fair competition, with the exception of a fairly low barrier to attaining the best equipment, of which there isn't much that is required, and to attract the attention of the best trainers. Sponsorship gives you no advantage beyond not having to worry about your finances.

In team sports, a new season will similarly reset everything - your previous successes and failures may put you in a higher or lower league, but again success makes it harder for you in future - this kind of mechanism is both satisfying for all and keeps itself in check. Some additional drawbacks to the above are the tendency for top teams to buy and sell individual players in accordance to what they think will benefit the team as a whole, which becomes more of a corporate brand. The chemistry between specific players is less important than general adaptability to play well with anyone. Here, the corrupting effects of the free market come into play even more to compromise fairness:

Capitalism has the exact opposite mechanism. Where success in sports makes it harder for you, success in the free market makes it easier for you. The inversion of sportsmanship.

E-sports often have an interesting fairness check, where between seasons MMRs (matchmaking rating)s or Elo ratings are contracted towards the average. This requires that the best players continually have to win back their claim to proficiency, and players stuck playing with inexperienced and/or incompetent players get a chance to play with better players who won't ruin their overall team's performance regardless of how well they do individually.

The common theme of the "marketplace of sports" is that they are regulated/interfered with in order to make things fairer and more satisfying for everyone in the exact way that the free market is not.

Carleas wrote:One argument is that people who successfully produce value in the past are more likely to provide more valuable information with their votes, i.e. in the past they have voted that certain investments will produce value for others, and their profits show that they were right (again, in a toy economy), so we might expect their subsequent votes will reliably point to future value for others. That argument is not entirely without merit: certain attributes that would make someone a better voter for what's valuable also make someone a better producer of value: appropriate risk weighting, accurate expectations about the future, the ability to delay gratification and invest for the long term, the ability to see alternative possible uses of resources.

For sure. In many ways it is better for the mechanism to inherently enable those at the top who are the best at providing for everyone.

The issue is the degree to which putting all your resources in the hands of the few is proportional to the overall benefit that they provide for everyone as a result of their reward.
It's at this point that every pro-Capitalist will shout at me about the Zero-sum fallacy, and I have to explain that I don't think there is a zero-sum of fixed pie, just dimishing returns in addition to the tendency towards oligarchy and even monarchy (autocracy and dictatorship).

It's a false dichotomy to either have the strongest lift everyone up or to lead from the back and enable the weak to lift themselves up and become stronger. I believe there's an optimal threshold of doing both that an unfettered market mechanism, where success makes it easier for you and failure makes it harder for you, fails to deliver.

However, it is true that this threshold is variable. For example, in conditions of scarcity and difficulty, putting all your resources into the hands of the strongest makes more sense because the weakest will drag everyone down and the costs of being dragged down are too great. This is why most of nature selects for such systems - because they are still "in the food chain" and danger/vulnerability is rife. It's also why Capitalism is effective for less developed economies and the less advanced periods in the history of more developed economies. However, once times become easy and resources bountiful - such as in modern western society - the benefits of diverting resources into the hands of the few no longer has the same impact, if any benefit at all - perhaps its even detrimental. The spoilt entitlement of the richest and most pampered upbringing is notoriously damaging and wasteful. It is at this point that the optimal balance swings over to enabling the less fortunate.

This is in addition to the lottery-like nature of modern financial success. Being born into it, happening to get into situations where you meet the right people, or making a good investment that others did not dare to risk - nobody can predict the future, regardless of the fact that predicting the future changes it, and an economic system that centres itself around the ability to do so is little different to gambling.

Carleas wrote:This framing suggests that 1) an unregulated market will degrade over time, and 2) redistributive intervention is necessary to maintain a market economy. Despite relying on an ideal market and a favorable framing, and ignoring other problems inherent in market economies, it shows that the major justifying functions of the market fail without some function to nudge the distribution of votes toward the initial conditions.

Absolutely.

I'm actually interested in the notion of in-built mechanisms that resolve "the rewards and votes no longer serv[ing] their initial function" without resorting to proposals such as "wealth tax, estate tax, and basic income as pro-market policies that strengthen the ability of market forces to allocate scarce resources".

I support such things in the meantime, but I think the world of sports and esports provide a lot of empricial insight on how to make a system satisfying, fairer, and better for everyone.

The cynical part of me suspects, however, that making things better for everyone is exactly not what too many people desire. Too many people would prefer measures to keep others down, even at the cost of themselves, just to gain advantage over them by any means. It's a rational decision for those in a better situation than they ought to be, because fairness is seen as threat to their advantage. I don't agree, I think lifting everyone up will make things better for even them, but their requirement is to be better than other people, not better for themselves. In this case, I believe it is even more important to bring about fairness, to root out such petty sabotage.

Silhouette
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### Re: Money as Reward, Money as Vote

[I found this mostly-completed reply while going through my saved drafts. It was a good conversation, but my kid was born right around that time so I forgot about it and never posted my reply. Apologies, and I hope people are interested in picking it up again]

Ecmandu, a couple nits:

I don't like income as the determinant of the rate of taxation (because people with the same income and different wealth differ in the amount they are able to afford taxes and in the amount they benefit from the social order).

