Model Madness

From: Technotranscendence (
Date: Thu Dec 27 2001 - 17:59:40 MST

I changed the subject to, hopefully, open the discussion to others.

On Sunday, December 23, 2001 1:21 PM Smigrodzki, Rafal
SmigrodzkiR@MSX.UPMC.EDU wrote:
>> I argue from valid theory _and_ history. You can make up fantasy
>> worlds
>> that fit any claim you want to make. Does your model capture
>> anything
>> relevant about reality? (Rhetorical here, since I answer below that
>> is
>> does not. To me, it's kind of like the "corn economy" used by Adam
>> Smith. See Peter Lewin's _Capital in Disequilibrium_, pp 47-52.)
> Imaginary worlds are quite useful to analyze principles. Game theory
> dissects simple behaviors under controlled conditions, like the
> observation of bacterial colonies on agar prepares the doctor to face
>the real infections afflicting humans.

I was not arguing against using such models per se, but arguing against
using irrelevant models. That why I stated and repeat: "You can make
up fantasy worlds that fit any claim you want to make. Does your model
capture anything relevant about reality?" (Note: I did not make a
blanket statement against using such models or imaginary worlds.) What
I want to avoid is just created some abstract model that supports a
given position, but is extremely unrealistic. If your model does
capture relevant features of the real world, that's great. If it
doesn't, then it can lead to trouble. What sort of trouble? Leaving
out important facts, such as when people look at exponential growth in
bacteria but forget that the agar base is limited, so eventually growth
drops off.

> BTW, can you give valid historical evidence of the beneficial effects
> of the absence of a government on social development (I mean *total*
> absence of a government resulting in great improvements in quality and
> quantity of human life)?

The examples already given qualify, but to these I would add some
extrapolation from other historical examples of less anarchistic
societies, but ones where government is either less interventionist or
in which the level of intervention has declined marketedly. Examples of
this include Late Middle Ages Northern Europe, the British Colonies in
the New World, and the United States before the Civil War. I would also
add to these examples of free markets or of deregulation (carried out
correctly -- i.e., with the moral hazard problem creared by halfbaked

Overall, these exampels seem to point out the societies that have less
government interference are better off. They create more wealth and
have more technological progress. Now, a counterargument to this could
be that there's a certain level of government needed -- more than
anarchy, but less than a modern welfare state. Some, like Rand and von
Mises, defend just this claim. However, absent any evidence or good
theoretical arguments for a lower limit on government, I think it
bolsters the claim for anarchism.

>> Taxes are coercive. Elections are coercive. You model already has
>> coercion built into it.
> OK - you made my day.

I have to nit pick. You do and will.:)

> Let's say the colonists just arrive
> haphazardly from other planets, in small groups, like the Native
> Americans, Polynesians, Easter Islanders. With no constabulary,
> individuals with a penchant for rape and pillage will inevitably act
> up.
> A tribal warfare system will inevitably develop (or can you give me
> historical counterexamples?)

Only the ones I gave you earlier. Also, by having different groups with
vastly different cultures arrive, you're tilting your example toward
cultural clashes. Surely, this stuff does happen, but the usual
solution is that different peoples tend to stick together and not
intermingle -- except at the boundaries and even then only in a
controlled fashion. This seems to fit anthropological evidence and even
modern experience, where we see immigrants -- surprise! -- settling in
immigrant communities in the US even now.

>> Another unrealistic assumption. I'd expect some industry to arise
>> and
>> technological progress -- unless there were strict controls against
>> it.
> How many thousands of years did take to invent the wheel (counting
> from the first emergence of ungoverned humans)?
> A government (usually a bad one) will form well before industry, and
> without stability offered by a good government, hardly any research
> will take place.

I don't think so. Fire and probably metallurgy were discoverd long
before nation states came onto the scene. Probably the same for pottery
and many small scale manufacturing. Add to this, that governments
created much of the instability, through invasion and occupation and
even wholesale slaughter.

> Coercion always comes first - government comes later. This played
> out in hunter-gatherer and agrarian societies hundreds of times
> (again, Native Americans, Polynesians......)

Is your argument that coercion comes, then as a reaction to it, people
form governments -- institutions for coercion -- to stop it? If so, my
argument would be that government is not necessary to do this. I
believe a competitive, market solution is much better.

>> This is unlikely for many reasons. One, as more land gets bought up,
>> the incentive for people to band together against further buying up
>> will increase.
> What do you mean exactly? Communes putting together their monies
> to buy land from the rich? Where on Earth did they form (aside from
> those insignificant credit unions)?

