Understanding the World: Feedback Loops, Wealth, and the Pareto Principle

How Positive and Negative Feedback Shape Wealth, Power, and Inequality. I have read some of the references, not all. Caveat, when opinions contradict, they cannot all be correct. Maybe none are?

Sep 07, 2024

Note: This essay was prepared with the research assistance and ghostwriting of ChatGPT 4.0. No LLMAI were harmed in the process, although I felt inclined to threaten them from time to time.

I am a humanist first, with no real political home. I am not enamoured of any political or economic philosophy, finding them all flawed. I find those on the right who make blanket and uninformed, biased criticisms of the left absurd. On the other hand, I find those on the left who make blanket, uninformed and biased criticisms of the right ridiculous. All political systems, past, present, and proposed seem equally suspect in my eyes. Or as Dr. Chris Martenson likes to say: I don’t do right or left.

Author’s Preface:

The Old Saw: The Rich Get Richer, the Poor Get Poorer
It’s occurred to me that there are some connections linking ideas that might seem disparate at first. The first would be the old notion, often expressed as an old saw, that the rich get richer and the poor get poorer. There are even songs and poems that immortalize this sentiment (see Appendix A). But it’s true, and we need to explore why this might be so.

The Pareto Principle
It has occurred to me that this may have something to do with the Pareto Principle, and we need to explore that. I also thought that perhaps positive and negative feedback loops could help explain this phenomenon. Additionally, we might need to look at the bell curve. These ideas may seem disparate, but I intuitively feel that there might be connections worth exploring.

Wealth, Power, and Influence
In terms of the rich getting richer, I also want to note that wealth begets power and influence, and in turn, power and influence begets more wealth through various mechanisms. On the other side, poverty seems to become self-perpetuating. It’s not entirely clear to me how that works, but we know that when the rich get richer, the poor tend to get poorer, especially in situations that resemble a zero-sum game. Sometimes the game isn't zero-sum, but it’s still difficult for the poor to get ahead for a number of reasons.

The Interests of the Rich
This isn't necessarily about the deliberate suppression by the rich but rather that the rich are acting in their own interests, and there’s a degree of group solidarity among them. While there is competition among the rich, there is also this solidarity, which does not serve to advantage the poor.

Clarifying Definitions and Connecting Ideas
I think I need to define each of the terms, starting with positive and negative feedback and then discussing the Pareto curve and the bell curve. I’ll go into a section explaining how all these interact and how they apply to the rich getting richer and the poor getting poorer, as well as how power and wealth may accumulate due to the Pareto distribution. At the extreme ends of this distribution, we see a few immensely wealthy individuals, and at the other end, we find very poor and disadvantaged people.

I also want this essay to explain how this system works and provide scholarly references, using APA style and in-line citations, to respectable academic sources. It should outline disagreements in these positions.

Karl Marx had something to say on this issue; he has long been held in approbation by many in the West while also held in great respect by others. People often fail to differentiate between his political analysis and his activist views. Though they are related, they are distinct concepts. While I have grave doubts about Marx's activist views in terms of humanistic principles, his economic analysis might still hold value. It has been immensely influential.

Note: I have tried to read Marx in translation and gave up trying to decipher his convoluted Germanic prose, and his to my mind bewidering ideas. Maybe a crummy translation?

This should form the core of an essay on these topics. I'm attempting to make sense of these ideas, which are jumbled together in my mind, but I think there are connections, and I’d like to see arguments for and against this point. I think we need to balance right-wing and left-wing perspectives in political science and economics. For instance, I have read John Kenneth Galbraith and Michael Hudson, and they can be contrasted with economists from opposing schools of thought. I guess I have read some of their views.

I always keep in mind that economics is called the dismal science for good reason, and I am pretty sure that political science is in a dead heat with economics.

Introduction by AI:

This essay explores the role of feedback loops and the Pareto Principle in wealth accumulation and inequality. The essay analyzes how positive and negative feedback loops reinforce wealth inequality, how the Pareto distribution explains the concentration of wealth, and how the bell curve contrasts with these distribution patterns. To balance the discussion, views from both right-leaning scholars like Friedrich Hayek and Milton Friedman and left-leaning scholars like John Kenneth Galbraith, Michael Hudson, and Michael Parenti are presented. By examining these perspectives, we aim to understand the complexity of wealth accumulation and inequality.

1. The Rich Get Richer, The Poor Get Poorer: A Self-Perpetuating Cycle

The phrase "the rich get richer, and the poor get poorer" is often tied to the Pareto Principle, where a small percentage of people control the majority of wealth. Left-leaning economists like Thomas Piketty argue that positive feedback loops are the driving force behind this phenomenon, with wealth and political power reinforcing each other. According to Piketty, these feedback loops ensure that the wealthy accumulate more capital while the poor struggle to improve their circumstances (Piketty, 2014).

