Russ -
Thanks . . .
As far as thinking about how economies "really" work . . . what follows is not really a response to your questions, but a source for thinking about transitions from subsistence/barter to a "monetized" system . . .
A clever scheme:
1.) Find a region where there is a subsistence/barter "economy" (with, typically, tribal/communal shared land).
2.) With "high minded" fanfare, institute "land reform." That is, divide the land up into small plots, and assign "ownership" of the plots to individuals.
3.) Now, the clever part: establish a "land tax," but make sure that the "land tax" must be paid in currency. Note that an "income tax" won't work, because then people could remain in their subsistence/barter mode, avoid having any accountable "income," and thus avoid the "taxation" trap . . .
4.) Before long, everyone will have to either switch to "cash crops," or engage in "wage labor" (or, more likely, both) in order to get currency to pay the "land tax."
5.) You will then have a "monetized" economy, together with a ready pool of "wage laborers," and "consumers" who purchase goods, since they have moved to "cash crops," away from subsistence farming.
A quick Google search yields this essay (the Google search was: colonial land taxation cash crop):
A quote from the essay: "The history of direct taxation in colonial capitalism also has some wider
theoretical implications. It shows, for example, “that ‘monetization’ did not spring forth
from barter; nor did it require ‘trust’—as most stories about the origins of money claim”
15 (Wray, 1998, p. 61). In the colonial capitalist context, money was clearly a “creature of
the state” "
Anyway . . .
tom
On Apr 12, 2009, at 5:07 PM, Russ Abbott wrote:
Hey Tom,
Very nice work. Do you have anything that would help build intuition about how it all works?
Also, what I'm after is an understanding of how an economy works. Your model says that an economy that satisfies certain conditions will (inevitably) wind up with a certain wealth distribution. But it doesn't tell me what's happening in the economy -- only that some people will become rich and a lot more will become poor. I'd like to develop a feeling for what's actually going on in the economy.
For example, in my original model in which (a) each agent needs to consume one unit of each of N different resources at each time step (b) there are N agents each of which produces N units of a particular resource i (different from each agent) and (c) agents trade (barter style) units of resource one for one as needed, it seems to me that there will be no wealth accumulation. Everything that is produced is consumed, and as long as agents are able to trade with each other on a one-for-one basis, every agent survives but no agent accumulates any excess. So that doesn't quite fit the model.
Furthermore, what happens if some agents (as a result of technological advances) are able to produce N units of a resource in less than one time step? Then those agents will have time on their hands and can produce something other than the resource that they contribute to the community. So they start producing resources that no one needs -- but that perhaps some agents want.
The agents with time on their hands then exchange these discretionary resources among each other. Again this might be modeled as a barter system -- although some convenient resource could come to serve as a unit of measure and medium of exchange. If you take this to the limit so that every agent is producing nothing but discretionary resources (i.e., the "needs" are so cheap to produce that there is no point keeping track of them), then what? In this model, every agent creates N units of value every time step. So there will never be any agents with no resources.
In addition, since every transaction involves the exchange of units of resource of the same value, it seems like there is no room for accumulation of wealth. (This is assuming that one acquires a resource in order to consume, i.e., destroy, it.) So when two agents exchange resources, they are both left poorer since they each consume the received resource. In this model an agent grows wealthy only by not exchanging resources and keeping all the resources it produces. It then has the ability eventually to go on a shopping spree, pig out, and consume lots and lots of resources at one time. But what else is that wealth good for in this economy?
So all this doesn't quite seem to fit the model you are describing.
-- Russ
On Sun, Apr 12, 2009 at 4:31 PM, Tom Carter
<[hidden email]> wrote:
All -
The real "random walks" link:
tom
On Apr 12, 2009, at 3:58 PM, Tom Carter wrote:
All -
Apropos some of this, there are notes from lectures I've given recently on some of these topics here:
Math Club lecture (including some discussion of the "wealth model," and some "power laws" discussion)
tom
On Apr 12, 2009, at 11:16 AM, Stephen Guerin wrote:
Russ writes:
there are N agents; N resources are needed for survival. So if the aggregate production is evenly distributed everyone has a subsistence living.
I don't think this is necessarily true.
Your mentioning a gift economy is further a reason to look at a model as simple as the Tom Carter/Victor Yakovenko model I mentioned where agents are giving a dollar to another random agent (ie gifting). This model, with minimal assumptions, generates non-equitable distribution of wealth where very few agents end up holding most of the wealth (Boltzmann distribution) even though the average wealth in the model is unchanged at $50/agent.
The important constraint in the model is that agents can only have positive amounts of cash/goods -- they can't gift a dollar they don't have.
Just as energy distributes itself as a boltzmann distribution as particles can not have less than zero energy after a collision (transaction). Basically we have diffusion against a wall in both models. Of course we can introduce debt and progressive taxes to the economic model to mess with the dynamics, but I think it's important to recognize the non-equity is there from the beginning with very minimal assumptions. Note that the wealthy agents do turnover in this model so the definition of what is equitable is important.
-Steve
On Apr 12, 2009, at 11:40 AM, Russ Abbott wrote:
Thanks for all the responses. What prompted my question was thinking about the "end state" of the current financial crisis. The question is: what does a successful stable economy look like? Only secondarily was I asking about markets, wealth distribution across society, etc., which is what many of the existing models focus on.
In attempting to describe the foundations of a stable economy I was making the following assumptions.
• We live off the gift of free energy -- the sun. So in some sense a stable economy requires little more than harvesting that energy.
• As human beings we have the innate (i.e., also free) ability to transform that energy into other forms that we need. For example, most of us on this list are capable of writing code. I'm taking skills like that as more free gifts from nature. Yes, it requires, education, study, practice, etc., but ultimately it grows out of our being alive, a free gift.
