Population – Wealth Equations

Formulae | Terms | Implications | Finite World

The formulae:

Annual-wealth-created = total-work-done + asset-wealth-accessed

Total-work-done = average-personal-productivity * population

Per-capita-wealth  =  average-personal-productivity  + (asset-wealth-accessed / population)

Asset-wealth-accessed = accrued-wealth + natural wealth-accessed

The Terms

Total Wealth.

The total wealth is simply the wealth of the society overall.  The sum of the wealth that is available for the total society to enjoy.  This wealth is available to be share evenly or not, but it represents that which is available to share.

Asset-wealth.

Asset wealth is the sum of durable wealth which remains from year to year such as housing and infrastructure as opposed to wealth which is consumed such as food and holidays.

Assets can be man made such as housing, or natural, such as the land under the housing, fertile farm land and water to grow crops or mines as a source of mineral wealth.  For natural wealth,  only those natural resources which are being utilised add to the wealth of the community at the time being considered.  Unused land or undiscovered minerals which may potentially be part of future wealth, do not add to current wealth.

Per Capita Wealth.

Simply the total wealth divided by the number of people.  In a society with perfectly even distribution of wealth, each individual would hold the per capita share of wealth.  Raising the Per Capita wealth would raise the wealth of all in the society.  However, simply adding to the wealth of one individual will still raise per capita wealth, even though there is no distribution of the increase in wealth.  Per capita wealth only is a sound indicator of overall wealth if wealth distribution remains static, and the rich remain in the same ratio of wealth to the poor.

Per capita wealth creation follow the formula above and combines individual wealth creation with the share of natural resource wealth.  Growing population should allow specialisation which can have a positive impact on the ability of an individual to produce wealth, but as the population grows this effect reaches a limit.  While there are untapped resources, growing the population can also allow accessing more resources,  but eventually all resources are already leveraged.  The result is that there is a phase where as population increases per capital wealth should increase, followed by a tipping point when all resources are fully exploited after which per capita wealth will be driven to decrease by further population grown.

The Implications: Pre-Finite world

Logically, total work done should increase in proportion to population. However, increased opportunities for specialisation and economies of scale can result in an increase in total work done slightly beyond the logical proportional increase. Simplistically, it is feasible for a team of 200 to do more than 10x the work of a team of 20 because of economies of scale and ability to specialise.  But a team of 200 trying to dig the same 3meter diameter hole in the ground may not be 10x as fast as team of 20.

Pre-finite world, natural asset wealth could never fully utilised, as there was always new natural assets to be found and utilised.  As population expands, more land can be utilised, more minerals discovered and the accessible total natural wealth expands as the population expands.  The result is that increase in population has the potential to increase per-capita wealth.

Finite World Implications

Once we reach ‘finite world’ where all new land has been found, and there is already sufficient people to exploit all available resources, more people simply means a smaller share of available land and resources per person.

Like digging the hole in the ground, there is an optimum number of people on the team.  Less than the number the work takes longer,  but past a certain point adding more becomes counter productive… or a least results in no further increase in production and the proceeds of the work on a per person basis start to decrease.

Once finite world is reached, further increases in population simple mean less wealth per person.  This is the same with any creatures in nature, within a given habitat, there is a maximum population of each creature which can be sustained by the habitat before living conditions start to decline.

Finite World: Finite vs Unlimited.

Contents:

Finite: What does ‘Finite‘ actually mean?

The Key: Not Just Two Possibilities, but three.

Even in a mathematical context, there are three possibilities:

  1. Finite.
  2. Infinite.
  3. Undetermined.

Depending on context, infinite and undetermined can be equivalent, and in both cases, you not aware of any limit. Something only becomes ‘finite’ when you become aware there is a limit.

Dictionary Definition Of Finite: It depends on context.

While ‘finite’ and ‘infinite’ have mathematical definitions, dictionaries reveal that common usage extends beyond the mathematical definition. The dictionary definition of infinite includes “immeasurably or inconceivably great or extensive : INEXHAUSTIBLE” as well as “subject to no limitation”, and for finite we have “completely determinable in theory or in fact by counting, measurement, or thought” .

By example, as a human we can consider the number of times a person in the open can breathe as being infinite, even though the amount of oxygen in the air is finite so there is a theoretical limit, a person can breath ‘an inconceivably large number’ and still have no noticeable impact the level of oxygen.

The Working Definition of Finite for this context.

The meanings of finite and infinite depend on context, as outlined below, so to avoid ambiguity, in the context of these pages, ‘finite’ means:

Finite: ‘known to have a limit that could, in practice, conceivably be reached’.