I also don't like hard lines in economic policy. Why treat the 5-million-and-first dollar so differently from the 5 millionth? and what happens when the meaning of $5 million changes through inflation? Or, to your percent of GDP proposal, what happens as the population grows, so that the relationship between percent and per capita changes? Hard lines are hard to avoid, but where possible I prefer incentives that naturally scale. For example, rather than a hard line at$5 million, so that the tax rate goes to 100% after $5 million, instead have a rate the phases in asymptotically towards %100 but never quite reaches it, and at a rate that is continuous with the rate below$5 million.

This latter preference is partly intuition and aesthetics, so take it with some salt. But cliffs in rates of taxation tend to bunch too much activity around the cliff, instead of letting people peg the appropriate threshold for their circumstances. You lose information about where in the jump between $5m and$5m+.01 people actually start to care. Since I value the information production function of the market, I see that as suboptimal.

Ecmandu wrote:What this forces capitalism to do, is to make it more democratic. Want to build something for a billion dollars? You need the consent of a billion divided by at most 5 million. That's the perfect capitalist system.

I basically agree, although I don't think we need every person making $5m to make it work. Even a modest basic income has a similar effect. Several people have also proposed something similar as a remedy for corporate money in politics: give a few hundred dollars to every individual which they can allocate to political campaigns, and you swamp anything that corporate lobbyists can do pretty quickly. Total spending on lobbying in 2018 was ~$3.5 billion, so giving every voting-age individual $150 to put towards their favored campaign would beat that by a order of magnitude. Silhouette wrote:E-sports often have an interesting fairness check, where between seasons MMRs (matchmaking rating)s or Elo ratings are contracted towards the average. This is close to what I would want for the economy, though it's harder to achieve when it's not just regressing Elos (more on that below). I think of it as wealth having a sort of gravity that increases as you move away (so, the strong nuclear force would be more accurate, but less accessible). On the low end, I'd also see a non-zero minimum below which a buoyancy-like effect lifts people upwards. Silhouette wrote:The common theme of the "marketplace of sports" is that they are regulated/interfered with in order to make things fairer and more satisfying for everyone in the exact way that the free market is not. These interventions also keep the game playable. It's not that fairness and satisfaction are ends in themselves, but that games that are unfair and unsatisfying don't get players. And in that respect, the same idea applies to the economy: when we design a system for society, it has to be self-preserving in the sense that it keeps people engaged in the system, bought-in to its continued functioning. Silhouette wrote:The issue is the degree to which putting all your resources in the hands of the few is proportional to the overall benefit that they provide for everyone as a result of their reward. [...] I believe there's an optimal threshold of doing both that an unfettered market mechanism, where success makes it easier for you and failure makes it harder for you, fails to deliver. However, it is true that this threshold is variable.[...] I don't have much to add here, but wanted to acknowledge that it is a good way of framing things. I also liked the point that it changes over time and by circumstances. In hard times, we might think of the external world of scarcity as playing the role that a redistributionist policy would play in more opulent times: people can only get so rich, and the stochastic mechanisms of disease and the desperation of their neighbors will tend to tear them down from time to time. And since the top is pruned frequently, there is more opportunity for those at the bottom to improve their lot through hard work and ingenuity. Silhouette wrote:I'm actually interested in the notion of in-built mechanisms that resolve "the rewards and votes no longer serv[ing] their initial function" without resorting to proposals such as "wealth tax, estate tax, and basic income as pro-market policies that strengthen the ability of market forces to allocate scarce resources". I'm curious to hear your objections to these specific policies, and what alternatives you see. I've seen good arguments against wealth and estate taxes as unworkable, and I think a land value tax would do roughly the same thing with less overhead and less gaming. But I also think that these policies might best be thought of as "the worst policies except for all the others". Against the alternative of systemic malfunction and collapse, somewhat onerous taxes don't seem so bad. Silhouette wrote:The cynical part of me suspects, however, that making things better for everyone is exactly not what too many people desire. Too many people would prefer measures to keep others down, even at the cost of themselves, just to gain advantage over them by any means. Unfortunately this seems to be how humans are wired: to care less about absolute circumstances than relative circumstances. You can see that in the modern left in the developed world, which is angry and disaffected because of billionaires, despite themselves living in a state of absolute abundance (and even relative abundance when compared with those in the third world, who are out of sight and out of mind). But my understanding is that people aren't as upset about being worse-off when they can see the ways in which others are adding more value, e.g. if someone does more or better work, people believe they should be better compensated. As you say, making things obviously fair will help to preserve the system. User Control Panel > Board preference > Edit display options > Display signatures: No. Carleas Magister Ludi Posts: 6092 Joined: Wed Feb 02, 2005 8:10 pm Location: Washington DC, USA ### Re: Money as Reward, Money as Vote Carleas, I’ve evolved since my last post... This post may make you think I’m insane. The economics part is about in the middle... viewtopic.php?p=2760234#p2760234 Ecmandu ILP Legend Posts: 10025 Joined: Thu Dec 11, 2014 1:22 am ### Re: Money as Reward, Money as Vote Carleas wrote: Silhouette wrote:E-sports often have an interesting fairness check, where between seasons MMRs (matchmaking rating)s or Elo ratings are contracted towards the average. This is close to what I would want for the economy, though it's harder to achieve when it's not just regressing Elos (more on that below). I think of it as wealth having a sort of gravity that increases as you move away (so, the strong nuclear force would be more accurate, but less accessible). On the low end, I'd also see a non-zero minimum below which a buoyancy-like effect lifts people upwards. A technique some games use, for example the racing game Mario Kart 64, is informally known as "rubber banding" (a type of "dynamic game difficulty balancing"). In the case of MK64, the players who are doing the worst get a slight boost in speed relative to how behind they are, and they also receive better items if they manage to pick any up - including a weapon that homes onto first place Presumably this is the kind of thing you're referring to through your "buoyancy/gravity" analogy? Funnily enough I actually resent such measures (the original Mario Kart was so much better!) and I'm probably not alone - in probably exactly the same way as many of the richest people if all their efforts went towards endangering their ability to "race themselves". Of course many rich people actually support "rubber banding", and in the context of competing against others many might enjoy the added challenge of being maximally threatened the better they perform. This isn't to say that the same would apply to me in the market economy if I was rich, because not only am I not interested in business or ostentatious material reward, I hate the idea of hoarding resources that others either need or would really appreciate. Racing against myself to see how fast I can go doesn't hurt anyone, and I wouldn't be interested in it if it did hurt anyone - even if merely indirectly or at least relatively. The way in which the market economy requires elevating the few so much in order to elevate everyone to the degree that it does feels like little consolation to me - and I don't like seeing it in anyone, not just in myself - that's why I'm a leftist. The market economy seems like a pandering to various nastinesses that only some humans exhibit, and I don't like encouraging or rewarding such things. I want any "people at the top" to be genuinely inspiring and clearly worthy of their success, which other than several notable exceptions, doesn't feel like it's the case under a market economy at all. As such, in the context of economics, I support your notion of gravity/buoyancy. Carleas wrote: Silhouette wrote:The common