We're in for a wild ride. Exponentially accelerating technological, cultural, and socioeconomic evolution means that every year will see more developments than the previous one. More change will happen between now and 2050 than during all of humanity's past. Let's explore the 21st century and ride this historic wave of planetary transition with a confident open mind.

Tuesday, August 2, 2011

Inequality of Wealth Distribution and Economic Growth

The forest was in chaos. Parts of it were burning and the food was scarce. Remembering how wonderful the forest used to be, various animal groups sent ambassadors to a very ancient owl. The wise owl remembered  historical cycles and hopefully had clues on how to reset the forest so it could be productive again. They gathered by the gargantuan oak tree where the owl lived.

"Is this what it took to come see me?" the owl hooted. "That's fine. I got some time to say the least, gather around."

"You see, most animals are needed to make the forest work. The beavers who are skilled at dams, the messenger birds, the defender bears, and the wily foxes. Each is as important as the next for proper societal function," the owl said.

The animals shouted, "foxes are the most important since they are 1% of the population and have the most food, they are the smartest and most capable! That's why they get at least 10% of everything always!"

"Well, perhaps. Don't listen to everything newspapers say. After all, they're owned by foxes," owl said.

The owl got comfortable and elaborated upon a few scenarios.

"Some animal theorists assure us that as the economy expands, the ruling foxes need to skim less and less from the pie. They say that if our economic pie is 100 slices today and foxes take 10%, then they can take 9% if the pie grows to 1,000 slices. Everybody wins?"

The animals nodded and murmured approval, "yes yes they'll need to loot less with time, we'll all have more!"

"Let me show you how that is rubbish!" declared the owl. He smiled at the puzzled expressions of the crowd. "If population and economy is both 100 then during the first generation one fox gets 10 slices while 99 chumpsters get 90 slices (.909 slice per chumpster). During the second generation, if both economy and population grow equally to 1,000 then reduction of fox share to 9% will yield 90 slices for 10 foxes (9 slices per fox) while 990 chumpsters split 910 slices amongst them (.919  slice per chumpster)."

He continued, "you see fellow forest dwellers, everybody always wants more resources with every passing year. Foxes, their offspring, and their families also want annual increases and they're in a political position to actually get them. Unless forced otherwise, they will expand their wealth at least at the rate of economic growth. Here's why.."

The owl pointed his wing at a sketch.

"Scenario I : Lets say we start with 100 slices and foxes take their usual 10% (10 slice) cut. Our pie grows 10% annually while the amount foxes take for themselves grows only 5% annually which means they're reducing their share gradually over time. After the first year, our pie is 110 slices and foxes take 10.5 slices. By year 10, we have 259 slices with foxes taking 16 of them. This means the share of how much they take has fallen from 10% to 6.17% in just a decade. If this continues and populations of foxes and non-foxes (chumpsters in fox vernacular) grow at a stable and exactly proportional rate, the foxes will be reduced to poverty chumpster status within a few generations."

A ripple of understanding went through the crowd, "since they lose when expanding insufficiently quickly, lets then peg the rate at which they grow their wealth to the rate at which the economy grows!" they roared.

"We're getting warmer" smiled the owl. "We've heard from various mammals that were dropped on their heads when little.."


"..we heard from them that not only should economy not grow at the rate of the herd but that we should enter post-growth!! Having taken everything the foxes want to consolidate their gains forever and turn everything into a "sustainable" equilibrium zoo!! As if life was equilibrium!"

*rolling laughter*

"Well, we can't stand still, that is, grow as fast as we breed considering the chumpster population usually breeds at greater rates than the fox one. If the orange trickster incomes are pegged to growth and have a guaranteed minimum pie cut, then there'll be massive privation for the rest. Keeping in mind the population growth rates of various animal classes is essential when determining forest policy. Especially in these troubled times we can't allow things to develop where one class wishes the other was depopulated or reduced in size just to maintain privileges, much less expand privileges.."

"Well lets expand the economy at a much faster rate than herd growth!", yelled the animals.