• In talking about "free gifts" from nature, I'm not trying to be spiritual, new age-y, etc. It just seems to me to be the way the world works. So I'm willing to build it into the model.
• But, even though we live off these free gifts, we all need energy to survive. If you look at my "Reductionist blind spot" paper, you see that we are what I call dynamic entities. Dynamic entities need to import externally supplied energy to persist -- in our case food, at least. So even though we find ourselves in a world in which there is externally supplied energy available to be imported (from the sun and its stored versions), we are each still required to do something to import it for ourselves. That is, we must each work for a living.
• Presumably a standard economic model says that we live at a subsistence level if the amount of work we do matches our needs. If I spend all my working hours doing nothing more than earning what I need to survive, that's subsistence.
• I want to allow specialization so I suggested that each agent specializes in producing some resource but that the aggregate amount produced exactly satisfies the needs of the producers. That is, each agent produces N units of his specialty resource; there are N agents; N resources are needed for survival. So if the aggregate production is evenly distributed everyone has a subsistence living.
• A society/economy grows "richer" when it can produce enough resources for itself without requiring everyone to work on producing those resources. In that case, the available excess labor can produce discretionary items, like art, pop music, software, soft drinks, philosophy, etc.
• As technology advances a smaller and smaller percentage of the population is needed to produce the necessities. The rest can spend their time producing discretionary items.
• So at this point we are all well fed, and we are all willing to spend our extra money supporting our local NPR stations.
• But what happens when there is shock to the economy and people find that they have less "wealth" than they thought they had? Presumably they will spend less on discretionary items, and the people who create those items will be out of work. Where do we go from there?
So I am looking for a model to explore these kinds of issues.
I must say that I'm surprised at the number of things I had to write down to explain what I am after. I thought it would be simpler. And I want something as simple as possible.
Any thoughts/suggestions?
-- Russ
On Sun, Apr 12, 2009 at 9:14 AM, Victoria Hughes <[hidden email]> wrote:
> Attention and action = the price to consume.
is it possible to have an idea / new information and not in some way, internally or externally, react to it?
Memes spread. Humans by design infect each other on all levels.
The Complex seems like a great example: by definition intends to do this.
Idea / attention / action-reaction / experience / new idea.
And so forth.
Am enjoying the bouncing of ideas and information in this particular string...
Tory
On Apr 12, 2009, at 7:04 AM, Jochen Fromm wrote:
The central property which emerges in markets is
the price. The central law which rules markets is
the law of supply and demand. A basic agent-based
model for markets should explain how both, the
price and the law of supply and demand, emerge
in competitive markets. It should be simple to
extend such a model to explain bubbles and crashes.
As far as I know, there is no basic model of
markets in general, there are only agent based models
of specific markets, for example stock markets,
financial markets and electricity markets. Perhaps
the law of supply and demand is too simple to justify
such a model?
Epstein and Axtell's Sugarscape is a model where
agents begin to accumulate "wealth" in some form,
but it is more about evolution of societies and less
about market mechanisms and economies.
It would be interesting to apply a basic agent-based
market model to the society of mind. If we consider the
crowd within and the battle of ideas which is going on
inside our minds, can we create an agent-based model
to explain the 'market of information' ? We have a
demand for new or highly emotional stuff, are constantly
supplied with information from the outside, and the price
we have to pay to consume it is attention.
-J.
----- Original Message ----- From: Russ Abbott
To: The Friday Morning Applied Complexity Coffee Group
Sent: Sunday, April 12, 2009 9:00 AM
Subject: [FRIAM] Agent-based market models
Does anyone know of good examples of generic agent-based market economies? I'm thinking of something as simple as this.
A population consists of agents each of which has certain continuing needs (such as food, clothing, shelter, Internet access, etc.) to survive. As a starting point, let's assume that each agent needs one unit of each of N resources every time period. Let's also assume that each agent is specialized and is capable of creating enough of one of the needed resources to satisfy the needs of N agents. (The fact that I used the same N in both places was intentional.) To keep it simple let's assume that these acts of creation occur from scratch, i.e., that the creator doesn't need raw materials, that all that's necessary for an agent to create a needed resource is that the agent be alive. The agents presumably develop a barter economy, trading the resources they create for the resources they need to stay alive. Perhaps markets develop, and perhaps money develops. At this point the economy should be fairly stable. Each agent creates enough stuff so that s/he can trade it for what s/he needs to stay live.
Perhaps some of the agents learn how to be more efficient in creating their resource and begin to accumulate "wealth" in some form. Perhaps the agents have discretionary desires, which they fill if they have enough resources left over after meeting their basic needs. Perhaps there are communal services that are paid for by taxes or memberships. This could become increasingly elaborate.
It seems to me that models of this sort must have been developed -- perhaps many times. Does anyone know of any references to this sort of work?
Thanks.
-- Russ Abbott
_____________________________________________
Professor, Computer Science
California State University, Los Angeles
o Check out my blog at http://bluecatblog.wordpress.com/
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Meets Fridays 9a-11:30 at cafe at St. John's College
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Meets Fridays 9a-11:30 at cafe at St. John's College
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http://www.friam.org
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Meets Fridays 9a-11:30 at cafe at St. John's College
lectures, archives, unsubscribe, maps at http://www.friam.org
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FRIAM Applied Complexity Group listserv
Meets Fridays 9a-11:30 at cafe at St. John's College
lectures, archives, unsubscribe, maps at http://www.friam.org
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FRIAM Applied Complexity Group listserv
Meets Fridays 9a-11:30 at cafe at St. John's College
lectures, archives, unsubscribe, maps at http://www.friam.org