theme of the "marketplace of sports" is that they are regulated/interfered with in order to make things fairer and more satisfying for everyone in the exact way that the free market is not. These interventions also keep the game playable. It's not that fairness and satisfaction are ends in themselves, but that games that are unfair and unsatisfying don't get players. And in that respect, the same idea applies to the economy: when we design a system for society, it has to be self-preserving in the sense that it keeps people engaged in the system, bought-in to its continued functioning. This is exactly why I see the psychology of games to be so interesting, and with so much potential towards broader applications. It's unfortunate that games are so widely perceived to be a waste of time, or at least inappropriate to apply to economics - I've no doubt that most would find the idea of applying gaming principles to economics to be a joke. But hopefully this is just an easily surmountable problem of marketing (in the least deceptive way possible of course) or at least a problem of time and generational fluctation. Though the idea that I'll be dead by the time we get there doesn't entirely relieve me of resentment. Carleas wrote: Silhouette wrote:The issue is the degree to which putting all your resources in the hands of the few is proportional to the overall benefit that they provide for everyone as a result of their reward. [...] I believe there's an optimal threshold of doing both that an unfettered market mechanism, where success makes it easier for you and failure makes it harder for you, fails to deliver. However, it is true that this threshold is variable.[...] I don't have much to add here, but wanted to acknowledge that it is a good way of framing things. I also liked the point that it changes over time and by circumstances. In hard times, we might think of the external world of scarcity as playing the role that a redistributionist policy would play in more opulent times: people can only get so rich, and the stochastic mechanisms of disease and the desperation of their neighbors will tend to tear them down from time to time. And since the top is pruned frequently, there is more opportunity for those at the bottom to improve their lot through hard work and ingenuity. Whilst "the top" is much like a babbling fountain in this sense, it certainly seems that water droplets at the top of the market are continually bounced back up and those pooling at the bottom are mostly stagnant. I don't support some kind of system where those at the top are thrown straight back to the bottom, I just think that - mechanically - the best/only way to draw up those at the bottom isn't simply to make the fountain as tall as possible. Carleas wrote: Silhouette wrote:I'm actually interested in the notion of in-built mechanisms that resolve "the rewards and votes no longer serv[ing] their initial function" without resorting to proposals such as "wealth tax, estate tax, and basic income as pro-market policies that strengthen the ability of market forces to allocate scarce resources". I'm curious to hear your objections to these specific policies, and what alternatives you see. I've seen good arguments against wealth and estate taxes as unworkable, and I think a land value tax would do roughly the same thing with less overhead and less gaming. But I also think that these policies might best be thought of as "the worst policies except for all the others". Against the alternative of systemic malfunction and collapse, somewhat onerous taxes don't seem so bad. I believe I've come up with a compelling solution, which I laid out in a thread here. Carleas wrote: Silhouette wrote:The cynical part of me suspects, however, that making things better for everyone is exactly not what too many people desire. Too many people would prefer measures to keep others down, even at the cost of themselves, just to gain advantage over them by any means. Unfortunately this seems to be how humans are wired: to care less about absolute circumstances than relative circumstances. You can see that in the modern left in the developed world, which is angry and disaffected because of billionaires, despite themselves living in a state of absolute abundance (and even relative abundance when compared with those in the third world, who are out of sight and out of mind). But my understanding is that people aren't as upset about being worse-off when they can see the ways in which others are adding more value, e.g. if someone does more or better work, people believe they should be better compensated. As you say, making things obviously fair will help to preserve the system. I don't like the idea that "humans are wired in some particular negative way" - it seems to me as though there's a significant variation in how different humans "are wired". It seems to me that most humans are held hostage by pandering to how too many humans "are wired", and even rewarding them for their socio-economically unfortunate wiring. It's only a lot of people who "prefer measures that keep others down, even at the cost of themselves, just to gain advantage over them by any means". Not all of us, by any means. Perhaps it's the case that when it comes to the more powerful "loss aversion", humans tend to care more about "absolute circumstances", and when it comes to the less powerful "propect of gain", humans tend to care more about "relative circumstances". If there is a "human wiring", I don't think it's unfortunate that this probably sums some of it up - it seems more inevitable that all life as a whole would adopt this behaviour. I agree that people aren't as upset if they see others being rewarded for transparently adding more value. Why then do have so much "private business" dominating the top of this business of "adding value", where by definition nobody except lawyers and auditors can see what's going on and what makes the beneficiaries so deserving of their rewards? The whole reason government is so distrusted by so many people is because they can actually see how incompetent people can be, and everyone is visibly accountable. That's just life though - many people are just bad, but it seems the perception of only the public sector suffers, where the perception of the private sector is that it's attracting all the best people who are therefore so much more competent and do the job a so much better - when anyone who's worked in the private sector knows there's an unmanagable abundance of incompetence and understaffing to cut down on costs (for the sake of profits) there too. Like you say about the third world being "out of sight and out of mind", it seems that the inability to see what goes on in private business (combined with some hand-wavey pseudologic) is enough to save its reputation as so distinct from the public sector. So is it worth the privacy of the private sector just to maintain the public perception of it, if it means we can't see and appreciate the best of what goes on to make certain people so successful? It's largely loss aversion no doubt that makes many at the top paranoid about transparency in case people might deem them unworthy of their riches. Silhouette Philosopher Posts: 4207 Joined: Tue May 20, 2003 1:27 am Location: Existence ### Re: Money as Reward, Money as Vote “Everyone” knows that that corporate welfare is what makes people successful. Siphoning money from the vast poor to bail out every company that would otherwise be bankrupt otherwise. I find it funny that the Reagan administration used to berate “welfare moms”, who added all together (combined) only make as much money as the three wealthiest people in the US. It’s fucking disgusting. Ecmandu ILP Legend Posts: 10025 Joined: Thu Dec 11, 2014 1:22 am ### Re: Money as Reward, Money as Vote Ecmandu wrote:“Everyone” knows that that corporate welfare is what makes people successful. Siphoning money from the vast poor to bail out every company that would otherwise be bankrupt otherwise. I find it funny that the Reagan administration used to berate “welfare moms”, who added all together (combined) only make as much money as the three wealthiest people in the US. It’s fucking disgusting. Actually this statistic sounded impressive. It’s not! The three wealthiest people in the US own more wealth than the bottom 120 million people (not including homelessness!) What this means, is that the top three wealthiest people in the US own more wealth than the bottom 1/3rd of the US population!! Ecmandu ILP Legend Posts: 10025 Joined: Thu Dec 11, 2014 1:22 am ### Re: Money as Reward, Money as Vote Ecmandu wrote:Carleas, I’ve evolved since my last post... I think my post is responsive to much of your argument there, but I'll say a bit more. Capping companies from paying more than$X runs into problems where people 1) work for multiple companies; 2) get compensated in other ways, e.g. company car, house, plane; 3) people make money from non-company endeavors, e.g. buying an selling commodities; 4) people store their wealth in other forms, e.g. houses, artworks, precious metals; 5) people barter for the things in #4 instead of taking payment in cash.

