Monday, March 23, 2009

Risk and inequities of wealth

I've been reading the book Suellyn lent me, Eric Beinhocker's The Origin of Wealth. I'm struck by the role he accords to chance within an economic system. According to him, it "above all" explains inequities in wealth and perhaps even the dynamic quality (not tending to equilibrium) of the whole system (86). I wonder if this chance is the same as the risk which is managed and cultivated within the system itself?  In any case, if Beinhocker is right, the relationship between risk and return in a capitalist system is mathematically valid (some have claimed that it's only a convention). 

I haven't read far enough to say for sure, but I'm not sure that Beinhocker's model successfully explains the major cooperative undertakings of essentially egalitarian societies in the paleolithic period. If economic systems tend toward the inequality of wealth and if wealth and power are socially synonymous, it's hard to imagine an egalitarian society commanding the kind of complex economy necessary to build, say, Stonehenge. No doubt there's an answer to this further on...

Beinhocker, Eric D. The Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics. Boston, Mass: Harvard Business School Press, 2006. 

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