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Date: Sun, 9 Sep 2007 23:49:03 -0400 (EDT)
To: improvetheworld &AElig umich.edu
From: James W Mickens <jmickens &AElig eecs.umich.edu>
Subject: Re: mind the gap

> Huge thanks to Melanie, Kevin, and Cam for responding to James better 
> than I could.  The response I was working on is pretty much obsolete 
> now, fortunately for everyone. :)

I am not convinced by any of these arguments, and as far as I'm concerned, 
the debate is still open :-P. However, for the sake of everyone's inbox 
size, this will be my last post on the matter.


To Melanie:

> Even though there is technically a finite number of people out there,
> when we're talking about # of people willing to pay for a service, it
> may as well be infinite.  Computers were once something very few could
> afford... that's not the case anymore.  They've become more affordable
> and the "number of people willing to pay for" them has essentially
> become infinite.

This is spectacularly untrue ;-). There are a lot of Americans who are
poor and who cannot afford computers. Even if everyone could afford a 
computer, it doesn't make business sense to model your customer base as 
unbounded. This is why market research is useful---there are a finite set 
of consumers whose interests are constantly shifting, and you have to 
tailor your business practices to them, lest they defect to another 
business. When we hear descriptions about the health of a company or a 
nation's economy, we always get bounded, non-infinite statistics (X 
dollars of profit or Y new jobs created). One of my core disagreements 
with Daniel is that I believe that infinity should never show up in 
economic calculations. It should never show up because it does not have a 
correspondence with anything in the physical economic system.


> Are you saying that it's bad when my widget business does better than
> someone else's and therefor increases wealth while theirs declines?

Not at all. I'm just pointing out that an increase in one business' wealth 
may induce a decrease in another's wealth. I understand that the incentive 
to build wealth drives competition and often leads to better goods and 
services.


To Kevin:

> I'd like to chime in for just a second on this one.   The fact that 
> companies prefer to represent some of their data in a pie chart doesn't 
> automatically validate the daddy model, you're going to have to work a 
> little harder than that:
> 
> company A builds 90 widgets
> company B builds 90 widgets
> 
> the total "market" for widgets is 100.
> 
> Both comapanies have still created wealth of 90 widgets, they're just 
> going to have to reduce their prices for widgets in order to sell their 
> inventories.  Widgets have now become cheaper because of the extra 
> "widget wealth" that has been created.  Pie charts are only reflecting 
> the fact that companies restrict production to maximize prices.

Every definition of wealth that I've encountered includes money as a type 
of wealth. Thus, when I purchase an object, I exchange wealth for 
wealth---money for an object. Given a finite amount of monetary wealth 
that people will exchange for widget wealth, the decision to give money to 
Company A is a direct loss of wealth for Company B. The only time that 
this won't be true is if Company A has already sold its full capacity of 
90 widgets. In this case, it has no surplus supply, so a sale to Company 
B is not stealing an opportunity for Company A to generate additional 
monetary wealth.

An over-supply of widgets may indeed force both companies to reduce their 
widget prices, but this doesn't change the fact that both companies are 
chasing after a constrained set of dollars. As with Melanie's example, 
there are not an infinite number of dollars waiting to be exchanged for 
widgets.


To Daniel and Cameron:

> The factory worker example doesn't make sense to me though.  The factory 
> owner pays the worker the market price for the labor/expertise they are 
> contributing.  No problem there.

Why is the market price of the wage relevant to whether the worker's 
wealth is decreasing? Your income counts as part of your wealth. Thus, if 
your wage decreases, your wealth decreases, independently of whether your 
new wage is closer to or further from the "market price" of your labor. I 
agree that the economy as a *whole* may have produced extra wealth, but 
that doesn't mean that *everyone's* wealth increased---in fact, some 
people's wealth may have decreased. This contradicts Daniel's claim that 
his wealth generation cannot negatively impact my own wealth. When I say 
that the worker with the cut salary has less wealth, I'm not making "an 
appeal to emotion" as Cameron claims. I'm making an objective statement 
about that worker's ability to purchase goods.


> Capitalism is at its core fair and the injustices, even if so big as to 
> cast a shadow over the whole system, are nonetheless at the periphery 
> and not the other way around.

It's absolutely heartbreaking to read this. Billions of people are 
starving, despairing, and dying around the world precisely because of 
capitalism's failures. Their welfare should not be at the periphery of the 
economic debate; it should be one of the focuses of the debate. I dare you 
to go into disease-ravaged Africa and say that capitalism's approach 
towards pharmaceutical patents is a peripheral issue. I dare you to go 
into the inner city of an America metropolis and tell the jobless, 
hopeless youths that they shouldn't worry because capitalism is on its 
way. It's very convenient for us to say that capitalism is the answer when 
we are reaping its rewards. It's not quite so easy when you're on the 
other end. It's not so easy when you're the person who's dying because you 
lack access to cheap medicine. It's not so easy when you've been laid off 
or had your wages cut in the name of "ultimate efficiency." Capitalism is 
not inherently immoral, but it is amoral. It is driven by profit, not 
compassion. I agree that capitalism has many fine features, but we have no 
reason to think that a system designed to maximize earnings will optimize 
moral outcomes as well.

I'm extremely dispirited by the outcome of this debate. I strongly believe 
that many of the economists on this email list are out of touch with the 
real-world impacts of their economic theories. As I mentioned above, this 
will be the last public post that I make on this subject. However, I'm 
still available for private dialogue.

Defiant,
   ~j