I recently came across an article in the November 2019 issue of Scientific American. The article “The Inescapable Casino” by Bruce M. Boghosian addresses the perplexing explosion of the “very rich” in the United States and elsewhere. The author explores some very basic, and surprising, mathematical modeling that seem to indicate that economic systems based upon “free trade” have a built-in inexorable tendency toward the accumulation of wealth, resulting in the creation of oligarchies.

The modeling was performed to better understand what happens in a “free trade” environment such as might be illustrated in a yard sale, or possible a real estate sale of residential properties. The underlying assumption of this modeling is that a “fair trade” does not impact the “wealth” of either the seller or the purchaser – it is just a change in the form of the wealth. In all other cases one side wins and one side loses. They simplified the model by assuming a fixed (arbitrary) rate of “profit” rate for winners with an equivalent “loss” by the losers. They modeled a pool of traders (1,000 in the example) starting with identical wealth and then trading pairwise with other members of the pool. All transactions were totally arbitrary, with a 50/50 chance of winning or losing for each transaction. First an arbitrary pair traded, then another arbitrary pair traded – repeating the pairwise trading thousands (or millions) of times. Amazingly, what always happened was that a massive inequality resulted. One person found their average wealth increasing, while all the rest found their average wealth decreasing, tending toward zero as they conducted more and more transactions. In every case, the person that accumulated the wealth was the first person to win in the first transaction! The tiny difference in wealth created by the outcome of the first transaction was sufficient to bias the overall outcome of the experiment. It didn’t depend upon skill, knowledge, good looks or any other attribute. They all started off with identical wealth and were treated symmetrically – it just depended upon who happened to win the first round of the game – pure luck!

The contention of the author is that while rather surprising, this is what actually happens in very large economic systems. He points to the example of what happened following the breakup of the U.S.S.R. resulting in the dramatic wealth redistribution by their governments and the concomitant jump in wealth-attained advantage arising from sudden privatization and deregulation. Formally communist countries became partial oligarchies almost overnight.

The modeling pointed to an interesting solution to the problem of the strong tendency of free-trade markets to create ever increasing inequalities, along with the creation of oligarchies, is to ensure that “excess” profits of the “winners” are redistributed back to the “losers.” This is similar to taxation with the exception that the redistribution needs to be to the losers, not to the government. There needs to be a significant direct transfer of wealth back to the losers or the system “blows up,” causing economic disasters for everyone, including the new oligarchs.

This reminded me of when I used to play marbles on the playground in elementary school. I would start the “marble season” with a couple of “shooters” and a handful of trading stock marbles. The trading marbles were of no particular value but were required to play the game, winning and losing them as the games progressed. I was a mediocre marble player – I couldn’t do any of the fancy trick shots and seldom got on a “winning streak.” However, I was consistent and found that my stash of marbles kept growing – especially for games where there was an advantage to having more marbles in play at once. By the end of marble season I had accumulated almost all of the marbles in play, more than a gallon of them. I found that by the first of May I had so many of the marbles, and so few had enough left to play, that I was forced to stop playing because of the lack of playing partners! I had all of the marbles and that ended the games. My solution was to pour all of my marbles (except my original starter set) onto the playground, effectively redistributing the wealth to all. We could then resume play for the rest of the season, but most importantly we could play again during the following season. I found it necessary to do this redistribution for two years while at that school, and a final time when I “graduated” from elementary school and moved on to middle school.

The interesting part of my “marble wealth” is that I had no use for the marbles other than to play the game. They had no value, had no meaning, and were intrinsically worthless (like dollars). But they allowed me to play the game. The only way I could keep getting value from my accumulation of wealth was to give it back to those that had lost their marbles.

Another intriguing example of this problem is the game of Monopoly. I used to like the game but found it perplexing that it was so difficult to reliably win. It seemed that there was always an inequality that made it clear who would win from very early in the game. There seemed to be very little opportunity to learn or gain skills necessary to become the winner. It felt like a foregone conclusion who win from very early in the game. After 2 to 3 hours someone had all of the wealth, the rest of the players were broke, and the game came to an end. My friends and I wanted to extend the game beyond a couple of hours and therefore modified the rules allowing for a redistribution of wealth from the obvious winner to the other players (it was too long ago for me to recall the details of how we did the redistribution). We were then able to keep a game going for days, with the more interesting outcome that the identity of the “rich” person could change – a poor person had an opportunity to advance. The problem with this new set of rules is that there was no ending criteria, we could keep the game going for as long as we wanted – it achieved a kind of forced stability.

A third example might include the idea of “potlatch” as practiced by many Native American tribes. My understanding is that periodically someone would accumulate “too much” wealth, meaning that others did not have enough wealth. The solution was for the wealthy person to throw a grand “give away” party, effectively transferring much of their wealth and positions back to the other members of the tribe. It was considered a great honor to do so, meaning that the gift giver achieved an increase in esteem and influence – wealth that carried real meaning and importance.

It seems plausible that redistributing accumulating wealth might be highly advantageous to everyone in a society, including the person that is judged the “winner” in terms of personal wealth. Perhaps a re-thinking of the concepts of wealth, power, value and similar topics could inoculate the society from the problems of extreme inequality and the dangers associated with the formation of oligarchies.