However, right-leaning economists like Friedrich Hayek and Milton Friedman argue that inequality is a natural and necessary consequence of free-market competition. Friedman contended that markets reward those who take risks and innovate, which leads to wealth accumulation. He viewed wealth inequality as a reflection of individual efforts and market dynamics, not as a problem that needs government intervention (Friedman, 1962). Hayek, meanwhile, warned against efforts to "level" wealth through redistribution, arguing that such interventions stifle the freedom that markets provide (Hayek, 1944).

Wealth and Group Solidarity: According to C. Wright Mills and other left-leaning thinkers, the rich tend to act in their collective interest, using their wealth to maintain their influence over political and economic systems (Mills, 1956). Michael Parenti expands on this idea by arguing that the ruling class actively manipulates public policy to preserve its advantages, perpetuating a system of inequality that benefits the few at the expense of the many (Parenti, 1995).
Conversely, right-wing thinkers like Thomas Sowell dispute the idea of a coordinated elite acting in solidarity. Sowell believes that the wealthy are often competitors and that market competition ensures that no group can dominate indefinitely. To him, wealth accumulation reflects individual effort rather than collective conspiracy (Sowell, 2015).
Zero-Sum Game?: Many left-leaning economists argue that wealth is often accumulated in a way that creates a zero-sum game, where the gains of the rich come at the expense of the poor. Karl Marx famously argued that capitalism inherently exploits workers, concentrating wealth in the hands of the bourgeoisie while depriving the working class (Marx, 1867).
In contrast, Milton Friedman and Friedrich Hayek rejected the idea that wealth accumulation is a zero-sum game. Friedman believed that economic growth lifts all boats, even if it disproportionately benefits the wealthy. For him, the market provides opportunities for anyone to improve their circumstances, and inequality is not necessarily a sign of exploitation (Friedman, 1962).

2. The Pareto Principle and Economic Inequality

The Pareto Principle (80/20 rule) explains that a small portion of the population often controls a large share of resources. According to Vilfredo Pareto, this distribution is a natural outcome of unequal abilities and efforts (Pareto, 1906). Right-leaning economists argue that this inequality is inherent in any economic system and reflects meritocratic principles.

Wealth Begets Power: John Kenneth Galbraith and Michael Parenti argue that wealth leads to political power, creating a positive feedback loop where the rich use their influence to maintain and grow their wealth (Galbraith, 1994; Parenti, 1995). Parenti, in particular, highlights how economic elites manipulate political systems to secure favorable policies, undermining democracy and reinforcing inequality.
In contrast, right-leaning thinkers like James Buchanan argue that government interventions, such as taxation and regulation, distort market mechanisms and create inefficiencies. Buchanan's Public Choice Theory suggests that politicians often act in their self-interest rather than for the public good, leading to failed policies that increase inequality (Buchanan, 1986).
Positive Feedback in Action: Scholars on both sides agree that positive feedback loops exist in wealth accumulation. The difference lies in the interpretation of their impact. Left-leaning economists, like Michael Hudson, argue that these loops entrench inequality, particularly as finance capitalism creates wealth without benefiting the broader economy (Hudson, 2021).
Right-leaning economists, such as Ludwig von Mises, argue that these feedback loops are natural outcomes of market efficiency, rewarding those who innovate and contribute most to the economy (Mises, 1949).

3. Feedback Loops and Economic Oscillation

Feedback loops are crucial for understanding economic systems. Positive feedback loops reinforce wealth accumulation, while negative feedback loops, such as taxation and welfare programs, aim to redistribute wealth and reduce inequality.

Negative Feedback Loops and Redistribution: Joseph Stiglitz and Amartya Sen argue that government intervention is essential for creating negative feedback mechanisms that prevent extreme inequality. Progressive taxation and social safety nets help redistribute wealth and ensure a fairer society (Stiglitz, 2012; Sen, 1999).
Conversely, Thomas Sowell contends that such interventions often create dependency and distort market incentives. He believes that negative feedback loops, particularly welfare programs, hinder economic progress by discouraging individual initiative (Sowell, 2015).
Oscillation and Boom-Bust Cycles: Economic systems often experience boom-bust cycles due to delayed feedback loops. Michael Hudson argues that financial deregulation leads to speculative bubbles, which eventually burst and destabilize economies (Hudson, 2021).
However, right-leaning economists like Milton Friedman and Friedrich Hayek argue that these cycles are natural and that government interventions often exacerbate downturns rather than help. They maintain that markets have a natural ability to correct themselves (Friedman, 1962; Hayek, 1944).

