Dan Kervick: The Political Economy of Citadella

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Yves here. Readers seem to like Kervick’s storytelling format, and he seemed to take NC readers’ suggestion to heart regarding making it a bit more compact next time.

By Dan Kervick, who does research in decision theory and analytic metaphysics. Cross posted from New Economic Perspectives

Imagine a world and a society in which 500 people own everything – absolutely everything. These blessed few live in the Citadel, a mighty bastion of comfort with fortified and impregnable walls. The walls surround the Citadelians’ collections of lavish homes, spacious and opulent gardens, gorgeous pleasure arenas, and well-outfitted factories and workhouses.

Yes, factories and workhouses. These mighty 500 pay 100,000 other people to do various kinds of work for them. The work consists in transforming some of the resources and goods belonging to the 500 owners into a variety of consumable products, and also in using some of those products along with other raw materials to perform sundry services for the 500, services that include the production of splendid works of art and intellect.

The labors of the 100,000 workers yield more delights than can possibly be enjoyed by the 500 owners as the latter live out their luxurious but all-too-finite lives. The result is that the 500 owners in the Citadel are absolutely sated. They have no need to hire any other people to do any additional work. They already possess riches beyond the limits of enjoyment and desire.

The industry of the 100,000 workers also produces a surplus beyond what is needed to meet the quenched consumption needs of the 500 owners, and that surplus goes entirely to providing a few goods and services for the 100,000 workers themselves. That is how the workers are paid – with the products of their own labor. The workers are permitted to produce just enough extra for themselves to make it worthwhile for them to do the work offered by the owners rather than remain unemployed outside the Citadel walls.

And there indeed are millions and millions of people in Citadelia outside those impassable walls, living on the land owned by the 500. Yet all but the 500 owners and the 100,000 laborers inside the Citadel have no significant employment at all, and their lives are utterly impoverished. The owners permit the naked millions to forage for subsistence in the vast plains and forests that belong to the owners and lie outside the walls of their compound, and they also permit the wanderers to build rude shelters from dead grasses and fallen twigs.

But that is all they permit. Despite their sumptuous and sybaritic lifestyle, the owners are frugal savers of their unused property. They are determined to preserve and maintain possession of everything they own, including all of those assets that are not in use for their own present consumption or for the present payment of their workers. They are determined to keep all of their superabundant property in their own possession, in perpetuity, to be handed on down to their posterity. Also, the owners are wary of permitting production lest the rude millions improve their material conditions and powers enough to become threats to the power of the owners and rulers of the Citadel. They enforce their strict property regime with vigor and extreme prejudice, and do not permit the unhappy millions to engage in any significant productive transformations of the vast unexploited resources beyond the Citadel walls.

The system is frozen in place because the owners possess a monopoly of force – a monopoly not just in theory, but in unchallengeable practice. The owners possess a battery of laser blasters they built in an earlier period, and that are sufficiently powerful to discipline the 100,000 workers and keep them under the owners’ control. The laser blasters are installed throughout the Citadel along with surveillance cameras, and are operated remotely by codes that only the owners know. If a worker becomes unruly or insubordinate, she is summarily blasted into oblivion with a short burst from one of these potent armaments. And any worker who shows the smallest hints of inordinate curiosity about the workings of the laser blasters, or a budding interest in using the tools and raw materials of the workhouses to design weapons of any kind, is dispatched just as expeditiously.

Among the jobs performed by the 100,000 workers is the task of shooting, burning, laser blasting or otherwise punishing any of the millions of unemployed humans who turn themselves into pests and threaten the property of the owners. The owners send frequent patrols of stolid and reliable workers outside the walls to hunt, terrify and discipline the nomads. They also propel unmanned flying machines out beyond the Citadel walls and into the exterior wilds to survey the activities of the wanderers, and to annihilate them on the slightest suspicion of threatening activity, or for so much as a gesture that breaches the ordained demeanor of prostrate obedience.

The millions of vagrant foragers outside those imposing walls, wandering unclothed and stupefied through the wilderness, would love to possess lives like those of the 100,000 lucky workers, about whose more prosperous existence they have heard many stories and legends. When the owners are in need of new workers, they issue a call throughout the land. All eagerly apply for consideration. Everyone wants to be selected, and the owners can always choose from the very strongest and brightest among the nomads to find the choicest workers.

