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The new financial capitalism represents the triumph of the trader in assets over the long-term producer.
When productivity is so high that you only need a small fraction of the population to be involved in long-term production, you need to employ increasing amounts of people in services. "Trading" is the capitalist market equivalent of Keynes' "government digging bottles full of money into the ground". It's just a way to keep people employed. Of course, there are more useful and fulfilling services people could be doing to keep busy since they can't all be making stuff, but I suppose pushing papers around.

The late Per Bak thought up the following example of his sandpile model. Imagine a large room, with desks arranged in a rectangular array. There are open windows aligned with the ranks and files of the array. Every so often, a paper gets delivered to a random desk. When a person at a desk has 4 papers on his desk, they pass one paper in each direction: front, back, left, right. This can lead to one of the neighbours to accumulate four papers and pass them on in their turn. The people at the edges of the room are dupposed to throw one paper out the window in this case.

This system keeps everyone busy, and it displays periods of quiescence and avalanches of frantic activity in which the arrival of a single paper at one desk causes every paper in the room to be transferred several times on average and a substantial fraction of the papers in the room to be thrown out the window. In addition, when a "large event" happens, there's no particular reason for it, even though one could trace the large avalanche to particular conditions and try to assign them meaning.

I think this is an apt analogy of the financial markets.

Can the last politician to go out the revolving door please turn the lights off?

by Migeru (migeru at eurotrib dot com) on Tue Jun 19th, 2007 at 06:01:44 AM EST

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