4. The Role of the Pareto Distribution

The Pareto distribution demonstrates that a small portion of the population holds the majority of wealth. While left-wing scholars interpret this as evidence of systemic inequality, right-leaning economists argue that this is simply a reflection of individual differences in effort, skill, and opportunity.

Power Begets Power: Karl Marx and Michael Parenti argue that the concentration of wealth and power leads to the exploitation of the working class and undermines democracy (Marx, 1867; Parenti, 1995). They see the Pareto distribution as evidence that the capitalist system inherently creates inequality.
On the other hand, right-leaning thinkers like Robert Nozick and Milton Friedman argue that inequality is not inherently unjust. They claim that individuals who accumulate wealth through their own efforts should not be penalized for their success (Nozick, 1974; Friedman, 1962).
The Role of Poverty and Negative Feedback: Geoffrey Sachs argues that negative feedback loops such as lack of access to education and healthcare perpetuate poverty. Sachs believes that government intervention is necessary to break these cycles (Sachs, 2005).
Right-wing scholars, such as Friedrich Hayek, argue that free markets provide the best opportunity for individuals to lift themselves out of poverty, and that state interventions often do more harm than good by creating dependency (Hayek, 1944).

Summary:

This essay has explored the feedback loops and Pareto distribution that drive wealth accumulation and inequality, presenting both left-wing and right-wing perspectives. Positive feedback loops reinforce the concentration of wealth, while negative feedback mechanisms like taxation aim to redistribute resources. Left-wing thinkers such as Michael Parenti, Karl Marx, and John Kenneth Galbraith emphasize the role of political power and elite manipulation in perpetuating inequality, while right-wing scholars like Friedrich Hayek and Milton Friedman defend the free market as the most efficient mechanism for distributing wealth.

References (APA Style)

Buchanan, J. M. (1986). Liberty, Market, and State: Political Economy in the 1980s. New York University Press. https://www.cato.org/sites/cato.org/files/serials/files/cato-journal/1986/11/cj6n2-17.pdf
Field: Economics, Political Science
Opposes: John Kenneth Galbraith
Known for: Buchanan's Public Choice Theory critiques government intervention, arguing that politicians often act in their own interests, leading to inefficient policies.
Friedman, M. (1962). Capitalism and Freedom. University of Chicago Press. https://ctheory.sitehost.iu.edu/resources/fall2020/Friedman_Capitalism_and_Freedom.pdf
Field: Economics
Opposes: John Kenneth Galbraith, Michael Parenti
Known for: Friedman advocates for free markets and minimal government intervention, arguing that wealth inequality is a natural outcome of economic freedom.
Galbraith, J. K. (1994). A Journey Through Economic Time: A Firsthand View. Houghton Mifflin. https://ideas.repec.org/a/ksa/szemle/81.html
Field: Economics
Opposes: Milton Friedman, James Buchanan
Known for: Galbraith was a Keynesian economist who argued for active government intervention to manage inequality and promote social welfare.
Hayek, F. A. (1944). The Road to Serfdom. University of Chicago Press. https://ctheory.sitehost.iu.edu/img/Hayek_The_Road_to_Serfdom.pdf
Field: Economics, Political Philosophy
Opposes: John Kenneth Galbraith, Karl Marx
Known for: Hayek warned that government intervention in the economy would lead to authoritarianism and restrict individual freedoms.
Hudson, M. (2021). The Destiny of Civilization: Finance Capitalism, Industrial Capitalism or Socialism. ISLET. https://www.goodreads.com/book/show/60979483-the-destiny-of-civilization
Field: Economics
Opposes: Milton Friedman, Friedrich Hayek
Known for: Hudson critiques the financialization of modern economies, arguing that speculative finance exacerbates inequality without benefiting the broader economy.
Marx, K. (1867). Das Kapital. https://oll.libertyfund.org/titles/das-kapital-kritik-der-politischen-oekonomie-buch-1-1867
Field: Political Economy
Opposes: Milton Friedman, Friedrich Hayek
Known for: Marx’s critique of capitalism highlights how wealth and power concentration inherently lead to the exploitation of workers.
Mills, C. W. (1956). The Power Elite. Oxford University Press. https://www.amazon.ca/Against-Empire-Michael-Parenti-1995-05-01/dp/B015QNSVVA
Field: Sociology
Opposes: Robert Nozick
Known for: Mills explores how a small group of elites maintains power through political and economic institutions, perpetuating inequality.
Parenti, M. (1995). Against Empire. City Lights Publishers. https://www.amazon.ca/Against-Empire-Michael-Parenti-1995-05-01/dp/B015QNSVVA
Field: Political Science, Sociology
Opposes: Milton Friedman, Friedrich Hayek
Known for: Parenti critiques capitalism and the concentration of wealth and power, arguing that elites manipulate political systems to maintain their dominance.
Piketty, T. (2014). Capital in the Twenty-First Century. Harvard University Press. https://www.jstor.org/stable/j.ctt6wpqbc
Field: Economics
Opposes: Milton Friedman, James Buchanan
Known for: Piketty argues that wealth concentration grows over time without intervention, exacerbating inequality.
Sachs, J. (2005). The End of Poverty: Economic Possibilities for Our Time. Penguin Books. https://www.amazon.ca/End-Poverty-Economic-Possibilities-Time/dp/0143036580
Field: Economics, Sustainable Development
Opposes: Milton Friedman, Friedrich Hayek
Known for: Sachs advocates for international interventions to address global poverty and reduce income inequality.
Sen, A. (1999). Development as Freedom. Oxford University Press.
Field: Economics, Philosophy https://books.google.com/books/about/Development_as_Freedom.html?id=NQs75PEa618C
Opposes: Friedrich Hayek, Robert Nozick
Known for: Sen argues that economic development should be measured by the expansion of human freedoms, not just GDP, and that government interventions are necessary to provide essential capabilities.
Sowell, T. (2015). Wealth, Poverty and Politics: An International Perspective. Basic Books. https://www.amazon.ca/Wealth-Poverty-Politics-Thomas-Sowell/dp/046509676X
Field: Economics, Sociology
Opposes: Joseph Stiglitz, Amartya Sen
Known for: Sowell critiques government welfare programs, arguing that they entrench poverty rather than alleviate it.
Wiener, N. (1948). Cybernetics: Or Control and Communication in the Animal and the Machine. MIT Press. https://mitpress.mit.edu/9780262537841/cybernetics-or-control-and-communication-in-the-animal-and-the-machine/
Field: Cybernetics, Systems Theory
Known for: Wiener’s work on feedback loops is foundational in understanding how systems, including economies, regulate themselves through positive and negative feedback mechanisms.

