[dhruval]

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).

[gjulianm]

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

[dhruval]

1. Sure, I think there are degrees of consent

- people enthusiastically lining up to get the latest sneaker / iPhone.

- mildly enthusiastic grocery shopping.

- overpriced medical drugs due to a monopoly.

- taxation.

- outright theft at gunpoint

2. Insightful, thanks. I think one variable the model doesn’t account for is time (which is not multiplicative and scarce).

Money and power can be multiplicative so maybe most of us are playing the non-multiplicative game of spending our time to make money, while the rich are leveraged time to play multiplicative games where they spend money to make more money and happened to win a bunch of times.

[solarmist]

2.) Pretty much. That's the way I see it. They also take risks with their time in order to find multiplicative or even exponential results. Such as starting a business that might go nowhere.

Similarly, (from comment [1]) paraphrasing an idea from Victor Wooten's video. If you grow up around people that do interesting things with money then you'll learn to do interesting things with money too. (He said people who grow up around people who speak music naturally learn to speak music quickly and easily too.)

[1] https://news.ycombinator.com/item?id=34094950

[imgabe]

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.

[orzig]

People tend to think about monopolies in terms of single companies, but they're more commonly a systemic thing.

Housing: Most voters are homeowners, with the shared incentive to increase the price of housing in their town through restrictive policies. This ignores the interesting conversation about whether NIMBY actually increases property values, but most people believe they do. They don't even have to be explicit about it, nor get 100% cooperation, but the emergent property is clear and shockingly consistent across US

Healthcare: There are many systems at play here, as an example: The AMA restricts the number of doctors who can enter the profession: https://skeptics.stackexchange.com/questions/4561/does-the-a...

Education: Prestige de-facto limits the number of 'desirable' schools in the marketplace, and the high-prestige schools haven't grown nearly as much as overall enrollment.

There's no single top hat wearing, cigar chomping fat cat. Or even a smoke filled back room. But a variety of cultural and regulatory norms keep the dynamics entrenched. Which isn't to say that they can't be changed! But it won't be just the subtle nudge of Adam Smith's invisible hand.

[imgabe]

Those are all industries that are heavily regulated and/or subsidized by the government. I’m not saying the free market is the perfect answer to everything, but none of those are a free market.

[piva00]

That's a No True Scotsman, by that definition there simply isn't free market at all in the world. Every product and service has regulations on how/what can be sold...

[danaris]

"Free market" has an actual definition.

And no. There is not, in fact, a truly "free market" in the world, in the sense that people frequently talk about in terms of "the free market will solve XYZ". Because it's an idealized abstraction used to talk about the theory and philosophy of market economics.

I don't claim to be deeply conversant with the theory, but I do know that a truly free market requires:

1. Commoditization: The products or services need to be effectively interchangeable, aside from features and price on which different vendors can compete

2. Perfect information: The buyers and sellers all need to be perfectly informed about all aspects of the products or services (including things like, "was this made with slave labour?")

3. Unconstrained ability to choose: The buyers must have no constraints on their choice beyond those actively under competition—they can't, for instance, be lying on a gurney with their appendix rupturing while deciding which hospital to give their "business" to. They also can't be so hungry that they must buy food now or risk starvation, or under such tight financial constraints that they must choose the very cheapest option or risk destitution.

If a given market does not exhibit even one of these characteristics, it cannot be considered a "free market" of the type we should expect to arrive at the ideal distribution of resources.

[imgabe]

That’s not the point. If this post is trying to argue that high prices are all just caused by greedy capitalists, then pointing out the three most heavily government-manipulated markets does not exactly support the hypothesis.

[gjulianm]

> 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?

But that competition isn't perfect. Right now, for example, there are very clear indications of price gouging with the excuse of inflation.

And it isn't even just with food. See the renting market for an example. People who had enough money to buy a house to rent it earn more money, and people who didn't spend more money because they need a house to live (and moving is a very high barrier for a lot of people).

But I think the most important example is jobs, mainly jobs with a low barrier of entry, which are mostly taken by poor people. People that don't have enough savings/time to get better education or to find for better jobs have to get whatever they can, so their employers have a lot of power to set low salaries: the employer can deal with an employee leaving or taking more time to fill a position, the employee probably needs a job quickly to pay the bills.

[chii]

Switch sandwiches out with internet service provider, and do you get the same story?

[imgabe]

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.

[chii]

> The vast majority of people are able to buy Internet service and it is not a significant percentage of income

how did you know that the cost of such a service is not way overpriced compared to the cost of production?

Are there really many ~sandwich providers~ISP that you can compare it to? Or are the prices just taken because there's no alternative, and that ~sandwiches~internet access is needed for living?

[imgabe]

The cost of production is irrelevant. The sale price is determined by the supply and demand on both sides (supply of the product, and supply of money available to pay for it).

A market like ISPs is subject to natural monopoly because of the physical nature of running wires to houses. A true free market would see any competitor free to run their own wires and offer a service, but we don't allow that. We kind of did in the early days of electricity when people just strung up wires wherever they liked. It led to a lot of people getting electrocuted.

If there is really a large margin available for a competitor to undercut, someone will find a way to do it. And, as predicted, people are with options like Starlink and 5G hotspots becoming viable.

[oreally]

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]

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]

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]

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.

[wizofaus]

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]

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.