I also maintain that cliffs are bad, of which I'll say more in the first part of my response to Silhouette.

Ecmandu wrote:“Everyone” knows that that corporate welfare is what makes people successful.

I don't know that. In fact, I don't think that's true, in which case no one "knows" that.

Silhouette wrote:MK64

This is a great example of the type you note later on when discussing the value of games to economics. And it happens to be a game I'm familiar with, so even better.

So we two separate interventions in the MK64 to level the playing field, and for me they feel very different. There's the "rubber banding" ("RB"), where the players in the rear are given a boost to help them keep up with the leaders. And there is the "blue shell" ("BS", how appropriate), where players in the rear get an item that specifically damages the player in the front. I find RB to be a better way to level the playing field than BS. BS feels arbitrary and unfair. Two racers neck and neck for first will see one of them lose for no reason other than that they are winning in the moment the BS happens. That randomness is frustrating. By contrast, RB feels less unfair, even though it also makes objectively worse driving still competitive with objectively better driving. I think it feels less unfair because it's a little smoother, it's not arbitrary or unpredictable, and it still requires that racers have some skill to get into the lead.

I've seen the term "Blue Shell Effect" used in other eSports, noteably CS:GO, a team FPS game that has a between-round meta-strategic element of buying upgraded weapons using funds earned for in-game accomplishments. Losing teams get more money to buy guns, which makes each match more even. It's called the Blue Shell Effect because it helps the loser compete, but it does so in a less intrusive way than either BS or RB in MK64.