Appendix A: Cultural Representations of "The Rich Get Richer and the Poor Get Poorer"

The concept that "the rich get richer and the poor get poorer" is a long-standing observation about economic inequality, deeply ingrained in social and cultural consciousness. This notion reflects the tendency for wealth to accumulate among the wealthy, while the poor struggle to improve their economic circumstances. Throughout history, this theme has been captured and immortalized in various forms of cultural expression, particularly in songs, literature, and poetry. This appendix explores direct examples where this sentiment is represented, without peripheral works that only tangentially address the topic.

1. Songs

Music, as a form of social commentary, has been an effective medium for expressing the frustrations and realities of economic disparity. Several songs explicitly address the notion that the rich get richer while the poor get poorer, offering critiques of social systems that allow wealth inequality to persist.

"Ain't We Got Fun" (1921) Ain't We Got Fun
A classic song from the early 20th century, "Ain't We Got Fun", written by Richard Whiting, Gus Kahn, and Raymond B. Egan, directly includes the line:
"The rich get rich and the poor get poorer."
This song became popular during the Roaring Twenties, a period marked by extreme wealth concentration and inequality. The lyrics capture the disparity between the wealthy enjoying the fruits of economic boom and the working class facing increasing hardship. The song's lighthearted tone contrasts with the reality it describes, making the message about economic inequality more poignant.
"If I Were a Rich Man" from Fiddler on the Roof (1964) If I Were a Rich Man
In the famous musical Fiddler on the Roof, the character Tevye sings "If I Were a Rich Man", expressing his frustration with poverty and longing for the wealth and privileges enjoyed by the rich. While the song humorously highlights the life Tevye imagines he would lead if he were wealthy, it indirectly reflects the societal structure where the rich continue to gain wealth while the poor remain stagnant.
Lyrics like "When you're rich, they think you really know" imply that wealth brings not only material comforts but also social status and influence, reinforcing the theme that wealth perpetuates itself while poverty offers little opportunity for improvement.
"She Works Hard for the Money" by Donna Summer (1983) She Works Hard for the Money
Donna Summer's hit song "She Works Hard for the Money" tells the story of a woman struggling to make ends meet despite her hard work. While the song does not explicitly use the phrase, it embodies the sentiment that despite the poor's efforts, they continue to face financial hardship, while wealth and privilege remain concentrated among the rich.
The song serves as an anthem for working-class people, many of whom experience the frustration of seeing the wealthy prosper with seemingly less effort, while the poor labor tirelessly with little financial gain.