Me

So yes, words have different meanings depending on context, but it this context, unless explicitly prefixed such as ‘theoretically finite’, ‘finite’ will mean with a known and potentially constraining limit.

Given the principle there are three possibilities, they become:

  1. Finite: known to have a limit that could, in practice be reached.
  2. Infinite: it is known the that limit cannot in practice be reached.
  3. Undetermined: there may be a limit, but if so, the limit has never been reached.

I would suggest that human nature is to assume that when the limit cannot be determined, then it will not in practice be reached, which means infinite and undetermined are seen as equivalent. In this context, the opposite of finite because ‘unlimited’.

Unlimited: Unconstrained by any known limit.

Again, me.

Again, words have different meanings depending on context, but it this context ‘unlimited’ will without any known constraining limit.

Finite World: When the world of humanity progressed from ‘undetermined’ to ‘finite’.

To the first people on Earth, it must have seemed that no resource was finite, virtually nothing had any known limit. It is not that people believing things infinite, it is that numbers seemed unknowable, and undetermined seemed equivalent to without limits.

There were always new lands to be discovered, hunting animals did not noticeably impact their population, nor did gathering fruit and vegetables make an impact. Fishing did not noticeably impact fish populations.

Most things remained finite until around 1650 CE. At that time no individual even knew of all the continents on Earth making even the amount of land seem unlimited. Sustainable was not a concept people needed to contemplate, as it seemed every thing humans did was inherently sustainable.

Fast forward to the 21st century and there has been a population explosion dramatically increasing the number of humans, and an industrial revolution increasing the impact individuals have on the planet. Now, most people see ‘sustainable’ as essential, but in surprisingly many ways, there are still people who do not, deep down accept the Earth is finite, and sustainability is essential.

Finite World and Sustainability: It is all relative.

Nothing is sustainable without constraints. Every ‘sustainable’ practice is only sustainable within limits as to the number of people who can engage in the practice and the length of time it can continue. In practice, ‘sustainable’ means ‘more sustainable’ rather than absolutely sustainable. Even ‘sustainable’ farming has a limit to the scale and thus the number people it can feed, and on a planet with a finite life, cannot exist forever.

A question becomes, to be ‘sustainable’ how many people can be supported and for how long? As an extreme example, even breathing air has a limit to the population size before it become unsustainable. There is always a window.

Some people see perpetual population growth as sustainable, and within a sufficiently small window of time it is sustainable. Others see burning fossil fuels as sustainable for as long as 50 years, and in their eyes that is sustainable, while younger people, of people who care about younger people, may require a longer time to be sustainable.

Then there are others who an in denial. Prior to around 1650 CE, everything seems sustainable, and it worked for so long then the same attitude can work today.

Free Education? Why not user pays?

The truth is there is no such thing as ‘free education’. There is always a cost so someone must pay, and the question is “who pays?”.  The choice is between ‘society pays’ (free?) and ‘user pays’. At first, the economic rationalist argument  “why should society pay for the university education of the elite?” appears compelling, but does it really work that way?

  • National Impact: Helicopter view
  • The impact on the individual
  • OK, who really pays?
  • Controlling studies: free market, vs university places
  • In depth, the fabric of the society we live in
  • Conclusion: The beneficiary pays

National Impact: Helicopter view.

“The individual should pay” because otherwise all society will be subsidising those will then have the highest incomes.  In other words, the individual paying will overall be more egalitarian.  But look at the countries where education is “free”.   This more in depth look at the debate in some of the main free education countries, free education is all about equality, and the countries offering free education include those that both value, and achieve, equality of citizens more than other countries.

So either these countries that both value and achieve equality so highly have it all wrong and only manage equality despite their free education systems, or the arguments for paid education representing equality are wrong.  So who has it wrong, those who best achieve equality, or those who have the worse record on equality?  If free education does deliver equality, why, and why would paid education fail?

The impact on the individual

The whole concept of paid education is that education is effectively an asset for the student.  The higher income earned from any asset, the better performing that asset, so the student should seek the asset which gives them personally the best return on their investment.  Each student should choose their degree based on which investment will provide them personally with best return.

The effect is to promote such studies as law and medical practice as opposed to subjects such as medical research or teaching.  Generally, careers which provide the greatest personal satisfaction, which can correlate to the public benefit that career provides, than areas where pay is the only motivator.  This means careers with a public benefit may have a higher study to income ratio, and therefore a lower economic yield as an asset.

Think of the idealised inspirational dreams of young children as in this video putting the case for ‘free’ education ( see 2:00) . End poverty, cure cancer, fix climate change.  All great aspirations, but none delivering the personal wealth required for a strong performing ‘university degree as a personal investment’.