I think it has to do with not interfering with the goals of the game, or the criterion for better play. CS:GO is first and foremost a first-person shooter, not an economic strategy game. Those elements spice up the game, but interfering with them leaves the core of the game untouched. By contrast, MK64 is a racing game, and BS and RB take away from that: RB just makes racing poorly less determinative of placement, but BS actively punishing being the best racer, and thereby makes the optimal strategy one of slowing down to stay in second until as late in the race as possible.

Silhouette wrote:The way in which the market economy requires elevating the few so much in order to elevate everyone to the degree that it does feels like little consolation to me - and I don't like seeing it in anyone, not just in myself - that's why I'm a leftist. The market economy seems like a pandering to various nastinesses that only some humans exhibit, and I don't like encouraging or rewarding such things. I want any "people at the top" to be genuinely inspiring and clearly worthy of their success, which other than several notable exceptions, doesn't feel like it's the case under a market economy at all.

I don't think this is inherent in a market economy. Our economy is significantly captured, and past winners have structured the laws to make keeping wealth easier than making wealth.

But setting that aside, I think the left (of which I consider myself a part) is often too eager to cut off the nose to spite the face. The difference between a 2% growth rate and a 1% growth rate is enormous over time, and we should be reluctant to choose the latter just because it also means a smaller increase in inequality.

Being "at the top" can mean more than one thing, because people get paid in different ways. People who earn lots of money might also earn lots of disdain. People who earn genuine admiration might not get paid much to do it. That makes sense because people will be willing to accept lower compensation to play a role that pays in admiration, since people like being admired, but will need extra money to compensate for doing unpopular work. That gets back to the original point: lots of unpopular work is socially valuable, and it's fine to compensate those people more, but in it becomes a problem repeated games with the prickly people who are willing to be unpopular for money get massively more votes in what is valuable.

Silhouette wrote:Whilst "the top" is much like a babbling fountain in this sense, it certainly seems that water droplets at the top of the market are continually bounced back up and those pooling at the bottom are mostly stagnant.
I don't support some kind of system where those at the top are thrown straight back to the bottom, I just think that - mechanically - the best/only way to draw up those at the bottom isn't simply to make the fountain as tall as possible.

I recently learned of the concept of ergodicity, and I think it's a desirable feature in an economy. In short, a system is ergodic when the distribution of a collection in any instant is the same as the distribution of any member of the collection over time. A fair society would be ergodic over generations, so that the status of ones wealth/class at birth were independent of the status of ones wealth/class as an adult, and the probability distribution for any individual mirrors the distribution of wealth in society.

I haven't read your Pareto Distribution of Wealth (but I will), but from a quick look it seems similar to this idea (if only in the way it considers the structure of society independent of values and policy).

Silhouette wrote:I don't like the idea that "humans are wired in some particular negative way" - it seems to me as though there's a significant variation in how different humans "are wired".

I don't disagree that there is variation, and there aren't really any human universals, but there are things we should expect the average human to do, and ways we should shape society in light of those expectations. Humans are, after all, not blank slates, we inherit some 'wiring' dictated by the circumstances of our evolution. And we can see similar wiring in our closest animal relatives, who show similar preferences on average (despite, again, significant variation).

And of course this is not to excuse that behavior: one way to encourage people to suppress instinctive selfishness is to punish it through law, policy, and culture. But in shaping those, we should be aware of what people will tend to do, what instincts we'll need to counteract, and what policies will work with those instincts to maximize buy-in and optimize outcomes.

I'd also point out that these 'wiring' tendencies are not all toward selfishness. We also see innate cooperative and pro-social tendencies, like a visceral distaste for unfairness and desire to help members of the community. Humans are social animals, and we've evolved to be part of a collective, and to support that collective even to our own detriment, and to punish others who don't support the collective.

Silhouette wrote:So is it worth the privacy of the private sector just to maintain the public perception of it, if it means we can't see and appreciate the best of what goes on to make certain people so successful?

This is part of why I've long been a skeptic of privacy and secrecy as a policy, but to push back a little: many of the factors that make choices rational are opaque from the outside not only because of secrecy of facts, but because a surface-level understanding of the facts doesn't give an accurate understanding of the dynamics of an organization that an insiders deep understanding provides.

We can see something similar going on when we look at the choices of the poor who live in a state of precarity, who often make choices that are hard for those with more economic security to understand. For example, buying and wearing gold jewelry seems extravagant for someone who lives paycheck to paycheck, but when we consider that choice in light of a lack of a secure place to store wealth (e.g. shared/insecure housing, not banks, etc.), the relatively liquidity of gold, and the social signaling function of displays of wealth, those decisions become easier to understand. Without considering the full picture, it's easy to conclude that people are making a bad decision and should be punished for their bad choices, but in fact those decisions are the rational reaction to a situation we may not fully understand.

This is somewhat at odds with the goal of "making things obviously fair", and I'm not sure what the takeaway is for policy makers, other than some humility that we might not actually know what fairness looks like. Indeed, to generate the perception of fairness, we might need to make society deeply unfair.
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Carleas
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### Re: Money as Reward, Money as Vote

Carleas, you said it yourself!

You disagree that corporate welfare is the ONLY thing that makes people “mega-rich”, but then state that the mega-rich make the laws that allow it to be easier (certain in my book) to keep wealth than to make it.