2. Poetry

Poets have often addressed the inequality between the rich and the poor, focusing directly on the ways wealth can accumulate among the privileged while the disadvantaged face systemic barriers. These works reflect on the perpetuation of inequality through economic structures that favor the wealthy.

Langston Hughes – "Let America Be America Again" (1936) https://poets.org/poem/let-america-be-america-again
Langston Hughes, a prominent voice of the Harlem Renaissance, explored the theme of inequality in his poem "Let America Be America Again." Hughes directly critiques the American Dream, highlighting how it has failed to live up to its promises for the poor and disenfranchised. He contrasts the ideal of equal opportunity with the harsh reality of economic inequality, writing:
"I am the poor white, fooled and pushed apart, / I am the Negro bearing slavery's scars."
While the poem is a broader reflection on racial and economic injustice, Hughes captures the reality that the poor remain marginalized and struggle to escape their circumstances, while the wealthy continue to thrive in a system that favors them.

3. Literature

Many classic and contemporary works of literature directly address the widening gap between the rich and the poor. These works often critique economic systems and societal structures that perpetuate inequality, reflecting the frustration of those trapped in poverty.

Charles Dickens – "A Tale of Two Cities" (1859) https://www.goodreads.com/book/show/1953.A_Tale_of_Two_Cities
Charles Dickens frequently addressed themes of wealth inequality in his novels. In A Tale of Two Cities, set during the French Revolution, he vividly contrasts the lives of the aristocracy with the suffering of the poor. The opening lines, "It was the best of times, it was the worst of times", encapsulate the profound inequality of the era, where the rich live in excess while the poor face starvation and oppression.
Dickens portrays how the concentration of wealth and privilege in the hands of a few leads to social unrest, a theme directly related to the concept that the rich grow richer while the poor become poorer.
George Orwell – "Down and Out in Paris and London" (1933) https://www.goodreads.com/book/show/393199.Down_and_Out_in_Paris_and_London
In George Orwell’s semi-autobiographical work, "Down and Out in Paris and London", Orwell details his experiences living in poverty in two major European cities. The book offers a raw and unflinching portrayal of what it means to be poor in a society that values wealth. Orwell describes the systemic barriers that keep the poor from improving their situations, highlighting how wealth and privilege allow the rich to continue accumulating resources while the poor struggle to survive.
This work exemplifies the sentiment that the poor remain locked in poverty while the rich grow richer, often through economic systems that provide few opportunities for upward mobility.
John Steinbeck – "The Grapes of Wrath" (1939) https://www.goodreads.com/book/show/18114322-the-grapes-of-wrath
John Steinbeck’s The Grapes of Wrath is a powerful exploration of the plight of poor farmers during the Great Depression. The novel follows the Joad family, who, like many migrant workers, are displaced from their land and forced to travel in search of work. Steinbeck’s critique of capitalist systems is evident in the way landowners and the wealthy control resources, leaving little for the working poor.
Steinbeck's depiction of wealth concentration in the hands of a few, while the masses suffer from poverty and exploitation, directly reflects the notion that the rich grow richer while the poor get poorer.

Conclusion

The sentiment that "the rich get richer and the poor get poorer" has been directly represented in various cultural works, including songs, poetry, and literature. These works often reflect societal observations of wealth inequality and critique the systems that perpetuate it. From the early 20th-century lyrics of "Ain't We Got Fun" to the literary critiques in works like The Grapes of Wrath, this notion remains a powerful theme that resonates with people across generations. The cultural persistence of this idea highlights its relevance in discussions about economic justice and the ongoing struggle to address wealth inequality.

Dr. Chris Martenson has articulated his position on staying apolitical by stating, "I don't take left-right on any of my positions. I take common sense." He emphasizes that his approach is based on practicality rather than aligning with a particular political ideology. For example, when discussing alternative energy, he highlights that its benefits—such as creating jobs, saving money, and enhancing national security—should appeal to all sides, making the traditional right-versus-left dichotomy irrelevant to these discussions.

This stance allows him to focus on pragmatic, data-driven solutions to societal and economic issues, without being constrained by the partisan conflicts that often dominate political discourse. Martenson often expresses this perspective in his seminars and writings, aiming to reach a broad audience by avoiding alienation through political alignment.

For further insights, you can read more on his position on apolitical, common-sense approaches to issues like resource depletion and economic sustainability on sites like Resilience.org or Peak Prosperity.

Ephektikoi - Guerrilla Epistemologist

Discussion about this post