- 1.1What Evolves?
- 1.2Result of Evolution
- 1.2.1Increase in ability for producing capital
- 1.3Communication skills
- 1.5.1Paying Extra Taxes
- 2Biological Analogy
- 2.5.3Ancient Egypt
- 3Real World Markets
- 3.1Ancient Egypt
- 3.2.1Ecology and History
- 3.2.2Current State
- 3.4.1East India Company
- 3.5.1Economic Stagnation
- 3.6The United States
- 3.6.1Monopolies have the support of government
- 3.6.2Intellectual Property Laws
- 3.6.3Pacific Railroad Acts
- 3.6.5The Banking Industry
- 3.7Explaining Russia
- 3.7.1Transition market
- 3.8Ancient Rome
- 4Open Source Development
- 5Monopolies as indicators
- 5.8.1Cell Phone Carriers
- 6What is Government
- 7Business Model Taxonomy
- 7.1Sole proprietorship
- 7.6For Profit vs Non-Profit
- 7.7Publicly Traded/Privately Owned/Closely Owned
- 7.8Member Owned
- 7.12Unions and Guilds
- 8Types of Markets
- 8.1Key Variables
- 8.2Market Topology
- 8.2.1The Three Groups
- 126.96.36.199The consumer-producer complex
- 8.2.2False Classifications
- 8.2.3Oversimplification: An Example
- 8.2.4Spectrum Based Class Stratification
- 9Governments Evolve
- 10Future Work
- 12Partial Source List
- 12.1Further Reading
Real World Markets
The first example of a real world market is one that I have already discussed: Ancient Egypt. as mentioned earlier, Ancient Egypt had a state religion which helped to ensure reciprocity between its citizens. Ancient Egypt’s economy was based, almost entirely, on a redistributive approach. The pyramids were essentially massive government labor programs. Yet, based on recent estimates, using housing structures as a proxy, there is a high probability that Ancient Egypt experienced massive economic disparity.
Somalia may not seem like the ideal candidate as an example of how markets work. After all, the place is a mess. But, it is important to look at what brought Somalia to its current state and whether or not it is really worse off than it has been in the past.
Ecology and History
Somalia was never a “great” place to live. The climate and geography make agriculture difficult. This is one of the reasons why the population was more or less nomadic until European colonialism forced the people into a sedentary lifestyle. Following the uprising which ousted European rule, Somalia was controlled by Siad Barre. He was a ruthless tyrant who was eventually ousted from power himself. With no real authority left to govern, Somalia fell into a state of unintended anarchy.
Research conducted on Somalia by Peter T. Leeson suggests that Somalia is actually better off now than it has been in recent history. In his study, 18 socioeconomic indicators were measured. Of those, 14 showed clear improvement under a stateless system. This includes higher life expentency, lower infant and maternal morality rates, a decline in low weight births, better access to health facilities and sanitation, a decline in extreme poverty, an increase in immunization rates, and an increase in access to TVs, radios, and telephones.
Singapore is a prime example of how a large amount of government intervention is unnecessary to maintain economic stability and reasonable socio-economic conditions. First, it is important to note that Singapore is one of the few nations that do not have a minimum wage. (Payment of Salary – Ministry of Manpower) One might expect that such a condition would lead major income inequality, but that’s not the case. The GINI coefficient is a measure of income inequality. A value of 0 is perfect equality, while a coefficient of 1 means perfect inequality. While there has been some issue with Singapore’s government misrepresenting the statistics to some extent, Singapore maintains a relatively high level of economic activity. Regarding the poverty rate in Singapore, it is high. However, it is important to note how Singapore calculates its poverty rate. The poverty rate in Singapore is not connected to how much it would cost to survive without assistance. It is tied to median income. Specifically, it is 50% of the median income. It is difficult to find an approximate for individual median income, but median household income for 2013 was roughly S7870/month in Singapore dollars, which is 107,905.525USD to per when factoring in exchange rates and a purchasing power parity of 0.7. This is not to say that there isn’t poverty in Singapore, and it is an issue, but it is not out of line with many other developed nations which spend far more resources on dealing with the issue. How to fully eliminate the issue of poverty is beyond the scope of this discussion. Indeed, this discussion suggests that finding such a solution is better left to market processes.
East India Company
The East India Company is probably one of the best examples of the impact of government involvement in the marketplace. By its peak, the East India Company had essentially become an extension of the British government. It coined its own currency, had its own military forces, and oversaw India’s occupation by British rule.
Japan has some interesting examples of private enterprise that have been in either continuous or near continuous operation for over a thousand years: far longer than any of its governments. The oldest company in Japan, and currently the oldest company anywhere in the world, which has been in continuous operation is Nisiyama Onsen Keiunkan, which was founded more than 1,300 years ago. If the Roman Empire and the Byzantine empire are treated as a single continuous government, then that would be the only government to have survived for a longer time than Keiunkan. If they are not treated as a single government, then there are multiple businesses in Japan which have survived far longer than any government.