The only argument you offered that I see as having import to what I offered was that people have multiple jobs... everything else can be explained by having a co-op economy or registered as part of the salary.

To this argument I offer two things:

1.) if you’re making 5-10 million dollars a year, you have no need for two jobs!

2.) the Internal Revenue Service can track whether you’re making more than 10 million a year with current gdp percentage and cut it off at 10 million per annum.
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### Re: Money as Reward, Money as Vote

Ecmandu wrote:Carleas, you said it yourself!

You disagree that corporate welfare is the ONLY thing that makes people “mega-rich”, but then state that the mega-rich make the laws that allow it to be easier (certain in my book) to keep wealth than to make it.

The only argument you offered that I see as having import to what I offered was that people have multiple jobs... everything else can be explained by having a co-op economy or registered as part of the salary.

To this argument I offer two things:

1.) if you’re making 5-10 million dollars a year, you have no need for two jobs!

2.) the Internal Revenue Service can track whether you’re making more than 10 million a year with current gdp percentage and cut it off at 10 million per annum.

Actually, let’s get inside the minds of the aristocrats....

They need society to believe that a kid working out of their parents basement can become a billionaire — let me ask you this (they lose nothing by doing this) — do you really think that a bill gates or a mark zuckeberg couldn’t have been stolen from the aristocratic class back then?

Aristocrats gain MORE stability (from revolution) by ALLOWING this to occur.

It in no way means that wealth gains aren’t all subsidized by our taxes. Sure, let Bezos be the richest business person on earth, doesn’t matter to the aristocrats. In fact, it’s part of their Business model! To allow this to happen. Once these people join “the club”, they stay there. Siphoning off the tax payers to stay rich—- part of that siphoning is the laws.
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### Re: Money as Reward, Money as Vote

Ecmandu wrote:You disagree that corporate welfare is the ONLY thing that makes people “mega-rich”, but then state that the mega-rich make the laws that allow it to be easier (certain in my book) to keep wealth than to make it.

I think there's a difference between saying that the laws have an influence and saying that "corporate welfare is what makes people successful", but maybe we need to unpack those terms a bit.

First, by "corporate welfare", I mean things like targeted tax breaks for corporations or other things that increase the rents captured by corporations. I wouldn't include the corporate form itself, i.e. the legal fiction of corporate personhood that separates a company from its owners. Corporate personhood is useful for coordinating individual activity and reducing transaction costs, so they actually create value and don't merely capture rents. I also wouldn't use the term to describe corporations that are created to exploit opportunities created by regulatory policies (which is a different case from where an existing corporation lobbies regulators to create new regulations that lock-in its existing place in the market, which I think do think qualifies as a form of corporate welfare).

The other fuzzy terms are in the phrase, "what makes people successful." Are we talking about but-for causation? If by "successful" we mean something so that only the richest person on earth qualifies, and by "makes" we mean the but-for causation, then if corporate welfare has increased Jeff Bezos' wealth by 2%, we could say that corporate welfare is what makes him successful. But I think those are not the natural definitions. If instead by "successful" we mean >70th percentile, and by "makes" we mean some stricter form of causation such that corporate welfare was both necessary and sufficient, then it seems obviously false to say that corporate welfare makes people successful in that sense.

Corporate welfare exists, it plays a role in picking winners and losers, and an even larger role in amplifying the returns to winning, but to say that it is the only or primary or even plurality cause of success -- for a what the average person would describe as success -- is too strong.

Ecmandu wrote:The only argument you offered that I see as having import to what I offered was that people have multiple jobs... everything else can be explained by having a co-op economy or registered as part of the salary.

This is hand-wavey, to say the least. We don't have a "co-op economy", we've never had one, no society close to the scale of the modern international order -- or any single-digit fraction thereof -- has had anything close to what I can only imagine you intend by a "co-op economy". To say that what I'm pointing out aren't problems because they can be easily resolved by upending civilization and replacing it with a poorly specified and untested alternative is... not a strong rebuttal.

Ecmandu wrote:It in no way means that wealth gains aren’t all subsidized by our taxes.

Sure, taxes are meant to secure individuals in the persons and possessions. They subsidize the commons.
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Carleas
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### Re: Money as Reward, Money as Vote

Carleas,

You are aware that the mega rich pay no taxes, right? They’re just following “the law” (with slime bag lawyers)

They launder money through the caymans or some such bullshit.

But you get a guy like Willie Nelson or Wesley Snipes who both know income tax is unconstitutional and the (illegal - unconstitutional) IRS rains hell on them... but NOT the billionaires!! You start to understand that the taxpayers are PAYING!!... For the laws as well! That’s corporate welfare as well.
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### Re: Money as Reward, Money as Vote

Ecmandu wrote:You are aware that the mega rich pay no taxes, right?

In 2018, the to 1% by income paid >37% of all federal income taxes. The top 5% by income paid more than half of all taxes (>58%). (From here, seems consistent with data here'; this article sadly does not link to the data it's based on, but has the top .1% by income paying ~22% of all taxes.

So no, I am not aware of that, and neither are you.

