Gold Maldistribution

A hobby project I keep procrastinating on is to stick some free-libre software onto github to give people some toys to play with for running Drǎgulescu–Yakovenko–Ispolatov (DYI) economic exchange models. This topic deserves a theory/empirical chapter, but today I just have time to write some commentary for more popular consumption.

Gold Distribution?

Oh yeah, the “gold maldistribution” is clickbait for the libertarians. In case any of them might still stumble across Ōhanga Pai by a one in a million chance.🤣 The rest of us are talking about scorepoints in T accounts.

I do often worry about real wealth distribution, but the thing is, in a monetary economy the real wealth effects are secondary to nominal wealth. If you have the scorepoints you can get the type of real wealth you prefer. Without the scorepoints you will not get the real wealth you desire, unless you can tolerate being in debt to a bank.

The brain twister for normies is that surely real wealth is primary, it is what truly matters, how can it be secondary? The MMT response should be “Yes! Real wealth is primary and is what truly matters!” — but in a monetary economy there is a sequence. You want to get the nominal scorepoints first (to avoid bank debt). Then you can get the gold dust you want to digest and grow libertarian fairies and leprechauns upon.

((Whoa! Something is wrong. I spelt “leprechauns” correct first time, pure keyboard hits.))

Exchange Toy Models

Today a few notes that came into my mind from listening to Dr Yonatan Berman talking about non-egodicity in macroeconomics. The models he was using like reallocating geometric brownian motion seemed a little reminiscent of the DYI econophysics models. They are useful toy models.

But the point to playing with them is to understand what the world should not be like, not why the world is like it is. The backwards thinking came into ear-shot when Berman mentioned his model’s “reallocation parameter” $\tau$ “does not capture any specific policy. A correct statement. But then all that means is the model is truly a toy model and unable to usefully inform government policy. I guess that’s what you call a libertarian’s realistic model. 😂

My comment:

@9:30 “… this is important for the interpretation…” right, and yet because it is not modelled as due to policy you’ve got a very unrealistic model for a single currency macroeconomy. All nations outside the EMU are currency monopolies, the state currency is a simple public monopoly. Granted no one in power seems to know this, or if they do they obscure their knowledge. But it does give us, anyone who does know the monetary system operations, an understanding of how to eliminate nominal poverty overnight. Then your model changes dramatically, and you can have a policy that permits any nominal wealth distribution whatsoever.
      The caveat is the nation needs to be on an exchange rate float — which makes all the difference, because then there is no need for the mainstream econ fixed exchange rate mentality (which gets the interest rate and unemployment “trade off” stories backwards). My point being that policy matters, it matters enormously, far more than any “free market” economics bro can imagine. To put none too fine a point on it, there is no need whatsoever for any involuntary unemployment or nominal poverty. Nor does government policy to eliminate all unemployment and nominal poverty risk inflation — the risk of inflation would be when on a fixed exchange rate. On a floating exchange rate, with full employment policy like a Job Guarantee (0% unemployment with a small transitory fraction), the risk is fewer imports, or need to export more to pay for the imports, in other words, that’s a domestic redistribution issues, which government policy can also address (who gets to play more golf, who gets to work longer in the factory). In yet other words, it effects your real wealth, but does not have to result in any needless unemployment — a waste of human lives, a needless tragic waste.

What about using macroeconomic models for public good? I wrote a follow-up:

I am saying your modelling efforts are nice for pedagogy, but I hope you also can better understand macroeconomics and run realistic models that inform wise and humane government policy. I am not a naïve idealist in thinking governments will take heed, the neoliberals probably will not, but it is a moral responsibility and serves public purpose to at least inform government representatives of the better policy options available. If they choose anti-worker policies that’s on their conscience, and hopefully that’ll see them get voted out of office too. For this latter effect, you must also educate the general public. Not just fellow academics.