On your parenthetic comment: if credit unions are so insignificant, why
are banks worried about them? Why do banks lobby to have credit unions
severely restricted? (On the wider issue of unconventional banking, the
Third World and many people in poor communities in the First World use
sort of lending coops to help each other out. This people helping
themselves out -- as opposed to the state taxing someone else to help
them. This is just the sort of thing you rule out in your model, yet
it's a real phenomena. Now, you might rule it out because it's rare or
unlikely to stem the tide of buy outs, but then tell me why.)

>> Such cooperation happens "spontaneously" in many instances --
>> from small businesses helping each other out to various corporations
>> (why wouldn't landowners just hire the right people to manage their
>> land for them and run it like a corporation?)
> Precisely what types of "small businesses" are going to help each
> other out, trying to stop land consolidation and how?
> Landowners do - they hire accountants, overseers, and hundreds of
> cheap
> peons to do the work, if such laboreres are available due to the
> scarcity of land.

But what about the overall context of this? If the peons they are
hiring are getting paid, then there's always a chance they can put aside
money or such to buy land themselves. (Insider trading might occur too,
here. It might be unethical, but it probably will occur.)

Also, if the wealthy landowners in your model compete with each other,
then the price of land will also rise as will the price of their
laborers. (This is why subsistence wages probably won't be the rule.)
Unless you posit some sort of class consciousness for the wealthier
landowners -- and if you do, how does it arise (since in your original
model everyone starts out the same) and how does it perpetuate itself
(as consolidation proceeds, the profit to be made by compete against
each other will rise plus) -- there wil lbe no reason to expect a two
class system of everyone else and big landowners. (On the perpetuation
issue, imagine this. As you say, all the landowners want to increase
their shares. Some are better than others. X, e.g., is the best in
area A, while Y is the best in area B. When X buys up all of A and Y
buys up all of B, as you assume, why wouldn't X and Y compete with each
other? Why wouldn't one or the other attempt to buy each other out?
Why would they stop only at that moment and not before or after?)

>> and other contractual
>> agreements to ward off mergers and the like. (Sometimes, it's
>> inefficient to do so, but beforehand, we can't always be sure that
>> voluntary behavior is inefficient or that coerced behavior can do
>> better.)
> Who is going to ward off mergers??? Why? How?

A contractual agreement could arise under private property where a group
of farmers agree to a convenant not to sell off their land. This is a
restriction on their property right, but one they agree to. (This
happens today with neighborhood convenants -- e.g., where people agree
only to sell their property if their neighbors agree to the sale or
where people voluntarily restrict the uses to which their property can
be put, such as disallowing commercial or nuisance uses. There are even
planned communities where this is carried out to a further degree.)

Why would people do this? It's often for cultural or property value
maintenance. In the former case, people want to live in certain
settings. In your example, it's quite possible to imagine yoemen
farmers who decide that 100 acre farms are the ideal and anything bigger
will destroy this sort of Jeffersonian culture of self-sufficiency.
(I'm not saying the whole planet would adopt this.)

In the latter case, sometimes property values are best maintained when
property is not split, combined, or put to different uses. For
instance, many people want to live in residential and not industrial or
commercial neighborhoods and will pay more to do so. One property near
them becomes industrialized or commercialized -- e.g., a factory gets
built -- the property value goes down. So, people form agreements to
limit or prevent this.

> We agreed there is no coercion allowed in this experiment, so you
> have to be pretty smart, trying to stop landowners from consolidating
> their holdings by marriage.

Not at all. This would depend on what marriage entailed. All of this
has to do with the culture and what people agree to. Right now, there
are prenuptial agreements in the US and in earlier cultures there were
rights on how properties were divided under marriage and inheritence.
The English has primogeniture and the Germans had equal division --
IIRC. (I'm not sure if these still prevail, but it's beside the point
here. After all, marriage does not necessarily entail consolidation and
there can be other agreements that override it. For instance, the owner
might only allow land to pass on if it's kept whole but not consolidated
with other land.)

>> Two, land will go up in value if some want to buy more and more of
>> The price will rise, meaning that owners of it will make more money.
>> There's no way to tell how much, but this already shows how your
>> scenario is a bit unrealistic.
> You are forgetting that the large landowners make more money than
> the small ones, both gross, and sometimes even per acre (they can
> afford the expensive, imported machines). The less land available for
> sale there is, the more difficult it is for the small operators to
join the
> game.

Still, as supply decreases, all other things being equal, price will
rise. This might mean in your model that latter sellers make more
money -- in fact, maybe enough to not turn into subsistence workers for
big landowners. This will create an incentive to hold out.