Ecmandu wrote:income tax is unconstitutional and the (illegal - unconstitutional) IRS

You've taken some outlandish positions over the years, but I never would have pegged you for a Sovereign Citizen! What a boring way to have outlandish beliefs!
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Carleas
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### Re: Money as Reward, Money as Vote

Carleas, take it from trump himself (who says he pays no taxes) and that he’s just following the laws as written because he’s a smart alpha male.

I’m assuming your “negative” in negative 22% was a typo.

Have you never heard of tax loopholes?

You mean that all the super rich who could use them decide not to?

Maybe we’re not talking about the same tax bracket.

There are only about 1000 people on earth as rich as trump. Even if trump payed for “the wall” out of his own pocket, he’d still be one of the thousand richest people on earth (oh poor trump *sobs*)
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### Re: Money as Reward, Money as Vote

Carleas, if you don’t believe me, read this New York Times article...

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### Re: Money as Reward, Money as Vote

Ecmandu wrote:I’m assuming your “negative” in negative 22% was a typo.

That's a tilde, I used it here to mean 'approximately'. Good to know it reads as negative, though, and from wiki it seems it has other meanings when attached to numbers. I'll try to say that in a different way going forward.

Ecmandu wrote:Have you never heard of tax loopholes?

I have, and I'm sure they're widely used. But I believe the numbers I provided are actual tax revenue, i.e. they are the taxes actually collected and thus take into account all loopholes.

Ecmandu wrote:take it from trump himself (who says he pays no taxes)

Trump paid no taxes because he took a bath 20 years ago. His income was significantly negative during one year, and our tax system lets him spread that loss over time. One can argue with the best way to deal with the situation, but permitting people who take on significant risk to spread their losses and gains has merits. For one thing, it's probably more accurate: if the nature of my business is that I make $200k a year with a 50% risk of losing a$100k, then my effective income over time is \$50k a year.

I personally think income is the wrong target for taxation. Instead we should target consumption with a VAT and property or land value tax, which would avoid this problem (though it likely introduces its own quirky edge cases).
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### Re: Money as Reward, Money as Vote

Carleas wrote:I find RB to be a better way to level the playing field than BS.

I think it feels less unfair because it's a little smoother, it's not arbitrary or unpredictable, and it still requires that racers have some skill to get into the lead.

I agree.
You could distinguish the two approaches as acute and chronic fairness measures.
Shocks don't work well with economies, especially when it comes to credit/lending.
And psychologically, smooth trends just become something to work around, like entropy or gravity.

I think this "Blue Shell Effect" being applied to Counterstrike is just hyperbolic. I've seen other much less dramatic terms being used, such as "Comeback Mechanics", which mean just the same thing.
I wouldn't be so hasty to dismiss the economic element of games like Counterstrike as not core to the experience - basically all games involve the management of resources to hopefully give you an advantage towards achieving a goal. The genre is more like the primary manner in which you manage your resources, and what sort of goal you're looking to achieve + the aesthetics around it. For CS:GO, you use the mechanics of the losing team getting more money to your advantage just like you use the terrain - it's just another limitation on the game to work around, like not using your hands in soccer unless you're the goalkeeper, or hitting the ball over the net and inside the lines on a tennis court. Games wouldn't be games without deliberate rules and restrictions, and with video games they don't have to be static - they can be dynamic as well.

It's just not rewarding when the Nash Equilibrium is to not play the game, like with "BS": if all players opt to stay out of 1st position as soon as someone gets the item, then it's arguable that everyone ought to immediately race in reverse as soon as a player picks one up (though in reality it's a weighing of risk that punishes the biggest risk-taker). But RB gets around all this anyway, we seem to agree on this one.

Carleas wrote:I don't think this is inherent in a market economy. Our economy is significantly captured, and past winners have structured the laws to make keeping wealth easier than making wealth.

But setting that aside, I think the left (of which I consider myself a part) is often too eager to cut off the nose to spite the face. The difference between a 2% growth rate and a 1% growth rate is enormous over time, and we should be reluctant to choose the latter just because it also means a smaller increase in inequality.

Being "at the top" can mean more than one thing, because people get paid in different ways. People who earn lots of money might also earn lots of disdain. People who earn genuine admiration might not get paid much to do it. That makes sense because people will be willing to accept lower compensation to play a role that pays in admiration, since people like being admired, but will need extra money to compensate for doing unpopular work. That gets back to the original point: lots of unpopular work is socially valuable, and it's fine to compensate those people more, but in it becomes a problem repeated games with the prickly people who are willing to be unpopular for money get massively more votes in what is valuable.

I agree that our economy is significantly captured. The power of past winners is beyond sufficient to hold the vast majority to ransom to increase the power of past winners more and more. If there's a threshold where a balance in inequality is kept in check, we passed it.

I think it's a little generous to think of "people who earn genuine admiration who don't get paid much to do it" as "at the top". I'm not being cynical or materialistic, I'm just not underestimating the power that the rich have over the world in all respects, regardless of earning any amount of disdain. No matter how loved you are or how much political influence you have due to the good you do, if you're not paid enough to place you up there with the disdained rich, realistically your power is only superifical. It's trade that makes the world go round.