"Very good, obviously that's the solution, yet even with ratio of economic to population growth being top heavy, we must still prevent the 1% from claiming larger share than their usual 10%..."

"Hey can you speak from that higher bare branch over there so we can hear you better?" somebody called from the crowd.

"Sure thing", said the owl as he hopped upwards. He then unfurled another sketch.

"Scenario II  : Economic pie is expanding at twice the rate of the population (which remains internally proportional). Economy expands 1,000% and population expands 500% every generation. Foxes gradually expand the amount they claim by 2% of the total pie.

1st generation) POPULATION = 100 animals (1% fox  99% chumpsters)
PIE = 100 slices
1 fox takes 10 slices (10% of pie), 10 slices per fox
99 chumpsters split 90 slice, .909 slice per chumpster

2nd generation) POPULATION = 600 animals
PIE = 1,100 slices
6 foxes split 132 slices (12% of pie), 22  slices per fox (120% increase)
594 chumpsters split 968 slices, 1.629 slice per chumpster (79.20% increase)

3rd generation) POPULATION = 3,600 animals
PIE = 12,100 slices
36 foxes split 1,694 slices (14% of pie),  47.055 slices per fox (113% increase)
3,564 chumpsters split 10,406 slices   2.919 slice per chumpster (79.18% increase)
..... "

"As you can see, even with phenomenal growth, a tiny minority beginning to increase their total cut begins to stagnate and reverse the party for all. This greed may bring more slices today yet leave forest burning tomorrow."

The animals cried, "that's not fair!! 99% of animals deserve these increases over time! There's more of us!"

"Yes furry and feathery ones. The ancients had a guiding principle for herd survival. They said to limit the amount of resources the best off animals get to no more than 10 times the amount that worst off animals get. More importantly, they said to peg the rise in resources that the best off get to the rise of resources that the worst off get. That means that if field mice get 10 slices the foxes would get no more than 100 and if foxes wish to get 110 next year they better work out conditions where the mice can get 11 next year."

"It's not in their nature to share!!" said the animals "You mentioned the ancients. Wasn't there a time when we were ruled by turtles and kinder hunters like your fellow owls? Wasn't the forest more bountiful? Wasn't the.."

"Hah! Indeed," said the owl. "There is one more thing I need to say before I forget. You must also never allow usury to develop and never neglect rapid construction of infrastruc..."

Suddenly a loud shot rang out. The owl froze briefly, clutched at its chest, slumped, and fell down to loud gasps. The owl lay dead.

A very old fox burst into the clearing. It was panting and had a wild yet serious expression on its snout.

"The humans!" it gasped. "They're here! There's guns and mercenary dogs, the whole herd is in danger!! We're being attacked!"

The crowd forgot about everything as panic spread.

"The humans did this, they spoiled the forest! They used some owls as spies. We're forming a defensive grid with the wolves by the river bank. Follow me, we'll overcome this together like we always have! The beavers are in charge of logistics. Defend the forest!"

"I knew that owl was up to no good, talking down to us from those branches.." snorted a beaver elder.

The animals began to run.

click to enlarge

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  1. Great job mirroring some of the current reality with simple concepts and characters. will take a second read to get it all. And that's my comprehension level even considering you've presented a simplified, fable version! Analyzing the more complex reality is a struggle.

    So, are all the "elders" up to no good? Did the owl mislead or is that obvious and I'm being dense?

    My theory is that it's best to leave allocation or assignment of resources unspecified and case by case. Failing that, divided equally.

    Some argue what's left of a societal economy after that is seemingly a free for all, where parties can conspire unchecked. I think it would be more like spontaneous order, and reduce opportunities for greed and grabs for power. At least it avoids putting "officials" in place to face the temptation to serve themselves.

    Of course, this assumes everyone can become more "street-smart." (Wink)

  2. Ive added a couple sentences to clarify owl's assassination. The foxes here are psychopathic humans (less than 1% of the population) who like get rich quick predation schemes while other elders like owls and turtles are unemotional yet prudent humans (such as technically competent managerial class that run infrastructural hierarchies). Pretty much every society is an oligarchy but not every oligarchy is a fox run kleptocracy like ours.