While Japan boasts some of the oldest functioning businesses in the world, it also has more to teach us. When Japan’s asset bubble exploded in the 90s, the government put into place a plethera of actions in an attempt to return the economy to normalcy. However, such actions failed and the country entered a near perpetual state of economic stagnation. This economic stagnation, originally named the lost decade, is seem to this very day and some consider it the lost 20 years. Interestingly, the actions taken by Japan, in the 90s, aren’t all that dissimilar to the actions taken by the United States during the 2008 recession.
The United States
Monopolies have the support of government
Very few if any corporations have grown out of control without the aid of government support. As evidence, I will point to the aftermath of the 2007 – 2008 financial “crisis”. In this instance, the bulk of the banking industry as well as other industries were in jeopardy of collapsing, which would have forced business entities to change their model of doing business. However, because of government intervention, the corruption has continued. US Steel Destruction of labor unions by the police force Pacific Railroad Acts.
Intellectual Property Laws
Intellectual property laws are obviously not limited to the United States, but it is easier to address how past laws as well as more recent laws, have impacted the market in the United States. Intellectual property laws give major benefits to large businesses, both in the tech industry and in the music industry.
Pacific Railroad Acts
While the Pacific Railroad Acts were very similar to stimulus programs in place today. Just like modern industries like Solar power receive biased loans from the government, so did the road road industry. People often attribute the Gilded Age and the rise of the Robber Barons to lack of government oversight. However, can it really be a coincidence that the Gilded Age began less than 2 decades after the first Pacific Railroad Act was passed and so many Robber Barons were involved in the railroad industry or industries related to it, such as steel and coal?
Prohibition, and the restrictions on alcohol production which followed its end, allowed for a monopoly on the liquor industry. Because of restrictive policies, only very large liquor companies were able to produce alcohol. However, this began to change with the Carter administration and continued in the decades that followed. Some would argue that Carter’s deregulation of home brewing had little impact on the hold that beer monopolies had at the time, but this is not really fair. In order to turn a craft into a business, you must first learn the craft, and it is very common for professional brewers to start out as hobbyist home brewers. Of course, brew pubs helped to take a large chunk of the beer production market and put it into the hands of small businesses, but those brew pubs would never have gotten off the ground without the ability to learn how to brew and test batches as a home brewer.
The Banking Industry
The banking industry is a clear example of how deregulation causes market chaos! Or is it? Sure, there was some deregulation of the banking industry leading up to the crisis. However, can we really blame that deregulation when the government still had a large influence on how the banking industry acted? The 2007 – 2008 financial crisis makes perfect sense based on the analog formulated in this paper. Like many other large business models, the banking model is fully supported by the “agriculturalist” government. The banking industry is directly sustained through the Federal Reserve: a public business entity which has been authorized to be the sole producer of the USD. Out of every business model, this banking model has the most direct access to the feeding trough. However, this direct access to feed is not the only reason why the banking model currently in place in this country has grown fat. The government also ensures the highest level of protection for these businesses. They are absolved of all risk. This entirely circumvents the selective pressures that would normally be in place. They are able to grow, without bound. This forces every other business to shoulder the burden, much in the same way that lands are stripped of all of their resources in order to feed certain livestock.
Under the USSR, apparent economic disparity was lower than in post communist Russia. However, this apparent disparity has only been shown in terms of income inequality. Income inequality is a poor measure of economic disparity and therefore caution should be used in making a determination based on that alone. Still, after the USSR fell, there was a rise of the Russian oligarchs. A robust theory should be able to explain this, or at least make an attempt to do so. Short time span of observation. When looking at the behavior of complex dynamic systems, especially stochastic systems, looking at only a small slice of the behavior can cause people to come to very misleading conclusions.
Still big government at play and the rise of the oligarchs fit in fairly well with the concept of governments as agriculturalists. Transfer of mining industry to a select few people who were aligned with the government. Second generation of oligarchs were created through revenue generated by government contracts.
In many ways, the downfall of the Roman economy is mirrored by both the Japanese and American economic downturns.
Instead of decreasing spending, taxes were raised to try to fill the coffers of the Roman Empire. In addition, in the first year Constitutio Antoniniana. This document made every free man in Rome a citizen. Up until that point, there were few ways to become a citizen if you were not born as one. One option would be to join the military and serve for 25 years. While this may seem like a generous move by the Emperor, the reality is that the edict meant that a large number of people suddenly saw an increase in taxes.
In order to garner political support Caracalla also implemented multiple building projects, including the creation of the second largest public bath in Rome. Of course, this reduced the funds available even more.