But some noble aspirations do fit with the return on investment model.  Perhaps not merchant banking or even corporate law, but what about doctors?  Perhaps not creating the cures, but certainly administering the cures as a medical practitioner does provide for both: a real need within society and a strong return on investment?

Logically the laws of economics should ensure that the needs of society will be because the pay for needed careers will rise until there is supply.  So if a degree is expensive, then the market will ensure those with that degree earn sufficient to offset the cost. We need doctors, so doctors pay will be sufficient.  We don’t need a to eliminate poverty, fix climate change(at least not this week), or cure cancer.  In fact from an economic perspective, curing cancer could harm that section of the economy.  The problems thus should be restricted to the optional parts of the economy, or those things we need in the longer term.

So it is true not all aspirations are undermined by the user pays education system, as not all aspirations are long term, and surely in these shorter term aspirations and the things we need today, the system becomes more egalitarian?

Well… perhaps not…

OK, who really pays?

The case of a medical practitioner does sound like a strong argument for ‘paid education’ works for todays needs.  Society needs doctors, and paid degrees provides doctors because the pay for doctors increases until there is sufficient supply.  But this is also the problem, the cost of doctors rises to cover the cost of the degree.  If this is real, then doctors will receive highest pay in countries where degrees are most expensive, so doctors can in turn pay of the debt of their education. I did a search for the pay of doctors in the USA vs Scandinavia (where education is ‘free’). This comparison is actually the pay of doctors in a variety of countries, but the clear trend is the higher the cost of education, the greater cost of doctors.  Correlation is not necessarily causation, but the data does seem to confirm the prediction.

All this suggests that with paid education, the cost of doctors university degrees is in the end paid by those who visit doctors.  So ‘free’ education taxpayers pay, which puts the greatest burden on those who earn the most income, in place of the greatest burden of the cost falling to those who suffer ill health. The same rule will apply in each case, prices will flow through intermediaries until they ultimately reach the consumer.

Funding for medical degrees:

  • paid education: funding from those who suffer ill health
  • ‘free; education: funding from taxation revenue across all society according to tax rate

Generally the rules of economics ensuring the cost will ultimately be met by those with the need means the only reduction in society paying will apply only for services that are needed, but also have a strong export focus thus ensuring the cost is partially met from outside the tax base.

Controlling student expense: free market, vs university places

To my knowledge, there is no government in the world that completely eliminates spending on education.  At least some education is considered part of the function of government.  But at the other extreme, no government can be responsible for everything every citizen may have a whim to learn.  Paid education may suggest every citizen must full pay for all education, and ‘free’ education may sound like every student is indulged for whatever they desire, but neither extreme is correct.

‘Free’ education still will limit what courses are provided by state universities, for which citizens and non-citizens and for which courses, and countries with ‘free’ education will still also have fully paid education ranging from industry specific courses through to paid public education providers.

Paid education countries still subsidise courses and have state based universities, it is just that students still must pay.

Overall it is not automatic whether paid education countries spend more or less than free education countries.  Consider per capita spend on education between counties and there is little difference between free and paid education countries.

 

In depth, the fabric of the society we live in

Paid education ultimately forces a purely financial focus to education, and ultimately the choice of what people do in life.  Certainly a nail in the coffin of the sentiment “Ask not what your country can do for you – ask what you can do for your country”.

Conclusion: The beneficiary pays

The answer to the difference is “the beneficiary of the education pays” in each case.  So do we want society to be the beneficiary of education, or each individual for themselves?  Do we want a society where people consider the overall society, or only themselves individually.

 

Tribalism: Good, neutral or bad?

My definition of tribalism: Part of the nature of humanity that leads us to support those from the group we identify with, over those from other groups.

Most people watching an event at the Olympic games will support the contestant from their own country over those from other countries, even when they had not previously heard of any contestants in the event.

This I consider an a simple and benign example of tribalism.

In the case of the Olympics it may be a very tenuous reason to support one competitor, but it can generally be argued that many positives arise from this form of ‘tribalism’.  An even more passionate case can be mounted for the positive aspect of tribalism referred to as patriotism, that can motivate some of the greatest war heroes. But I suggest there  is also a negative side to this same ‘tribalism’ instinct that can drive discrimination, racism, terrorism and even be responsible for war.

Can we restrict tribalism to the benign? Aspects of tribalism will be discussed for consideration in a series of pages :

  • Tribalism and sport
  • tribalism and racism
  • tribalism and terrorism
  • the engine of war

 

The Potential Scale and Impact of population growth: 7 trillion humans?

