[ExI] Middle Class Doomed?

[Kelly Anderson]

On Mon, Sep 30, 2013 at 2:17 PM, Anders Sandberg <anders at aleph.se> wrote:

> On 2013-09-30 15:02, Eugen Leitl wrote:
>
>> On Mon, Sep 30, 2013 at 07:29:34AM -0600, Kelly Anderson wrote:
>>
>>  I believe that incomes almost always follow a power curve, with a few
>>>
>> Depends on the country. It's not a natural law.
>>
>
> Whether it is a natural law is a good question, actually.


The folks at the Santa Fe Institute certainly seem to think that it is.
They are smart people, pursuing original lines of thinking, but it makes a
lot of sense to me.


> It is not just that power-law tails are found in all industrialised
> economies, but they seem to follow robustly from a lot of models too (e.g.
> http://arxiv.org/abs/condmat/**0002374<http://arxiv.org/abs/condmat/0002374>).


Do you happen to know what they mean by "distribution of wealth tends to be
very broadly distributed when exchanges are limited" Anders?


> One can of course quibble about whether it is really power law, lognormal
> or stretched exponential: http://arxiv.org/abs/1304.0212 - but the effect
> is the same.
>

Yes, it is only an approximation. But a pretty good one most of the time.


> Different countries have different exponents, so clearly the shape can be
> affected.


The question sort of comes down to this, "Is it always a good thing when
the exponent is adjusted so that the middle class is larger?"

It seems obvious, but perhaps it isn't so obvious. I'm not entirely sure,
but my gut says a healthy middle class is a good thing.


> But I suspect the overall wealth condensation effect is just due to the
> skew distribution of human ability and the winner-take-all properties of
> human attention: give everybody an equal amount of wealth, and very soon
> they will have given some of it to a few superstars who produce something
> everybody wants.


 What I'm seeing is that globalization, the Internet and dematerialization
are things that push the winner-take-all paradigm to levels that it hasn't
previously attained. For example, there can be only one lowest cost blender
at Walmart. Other slightly higher priced blender makers are therefore
pushed out of the market. That means that the blender maker that wins the
Walmart bid makes way more money, and the underbidder makes so much less
that they might even go out of business. That kind of winner-take-all thing
happens with web sites as well. Just look how hard it is for Bing to make
inroads against Google, despite spending tons of money to try. The way I
think of this is that there are natural monopolies. Or in other words,
monopolies are often the natural outcome of competition. Since monopolies
are bad in the end, (no competition leads to inevitably higher prices) we
try to keep them from forming. I should amend my normal anarchist stance
slightly to say that I approve of the government keeping the formation of
monopolies to a minimum. Even with that caveat, ologopies lead to Mark
Zuckerberg being one rich mother.

-Kelly
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