Tear it down, boys [Updated]

There's an old joke that goes like this: A carpenter, heading up the crew of builders, comes to his foreman with a puzzled look, and asks him, "Charlie, remind me again. When we build this house do we start from the bottom and build up, or from the top and build downwards?"

"Why you idiot," growls the foreman, "From the bottom up, of course!"

The crew chief goes back to his men and says, "Sorry guys. We gotta tear it down and start over."

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In the last post, I asked you to try a simple thought experiment: in a small nation of 100,000 people, an angel comes at night and offers the lowest paid 99% a one-year, all expenses paid vacation in heaven. They happily accept, and when the sun comes up, only the richest 1,000 people remain in the country.

Question: what sort of economy now exists?

Let's also assume that the angel (or djinn, or Trickster, or deus ex whatchamacallit) has also calmed the 1000 so they don't worry about the situation, but just carry on as best they can.

Dancing in empty streets

As I see it, there will be two sorts of results -- what I call transient and steady state. Transient effects are found at the beginning of a new situation, are often extreme, and extinguish quickly. Steady state describes a normal, ongoing situation which will vary rhythmically in intensity and emphasis, but varies around a set level and tends to return to that level.

Our wealthy 1000 will probably spend the first few days finding each other, enjoying the comparative wealth and ease, maybe partying and driving around enjoying the empty streets. They may even develop a premature set of norms, temporary patterns which cannot be sustained, but are adhered to pretty strongly once they're established. These are short transients, supported by novelty.

But soon they will realize that they're in trouble. They have no commerce, for instance. No police, no plumbers, no workers except for themselves. In a way this is fine because they're still living off the wealth the other 99% have left behind, but things will soon begin to need maintenance. We can assume the 1000 are bright and capable, but 1000 people are just not enough to keep roads, bridges, power plants, sewers, elevators and all the vast machinery of a city operational, even if all 1000 had all the skills and strength needed.

So the 1000 will come together and discuss what to do, and I imagine they will decide to regroup to an area where they are up to the job of maintaining the infrastructure -- at least for the next few months.

Who pours the coffee?

So they move to a smaller area, and begin to get tired of camping out.

It's been fun, but sooner or later you want to stop camping and go back to normal. Since these people are usually more wealthy than anyone else they know , "normal" includes hiring people and having people to do things.

I predict that as soon as the short transient begins to wear down, there will be some abrupt changes in who does what, and why. Not for money, that's for sure.

Any thoughts?

Noni

UPDATE:

It seems to me that "the tip of any pyramid is another pyramid". The Tip in itself is (or can be) another social pyramid complete with rich and poor and workers and loafers -- but on its own the Tip cannot live as it did when it was still part of the larger pyramid.

The logical deduction is that, whatever else the Tip might be, it cannot be the source of value -- or at least , not enough value to support the rest of the pyramid.

Coming up: "Pantomime horses and other economic models".

Do I stick the test-tubes in my ears?

Um ... no.

One reason why I decided to set aside developing TEA analysis, which I have actually done two or three times over the past two or three years, is that at least on the surface it looks way too complicated. How do you approach the development of an entire new branch of economics, especially when you are a little hampered by not being an economist?

Finally, I decided to approach it by creating a site, posting a succession of thought experiments, and prevailing upon my friends in the economic blogosphere to add their thoughts, and their experiments, hoping that over time some reliable principles and structures will emerge from the primordial ooze.

Of course, doing something like this requires that I give my friends some vague idea of what I am going on about. That's why I wrote up post number one and placed it here. As you can see if you read it, it comes to a rather abrupt end because I ran out of thoughts and because even I could see that it was time to stop rambling and start trying to pin things down.

So -- thought experiments. In sociology and economics often the only experiments you can do are either thought experiments, or natural experiments -- i.e. looking at events in the real world and seeing what happened there.

If you're going to do this sort of thing on a shoestring, a thought experiment is your method of choice.

So I will begin with one scenario that I have also used in other people's blogs. It has to do with who creates value.

Imagine you have a nation of 100,000 people, divided into 99,000 people living at middle-class income or lower, versus 1000 people living well above that level. That is, in fact, pretty much a description of the US economy at the moment.

One night, an angel appears unto the 99,000 people, offering them a one year trip to Heaven. (This is a cheerful thought experiment -- no middle-class people were harmed in carrying out this experiment).

This all happens overnight. When the sun rises, all the 99,000 people are gone, leaving the 1000 behind. (we will assume that this is a fairly small nation, perhaps 50 x 50 miles in size.)

Question: what sort of economy now exists?

I will leave this to your thought today, and return to it sometime tomorrow.