What should be noted about the current situation of the world is where real value lies - and it's with those who don't earn nearly enough admiration for the good they do, and whose monetary compensation is practically negatively correlated with contemporary pay structures. The left has always known this. I'm not even sure that rectifying this would actually result in less growth as you seem to fear? But I do know that growth for the sake of growth has a lot to do with merely allowing free markets to survive rather than being necessarily socially important. Funding is attracted through a good return/interest, which is maximised overall by overall growth, and simplified when more funds are in the hands of less people, which is the emergent result of all free trading games anyway. It's not cutting off the nose to spite the face for the left to want to rectify that. In a lot of ways, growth is bad for us - psychologically as well as socio-politically and environmentally speaking.

Carleas wrote:I recently learned of the concept of ergodicity, and I think it's a desirable feature in an economy. In short, a system is ergodic when the distribution of a collection in any instant is the same as the distribution of any member of the collection over time. A fair society would be ergodic over generations, so that the status of ones wealth/class at birth were independent of the status of ones wealth/class as an adult, and the probability distribution for any individual mirrors the distribution of wealth in society.

I haven't read your Pareto Distribution of Wealth (but I will), but from a quick look it seems similar to this idea (if only in the way it considers the structure of society independent of values and policy).

I had a quick read about Ergodicity. If I'm understanding it properly, it sounds like a measure of consistency and fairness - the average for individuals over a long time matching the average for everyone at any one time, or something similar?
Sounds reasonable.
You seem to be relating it to an aversion to nepotism? Nepotism can and will happen in free markets, which is just another one of the anti-meritcratic consequences of free markets.

Since you wrote this post, I noticed you replied to my Pareto Distribution of Wealth thread - I'll hopefully respond to what you said on that thread at some point.

Carleas wrote:I don't disagree that there is variation, and there aren't really any human universals, but there are things we should expect the average human to do, and ways we should shape society in light of those expectations. Humans are, after all, not blank slates, we inherit some 'wiring' dictated by the circumstances of our evolution. And we can see similar wiring in our closest animal relatives, who show similar preferences on average (despite, again, significant variation).

And of course this is not to excuse that behavior: one way to encourage people to suppress instinctive selfishness is to punish it through law, policy, and culture. But in shaping those, we should be aware of what people will tend to do, what instincts we'll need to counteract, and what policies will work with those instincts to maximize buy-in and optimize outcomes.

I'd also point out that these 'wiring' tendencies are not all toward selfishness. We also see innate cooperative and pro-social tendencies, like a visceral distaste for unfairness and desire to help members of the community. Humans are social animals, and we've evolved to be part of a collective, and to support that collective even to our own detriment, and to punish others who don't support the collective.

The final paragraph in the above quote is exactly what I'm getting at.

There's just too many people, myself included, whose instincts like those in said paragraph completely nullify the selfish instincts we were discussing before as "human nature" or not - such as the seeming urge to sabotage others even if it includes self-sabotage simply to maintain a competitive advantage: I don't have any of that at all, except in competitive game situations with negligible real-world impact.

My point is that if many people have one side of their instincts dominating the other, and many other people vice versa, what use is an average? An average just tells us about those in between at the cost of telling us amount far far more than mere minorities/exceptions either side.
That's my only issue, I know you're not apologising for the existence of selfish human instincts, and I agree we're not blank slates.

Carleas wrote:This is part of why I've long been a skeptic of privacy and secrecy as a policy, but to push back a little: many of the factors that make choices rational are opaque from the outside not only because of secrecy of facts, but because a surface-level understanding of the facts doesn't give an accurate understanding of the dynamics of an organization that an insiders deep understanding provides.

We can see something similar going on when we look at the choices of the poor who live in a state of precarity, who often make choices that are hard for those with more economic security to understand. For example, buying and wearing gold jewelry seems extravagant for someone who lives paycheck to paycheck, but when we consider that choice in light of a lack of a secure place to store wealth (e.g. shared/insecure housing, not banks, etc.), the relatively liquidity of gold, and the social signaling function of displays of wealth, those decisions become easier to understand. Without considering the full picture, it's easy to conclude that people are making a bad decision and should be punished for their bad choices, but in fact those decisions are the rational reaction to a situation we may not fully understand.

This is somewhat at odds with the goal of "making things obviously fair", and I'm not sure what the takeaway is for policy makers, other than some humility that we might not actually know what fairness looks like. Indeed, to generate the perception of fairness, we might need to make society deeply unfair.

It's true that the dynamics of an organisation isn't something the general populace are going to understand, to give the organisation's decisions the correct context - so there's little point in transparency in that respect. There's going to be a lack of empathy, rationality and sufficient study all over the general populace - especially between people with very different lives to one another, as you say.

That's not to say that fairness can't be garnered from it scientifically - when with current privacy in place it can barely be speculated. Though I agree that this is inevitably going to be at odds with the perception of fairness, as you also point out, at least at first. One thing that the current privacy that we have in place has in its favour is that it keeps latent the majority of outcry against it, simmering away relatively calmly as a general political resentment that most accept or at least don't fight. I would argue though that this is mainly because of general public ignorance, which rubs me up the wrong way on a personal level at the very least. In light of your comments on this matter, I'm not entirely sure how much more transparent things ought to get - purely out of distrust of the public's ability to deal with it if privacy were removed. Ironically this is no doubt the same kind of distrust that would cause the misunderstandings that would arise if transparency allowed people with different lives to judge one another too harshly... I'll have to think about this one.

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