Philip Maymin's poster examining the wage gap between free market and large government economies

Maymin, Philip Z.

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Does Big Government Cause Poverty?Philip Z. MayminTrefz School of BusinessUniversity of Bridgeport, Bridgeport, CT Among five people, there are 26 possible contracts. For example, contract #2 may be a 4-way beauty contest contract with one judge and three contestants. On the left is the transition diagram of rule62, the only 2-state, 2-symbol state machinethat generates complexity in the evolution ofthe contracts. On the right is the evolution ofthe contractual counts for the five people. Itis not random or predictable; it is complex.The GDP is the total number of active contracts, the individual wealth is the cumulative total number of all contracts each individual hasever been part of, the income gap histogram is the difference between the highest number of contracts and the lowest, and the populationin poverty is the number of individuals involved in zero contracts. The top charts with the American rattlesnake of capitalism show theeconomy of a free market. The bottom charts with the Soviet hammer and sickle of communism show the economy of a market where thegovernment provides services that cannot be opted out of; in other words, there is no exit from contracts with the government. Forexample, you cannot opt out of paying for Social Security, welfare, Medicare/Medicaid, and other government services.In the free market case, the GDP grows over time with some volatility, the income gap is steady, and poverty is infrequent and temporary.In the big government case, the GDP never grows but repeatedly crashes, the income gap between individuals is smaller but most wealthaccrues to the state, and poverty is both frequent and widespread. Conclusion: Yes, Big Government Causes and Exacerbates Poverty.In all of these effects, the minimal model of economic complexity broadly matches stylized facts about real world economies, and it doesso without any explicit assumptions about individual decision making, without any fitting to data, and indeed without any parametertweaking or calibration at all.

Does Big Government Cause Poverty?

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Does Big Government Cause Poverty?

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