calvin blackwell is chair of the economics department at the College of Charleston.
Published August 14, 2019
The grindingly steady rise in wealth concentration since the 1980s means that millennials, who already comprise nearly half the American workforce, have lived their entire lives with rising inequality. Angst about their plight has resurrected the idea that inequality is an inevitable consequence of capitalism and turned a lengthy economics tome (that’s right, Thomas Piketty’s Capital ) into a bestseller.
No wonder, then, that many of them no longer consider socialism a dirty word — or that Democratic presidential candidates are seeking to distinguish themselves from the pack by advocating capitalist-unfriendly policies ranging from wealth taxes to busting up tech companies. There’s a problem, though: Even assuming such proposals could break through the political opposition, it’s far from clear that the fixes would actually flatten the economic pyramid.
There is a means to this end, however, that stresses egalitarian principles that have, at least nominally, been celebrated by market fundamentalists: strengthen and enforce property rights. And unlike soak-the-rich proposals, there’s even evidence — well, simulations — that suggest this approach could keep inequality in check. If you doubt, consider the most modern of market economies, now all the rage in videogames.
Working in the Coal Mine
My son loves Minecraft, Microsoft’s wildly popular game that has absorbed hundreds of hours of his time. The game’s appeal lies in its openness – it is sort of like playing with virtual Lego blocks. Within the simulation, players can interact with both the virtual landscape and with one another, building elaborate structures out of wood and stone. Players compete to earn rank, battle one another with weapons of their own making, and trade for precious resources such as gold.
One afternoon I was chatting with my son about Minecraft, and he mentioned how much gold he had accumulated, bragging that he was one of the wealthiest players on his “server,” an individual virtual playground within Minecraft. I was intrigued. “How do you know that you are one of the top players?” I asked. He told me that he could generate a list of the store of gold of every player on his server with a simple command. As he explained this, a lightbulb went off over my head: I could use the data from his server to study the dynamics of economic inequality.
In the real world, data on wealth are hard to come by. Wealthy individuals are understandably reluctant to reveal that information. In the United States, only indirect measures of wealth (from surveys) are available to researchers. And without direct data, it is hard to measure inequality with any precision. Minecraft, by contrast, offered a trove of data for the simulated world.
Along with one of my students, Jack Carroll, we looked at the distribution of wealth on nine different Minecraft servers, encompassing more than 17,000 players. We found that the distribution of wealth on these servers is highly skewed and unequal – more so than in any current real-world economy. For example, in the United States, the wealthiest person is Jeff Bezos, with an estimated wealth of $109 billion. The median wealth in the United States is about $80,000, so the ratio of the richest to the median wealth’s is then about 136,000 to 1. In contrast, on the Tempus Minecraft server, the median wealth is 50 pieces of gold, while the wealthiest player has 50 billion pieces of gold – over a 1,000 times higher than the ratio in the United States.
The ways that the Minecraft economy differ from modern economies may help us better understand the wealth- and inequality-generating processes of capitalism.
Back in the Real World
Minecraft’s virtual inequality is worth paying attention to because the way wealth is accumulated in Minecraft is similar to that in the real world. Players in the game can stockpile gold by mining it directly from the ground, or by mining other resources and selling them for gold, or by taking it (using force) from other players. The Minecraft economy is simpler than the real economy, but it simulates two primary activities — production and trade — that take place in all economies.
In fact, the ways that the Minecraft economy differ from modern economies may help us better understand the wealth- and inequality-generating processes of capitalism. Economists agree that capitalism and the spread of markets have generated vast amounts of wealth. However, since the 18th century (and perhaps earlier), critics of these institutions have argued that they also create inequality. In the real world, fluctuations in inequality can be due to a myriad of factors, from advances in technology to the growth of international trade to changes in tax policy. The simpler Minecraft economy’s rules do not change, making it easier to get a clear picture of what is going on.
Rights Make Might
In Minecraft, players interact in two areas: markets, where property rights are enforced (i.e., trades are only allowed if both players agree), and mines, where property rights are not enforced (one player can attack other players and rob them of their possessions). It is mines that appear to create the greatest amount of inequality. The “wild west” nature of the mines allows players to use force to amass great wealth, which in turn leads to great inequality.
This helps to explain why wealth distribution is so much less equal in a country like Russia than the United States. In Russia, the ratio of the wealthiest to the median wealth is an order of magnitude greater than in the US, at 14 million to 1. Russia is a “kleptocracy” with poorly enforced property rights.
To be sure, capitalism has always required strong and evolving property rights to flourish. Indeed, it takes a formal property system to unlock the mystery of capital: turning assets such as land or patents into economic capital. And, along the way, it tends to reduce inequality.
Facebook, We’re Looking at You
It thus seems unfortunate that we as a society have backed away from considering property rights policy to be a tool for social welfare. The current debate about the use of personal data, and their ownership, fits neatly here. Data have been called “the new oil,” with an oligarchy controlling all the reserves. Internet giants such as Facebook and Google, not individuals, are keeping the wealth generated from personal, consumer and even medical data. But rather than attacking the issue by breaking up big tech, as some seem keen to do, a change to the property rights regime might be more effective for mediating the rise of data-driven wealth concentration.