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7 trillion looks like a typo, but no, the maths shows that either by continuing the actual global population growth levels typical the 20th century, or achieving 2% per year (or far less than what is currently happening in Nigeria), the maths produce this number in a relatively short time!

Alternatively, consider that if we had peak 20th century population growth rates from 1650 until now, we would already have 1 trillion humans.

While population growth itself is currently not the threat that it once was, we are still overpopulated, as any suggestion that returning to the out of control population growth of the 1960s and 1970s would cause even more long term damage to a world with 8 billion people, than that growth did on a world with 4 billion people.

Continue reading “The Potential Scale and Impact of population growth: 7 trillion humans?”

How the ‘basic income’ proposal could change society

The current wealth distribution system is an already a broken system about to face severe attack. As discussed in Robots & Job Terminators, the role of employment is set to change.

canada20flagflagbigfinlandOn engadget, the post How will you survive when the robots take your job? outlines the ‘basic income’ proposal, as put forward by many in the tech industry and being experimented with in Canada, Finland and the Netherlands. This articles provides a great starting point and conveys the basic idea and if unfamiliar with the idea it makes sense to read that article first. This post is about looking further, in terms of thoughts about what else should change if a ‘basic income’ is introduced and what would be needed to make such an idea work. What would such a measure cost, and what would be the impact on society of a total package, of a ‘basic income’ together with a logical set of policies to create a total package? Continue reading “How the ‘basic income’ proposal could change society”

Is our wealth distribution system really broken?

pot_goldA first reaction could be: “ok, the people who voted for Donald Trump clearly feel it is broken, but I am not sure they are that smart”, or “I am doing ok, and I think the system is fair. Yes people like that Elon Musk character have ‘X’ times more than me but he is also ‘X’ times more clever than me so he deserves it!”.

But the system feels sufficiently broken to those who voted for Trump, that they were desperate enough to vote for him, and there appears to be some similarity with the ‘Brexit’ vote in the UK.  Something has to change, even if it is just perception or we are going to keep having to live with these kinds of election results.

Also, either Elon Musk is really clever, in which case we should listen when he is proposing that we need to make changes to wealth distribution (soon, if not now),  or, he is not clever, in which case he does not deserve his wealth.  Either way, we need to consider changes.  Continue reading “Is our wealth distribution system really broken?”

Australian Record Trade Surplus: good news, or a warning on automation?

skitched20truckAs explained by ‘Alan Kohler’ of the ABC, the record trade surplus is largely due to “A huge rebound in iron ore, coal and gold exports delivers a record trade surplus of $3.5 billion in December, providing a big boost to national income.”, with no proportional increase in imports.

I suggest an analysis of the impact on the Australian economy is reason for people around the world to consider the impact of automation.

Continue reading “Australian Record Trade Surplus: good news, or a warning on automation?”

Opportune Arguments: The dangers of quick adoption

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How do you sway others to support your heartfelt convictions, beliefs and causes when they don’t feel the same way?  One tactic is the ‘opportune argument’.  An ‘Opportune Argument’ provides a logical, and usually economically rational, reason for supporting actions a person already wants for an entirely separate heartfelt believe.

Opportune Argument: (definition).  An argument we champion because it supports a conclusion or belief we already hold, for reasons separate to the logic of the ‘convenience argument’.  The convenience argument provides new, and accessory, reason to convince others to embrace or support our beliefs.

Refugee example: A classic example is people who feel compassion for refugees, trying to convince others to help refugees because there are economic benefits that result from a refuge intake, even though the person presenting the argument is motivated by compassion, not economics.

The Risks Of Convenience Arguments

We sometimes rapidly search for these ‘convenience arguments’ and then champion them, because we believe it will encourage the outcome we seek, even if not for the motive we embrace.   The danger is that we search for these convenience arguments to justify beliefs, the same way we search for something like car keys.  We stop searching immediately we find something and can easily pick up and do not care very much about what we find, as long as it seem to fill our need. There is an old joke that goes like this:

Why is it that when I have lost something, I only ever find it in the last place I look?  Answer: Is it because once you find what you are after, you stop looking?

But stopping the search as soon as we find an ‘opportune argument’ that justifies the actions we want for our own reasons, is fraught with risks.

Continue reading “Opportune Arguments: The dangers of quick adoption”

Trickle up economics: How the wealthy become wealthy.

pot_gold

It was a reference to the wonderful children’s and politician’s fairy tale of ‘trickle down economics’ that started me on this thought path. How do the wealthy get wealthy?

Continue reading “Trickle up economics: How the wealthy become wealthy.”

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