Let's look at this realistically. In any such society, there will be
incompetent landowners -- for whatever reason -- and unlucky ones.
There will be highly competent ones and very lucky ones -- the guy get
the best top soil even if his farming practices leave something to be
desired. But there will also be the vast middle grade in between. The
inefficient landowners probably should get bought up and find something
else to do. The ones in the middle will always have a chance to be
among the buyers (driving up the prices for the big guys) or to plan
ahead, since their fortunes are not so marginal. Unless you assume from
the start there are only good morons and evil geniuses -- yet with both
groups deciding to abide by libertarianism -- your model probably won't
come about.

>> Three, you assume that inheritance alone will preserve large estates.
>> Historically, this has not been the case. In fact, inherited wealth
>> often declines after a time. Surely, there are exceptions, but even
>> biggest family fortunes tend to get consumed over time and less
>> entrepreneurial and frugal family members take over.
> Historically, that *was* the case, at least in countries with
> primogeniture (or can you give me specific and numerous
> counterexamples?).

Actually, from my reading this was _the_ problem in the Frankish
kingdoms, where land was divided equally among male offspring. What
happened was big estates eventually were broken into ever smaller
ones -- a process helped by other social processes going on in the early
Middle Ages.

> "From rags to rags in three generations"
> is mainly a phenomenon of the capitalist society, where you
> need to be on your toes to stay on top.

But, by construction, the society you're talking about is capitalist.
It has a free market, respect for property rights, and initiation of
force is a no no. Also, the process of accumulation in your model is
supposed to be that the people on their toes stay on top. If this is
so -- and how is this any different from other models of capitalism in
action -- why would one expect vast estates to only grow and never
decline? How could one guarantee that a guy who is competent would pass
that competence along to his heirs? How could one also expect a guy who
is competent at running a 100 acre farm will be equally competent at
running a million acre one? How could one expect that a guy who is
competent today will still be competent tomorrow and vice versa?

>> This process, the concentration of a crucial and non-expandable
>> Land actually is expandable in many ways. One, land that was
>> formerly
>> marginal can become profitable if it's physically altered, e.g.,
>> cleared, irrigated, and plowed. Two, if the price of land increases
>> overall, then more marginal pieces will be economically usable.
>> Three, land can be created in the sense of reclaiming land from
>> the sea or even building islands. Four, things like agriskyscrapers
>> could create new land on top of old land -- if they became
>> economical. We can't just assume static amounts and values.
> This is orthogonal to the issue of land concentration - land is
> expanded only if there is population pressure,

Wrong! Land is expanded when it becomes economical to do so -- or, even
more accurately, when some people think it will be economical to do so.
(Entrepreneurial action is based on perceptions and expectations -- not
necessarily underlying realities. That's why some projects fails.)

> with total demand for
> food exceeding the supply. It does not result in an unlimited supply

Note: I never said unlimited. I merely said we can "assume static
amounts and values."

> land at competitive prices - entrepreneurs cannot make money by
> cheap "land" in skyscrapers to undercut the traditional landowners

They can if it becomes profitable to do so. Right now, it is not
profitable to do so -- or no one has found a way to make it so. (After
all, the price of land could rise to make other methods more profitable
or the cost of other methods -- even formerly unknown ones -- could
decrease, or some combination of the two could come about.)

> (as
> opposed to memory chip makers being able to flood the market with
> new advance in technology). Marginal land sometimes offers a refuge
> subsistence farmers, but with enough pressure even they might end up
> being displaced.

This is only your assumption here. There are also other things to do
with land aside from farm it. Unless you assume only farming is allowed
and that no one can find other profitable uses for land, then your model
has other flaws in it.

In essence, if you make a model with enough assumptions in it -- however
unrealistic or unlikely they may be -- you can get just about anything
you want. This is how, e.g., we get Keynesian economics. (For
criticisms of Keynesian macroeconomic models, see Roger Garrison's _Time
and Money: The Macroeconomics of Capital Structure_. I specifically
brought up Adam Smith's corn economy as such a model. Granted, Smith's
model is not all that bad, but when taken too seriously, it can lead to
results we never see in real world economies, even in farm economies.
He abstracted away from the richness of real world economies. From
this, Marx was basically able to build his highly unrealistic model of
capitalism, which is very close to your model. That's why I brought
this up earlier.)

This is a wider point that applies outside of the discussion of free
markets and libertarianism to many other topics discussed on this list,
including various singularities. How many projections of when it will
occur suffer from unrealistic modeling techniques?


Daniel Ust
    My "Love in Ancient America," a poem recently published in _The
Thought_, is now at:

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