The Game of Oligarchy

You should try this game.

I just invented and played a game today with my family, and it worked great– it was fun and we learned an important lesson. Similar to the game “Monopoly” which shows that one person ends up monopolizing even though you think the rules are “fair,” the game of Oligarchy shows that the “free market” leads inexorably to one person getting all the money and everyone else going broke. And fast.

The reason this is important is that it disproves one basic tenet of the free-market idea– that it is a game with many winners. Rather the free market, without redistribution, puts everyone (except one) in debt bondage, and quickly. We joked that those that were run out of money had to sell organs. Our game broke up into social classes– it was not worth it to the rich to play with the poor. It was all very real for a simple game.

All of this is based on a paper in Scientific American, Is Inequality Inevitable? Wealth naturally trickles up in free-market economies, model suggests, which has been a mind-blower for me: it is so simple and disproves the Libertarian premise.

We played 4 rounds with 6 people in about an hour:

  • each gets a pad of paper and pen and writes $100 at the top, that is their pot of money
  • each gets a coin to flip

Then each player picks another player agrees to gamble on a flip of a coin, they agree on which wins on heads, and tosses. The stake of the gamble is set at 50% of the lesser of the pots of that pair. So in the beginning, when everyone has $100, the gamble is $50.

Then the players pick another player (or the same player) to do another round. This proceeds.

What is amazing is that even through each toss is “fair” in that it is a 50-50 chance to win a straight amount of money, the results shows one player wins all the money, and really quickly.

Two nephews and their partners, Mary and I played 4 rounds in about an hour and we discovered social classes (we called the broke ones “organ sellers”), feeling of righteous empowerment based on being successful (even though it was completely random), but also that “free market” ended with all-but-one-of-us in a bad situation really quickly.

Try it, it is fun. And read the article, it is startling– free-market without redistribution goes to Oligarchy very very fast. This book on Sumerian and Babylonian economics shows it has always been this way, so people developed peaceful reset mechanisms with debt forgiveness and Julilee: …and Forgive Them Their Debts by Michael Hudson.

[And now you can see it played automatically! Go Neal!]

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12 Responses to The Game of Oligarchy

  1. Pingback: use coin-tosses to demonstrate "winner take all" and its power to warp perceptions / Boing Boing - Affiliate Marketing Made Easy

  2. John J. Rynne says:

    Very interesting article.
    Just a minor correction:
    “The reason this is important is that it disproves one basic tenant”
    That should be “tenet”

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  4. Rob says:

    It really is too bad all the money always rises. Possible by providing Good information at the top of a chain, one can help rationalize the system.

  5. Michael Gorectke says:

    It’s disturbing that this game is presented as a fair representation of the free market. Where is the exchange of goods? Where is the ability for the participants to decide to operate in their best interest? Why do the losses of the losers automatically go to the winners? The answers to these three basic questions show that this is a misleading comparison.

    • thank you for taking the time to reply.

      #1: This is simulating money flow in transactions, back-and-forth, basically (does not representing the goods). 50-50 to say who pays whom. #2: it is up to each participant to trade with whomever they want. #3: it is not quite losses if you think of it as trading back and forth, 1/2 time going one way 1/2 time going the other way, and a person spends a maximum of a fixed percentage of their wealth.

      The scientific american paper is more clear on this. I recommend

  6. Chris says:

    The model presented in the Scientific American is so utterly ridiculous that I’m seriously shocked they took it seriously enough to actually publish an article about it. It’s a cut-and-dried case of the fixed pie fallacy. When two people trade voluntarily, each is better off than before, and the amount of wealth in the world increases. Otherwise they wouldn’t have traded in the first place! The fatal mistake is focusing on the quantity of money, but wealth is much more than that.

    In a more accurate model of the free market from the same starting conditions, total wealth increases over time because (most) participants will produce new wealth. They would do so through the production of goods and services, and through trading those goods and services. At the end, a tiny minority will have less than they started with due to bad luck or poor decisions. Everyone else will have more than they started with. In other words, most participants will be winners! How can that be true if the total number of dollars is the same? Well, wealth increased, but them money supply did not: deflation. Those dollars are worth more than before.

    This matches what we observe with free markets in the real world. In societies with economic freedom, nearly everyone becomes wealthier over time. Even just in the Western world, consider for a moment how much immensely wealthier we are than just a few decades ago. If you just scoffed at that suggestion in disagreement, consider this: How much would I have to pay you to never use the internet again? To never use a smartphone again? Or, really narrowing it down: To never use YouTube again? Whatever dollar amount, that’s how much wealthier you are than the same you living in the 20th century, who has to do without either the goods, nor that hypothetical payout — your consumer surplus.

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  8. talcardo says:

    The premise is flawed. It a assumes there’s a finite pie that everyone has to share.
    You are just trafficking with money. Where are the goods and services that work produces? Why do the players “get” 100 cash? Who gave it to them and in exchange for what?
    You start with government distribution in a closed system that doesn’t produce anything and just swaps money arround. Of course in the end someone is going to take all the money in that stupid game. But that is absolutely NOT how a real free market economy works.
    How did we get all the wealth we have today? Stealing it from some other people at some point in history? really? Who did the USA take the car from? Who did Germany take the printing press from? Who did anyone take the wheel from?
    Isn’t it that people invent things and work to make things and then there are more things that people might want to better their lives?
    Asuming you believe in that silly fairy-tale called the theory of evolution (I don’t), how would you say that life got from goo to you? How did human societies get from nothing to western civilization with all it’s knowledge, technology and overall weatlh? Where’s the swapping out of 100$ dollars? Where did the 100$ come from in the first place? Did money evolve from goo too?
    Seriously, I’m amazed that an otherwise brilliant man like Kahle is so brainwashed by this socialistic nonsense that he doesn’t understand that people can produce wealth with their work, and money is just a convenient value exchange token.
    If you exchange money for money, or just bet for who gets to keep it, no wonder you end up with a broken market. Someone will have all the money and everyone else will be broke, and then money will be worth exactly nothing.
    But that’s not how real economics work. The market is not a casino, stupid. There isn’t a pie to redistrbute. The only “pie” there can be is what the government extorts from the cictizenry with the threat of punishment and ultimately, violence. Then they take PART of that (after embezzling a good chunk, basically) and they proudly present themselves as the charitable and generous redistributors of “the pie”. There’s a quote I like a lot: “The problem with socialism is that you eventually run out of other people’s money.” and that’s exactly what it is, other people’s money that they’ve taken by force (just try not paying the taxes the government demands)
    The market is people making stuff and other people buying their stuff if they find it desirable in exchange for a price mutually agreed upon. The seller thinks he’s better off with the money and the buyer thinks he’s better off with the product or service. It’s a mutually beneficial exchange, not a gamble with winners and losers.
    If you want to redistribute something, redistribute what’s yours, instead of taking from others whether they want to part with it or not. That’s theft.

    I’m really amazed that I have to explain this.
    This is not even libertarian or anarcho-capitalist (which I’m not), just basic free market economics.

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