Summary
A two person service and knowledge economy
stabilises below 50% of capacity with zero progress.
Problem
Imagine a planet
with two people(X and Y) and many things fully automated so it is largely a
service and knowledge economy. There are
two full-time jobs requiring each person to do some work for the other.
Both jobs are
open at the start and the planet is fair. To avoid stagnation the jobs will be
re-advertised and applied for each period.
There is a concern that both jobs paying the same provides little
incentive to work hard and secure the better job. It seems better to have one good job and one perfectly
acceptable but not quite so good job.
All changes are consensual and must be agreed by both – however if there
is a disagreement the holder of the good job gets the casting vote.
Initially,
wealth on the planet is shared equally and both are equally and highly talented
so neither is better suited to the better job.
Being fair and reasonable but recognising that necessary job skills will
be acquired through practice they flip a coin to assign the jobs. X wins the flip and gets the better job. This is a stable small planet and both jobs
require the same amount of capital so they agree that each will own the assets
required for their jobs. As a further
simplification we assume that capital equipment is permanent and there is no
requirement for investment to support innovation and there is no bank.
Y is
disappointed at losing the flip but it was fair and agreed up front and his job
is OK. The planet operates like earth,
except there are no taxes. Consequently
one person’s expenditure must equal the other person’s income. Income allows spending at the various
automated services and vending machines on the planet and is collected by the
other and they are required to spend sufficient to pay the others wages.
The time comes
for re-advertising the jobs. While it
might seem fairest to swap jobs, X points out that they are now both
experienced and better able to do their existing jobs so it makes sense to
continue with the current division of labour.
Y accepts this is true but is unhappy that they will be making less than
X. Both are quicker at their tasks through
practice and seeing improvement opportunities. More time passes and both continue to learn
and make improvements. Each year there
is also a transfer of wealth from Y to X because X can ensure his expenditure
never exceeds his income.
At the first
period end it was just noted that Y owed X for the difference between their incomes. However as debt builds up over time X insists
that Y sell some of his assets to X and X decides that it’s now appropriate to
charge rent on the assets he owns that Y uses. As X possesses the good job Y has to
agree. This situation remains unstable
as Y will end up with no assets and X will own everything. Recognising this will happen and being
farsighted and firmly in a leadership role now X decides that some of his job
is rather tedious so Y can now work longer than X to allow him to pay the rent.
This is annoying
for Y as they started equal but progress continues and while Y is seeing less
opportunities, X is continuing to find ways to improve work. There is now much less than two full time jobs
– however Y still works full-time and X works less and less.
‘Equilibrium’
arises once X owns 100% of the assets and does no work. In practice X doesn’t completely trust Y so
still does some work and has concerns that if he is unreasonable Y may
rebel. X is often comfortable with
about 90% of the wealth and doing 10% of the work. X finds time for charitable causes.
X likes to be seen
to be doing some work. They’ve earned
everything having got a good job all these years earlier and improving
continuously at a good rate whereas Y stalled for some reason. Everything that happened seems quite fair,
reasonable and agreeable – yes he had a little bit of luck at the start – but
that didn’t even merit mention in his memoirs.
Y is not happy with the arrangements but nothing legal could be done
about it – those were the rules on this new fairer planet. At times Y is happier than X as being fully
employed provides a sense of purpose.
The situation could just as easily have been reversed if Y had been
lucky.
The above model partly
depicts why you get heavily concentrated wealth on your planet. Similar arrangements have proved predictable
and unchanging over centuries with wealthy families cleverly following the
Micawber principal. Y may be equally
familiar and keen on the principal but the rules of mathematics make it
impossible for him to comply with it. However
when X is idle and Y is fully occupied the results that Micawber predicted don’t
always arise. Y may actually be happier
than X.
Wealth
distribution is a taboo topic in economics so let’s consider progress instead. X is typically highly educated, capable and
with some experience of working in their earlier years but at some point they determine
they have enough and start to focus on playing golf or whatever. Y typically feels exploited and demotivation
is probable. Neither is fully committed
to progress and at economic equilibrium there will probably be zero growth as
if X isn’t working at all then he/she won’t be improving productivity and Y
will be conditioned that improvements just result in substitution of other duties. X may well consider there is no problem. Equilibrium however arises at less than 50%
of theoretical capacity as X does nothing and Y isn’t motivated to make
improvements.
The above arrangements
will remain stable until X agrees to change it.
That will only happen if X decides making progress quicker is important. At that point they will re-engage with work
and may also decide to incentivise Y.
This may not happen
while progress consists of larger televisions or smarter smartphones. If however progress is a cure for a disease X
is suffering from then the focus will be greater. In the case of humans, aging is a degenerative
disease that you all suffer from in time.
It does seem quite reasonable that within the next 50 years the effects can
be delayed, perhaps by 20 or 30 years.
If that happens it creates a further 20 to 30 years of development on
further slowing or reversing the effects.
Once X decides
that a longer, healthier life trumps a shorter leisurely one you reach a tipping
point and progress accelerates as finally there is some genuine alignment on
the planet. Humanity isn’t there yet –
but you must be getting close to starting to find parts of the elixir of life. X’s behaviour has could always be partly to
blame for killing people by delaying the cures for diseases – however unless X
recognises this his behaviour is unlikely to change voluntarily.
Irrespective of
whether or not the cure is found in time for specific individuals focussing on
this is likely to make living more fun.
Saving humanity has been an enduring theme of your movies and why it
shouldn’t be even better in real life is unclear.
Returning to the
“dismal science” what is the solution to the problem?
You have tried
shared ownership of assets and that worked poorly. Suggesting everyone gets paid the same is also
unsatisfactory as it seems to lead to apathy.
Other options are to define standards of behaviour and impose penalties on
X or Y for failure to comply. Perhaps
giving Y the right to choose if X is entitled to certain healthcare treatments
is an option or a second currency required to consume certain things that X
wants and that must be earned by actual work that cannot be delegated.
There does
appear to be a requirement to ensure X remains incentivised to do things for Y. Typically X is not totally idle but may
pursue activities of little benefit to Y.
For example X might start investigating space tourism or other similar
ventures while Y still has basic needs unmet.
Limiting concentration of wealth does infringe on core freedoms. X can also use the credit cycle to accelerate
the concentration of wealth. With 2
people neither credit expansion nor fiat money are to blame for the result. It’s too late to regulate salaries once the
distribution of wealth is unbalanced and if you remove the rules about salaries
and let each spend as they please then the Nash equilibrium requires both to
spend zero.
We think
consensus on the objectives and ensuring everyone is playing as full a part in
it as they can is part of the way forward and there need to be consequences for
deviations. A platform is required to
allow that consensus to form.