Thus is the tale of Citadelia. I now have some questions for theoretical economists. How would they describe the economic conditions of Citadelia? More specifically:

1. Would economists classify the conditions of Citadelia as a depression?
2. Are the markets in Citadelia routinely clearing?
3. Is Citadelia an economy in equilibrium?
4. Could the mass unemployment of Citadelia persist for a very long time?

And here is a question for the rest of us: Could we be living in Citadelia? Obviously, the conditions of the Citadelia story are extreme and fantastic. But in our world right now many millions of people – particularly young people – are involuntarily unemployed. The plague of unemployment is devastating large parts of Europe, The United States, the Middle East and Africa. Could it be that a chief reason for this persistent joblessness is that the owners of these regions and their resources, having sated most of their own personal desires, have no urgent need to employ more people to produce more goods and services, or to generate more profits? And could it be that the unemployed do not themselves own enough of the world’s property to create their own opportunities for productive work? And even if the owners of the world’s property are not exactly sated, might there be degrees of satiety such that when that degree is high enough, and when wealth is concentrated in too few hands, these circumstances have the effect of stifling economic development?

Notice that the unemployment in Citadelia could be relieved in two ways: If the owners were less exclusively concerned about their own well-being and property interests, and were more concerned about the well-being of others, then they might simply give away most of the land outside the walls, and liberate the natural industry of the foragers to begin improving that land, cultivating it, mining it and building on it. Also, if the owners were insatiable, so that no matter how much they had they always wanted more, then they would always be providing increasing amounts of work. They might gradually expand the walls of the Citadel over time, incorporating by stages more and more of the hinterlands into their enclosed civilization. But the combination of the owners’ satiety with their fixed determination to hold all of the property that is already theirs, works to prevent Citadelia from growing.

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  1. Enrico Malatesta

    Would the lasers be used on one of the 500 if they deviated from their stated role?

      1. Dave of Maryland

        Does the consequences of intermarriages among the ruling houses in the Middle Ages ring any bells?

      2. Nathanael

        The “undefeatable” monopoly on force is one truly unrealistic part of the entire scenario. That part is, however, extremely unrealistic.

        An even more unrealistic part was explained by Veblen. As he explains in great detail, one of the goals of the 500 is, always, to *not have to think* about the factories and workhouses.

        Therefore who supervises the use of the laser blasters against the 100,000? Is it one or more of the 100,000? Fail! They will overthrow the 500, eventually. Is it a robot? The robot cannot be smart enough to identify all forms of disobedience accurately (and if it is smart enough… it’ll overthrow the 500). Is it one of the 500 who happens to personally like this form of sadism? Well, that *one* will overthrow the rest of the 500. And then he’ll die of old age, and what happens next?

        This is why this situation is *inherently unstable*, politically.

    1. reslez

      If they do, does it affect the material conditions on Citadella in any way whatsoever?

  2. Rik

    I’m “only” an amateur and I wouldn’t call me an “amateur theoretical economist”, but here are my answers:

    1. No (the world outside Citadella is irrelevant to the economy inside the city);

    2. I have no idea what “routinely clearing” means;

    3. Since Citadella seems dead to me (why innovate? they already have everything they’ll ever need..) and death is the only equilibrium we know, the answer is yes;

    4. No. Are 100,00 workers enough to provide new talent? And what about the weather? I’m sure economic models don’t take that into account, but suppose one night is particularly dark and stormy… what’s to keep outsiders from storming Citadella? Sooner or later, I think, one of the outsiders will (design a way to) get in. There are simply too many of them.

    1. Capo Regime

      Actually, all economic models have an error term. The error term is happily used by economists to expain away every issue. Y= a+ B+ C+……N+e . Always use e to explain away when things go awry….

    2. Dan Kervick

      Interesting answers, Rik. The idea that the folks outside the walls are out of the labor market altogether, and hence not unemployed, seems to be reflected in the way our own government counts the unemployed. However, the Citadelian nomads do want to work inside the wall. But I guess there is nowhere they can send an application.

      By “routinely clearing” I had in mind the idea that market clearing isn’t just something that happens once, but every time there is a market. If the Citadelians outside the wall are not part of the labor market, and only the workers inside the wall are part of that market, then I guess the Citadelian economy is at “full employment”, and the labor market is clearing day after day.

      1. damian

        this is exactly the scenerio in 1917 in Russia when the Czar Nicholas was deposed – serfs were slaves – subsistence – and the core inside was corrupt – he was murdered along with his wife and kids and all the hierarchy of nobles – the walls were penetrated – overcome by millions who didnt care about their own life …nor the lasers!

        once people dont care about their own life because of the misery – things happen – desperate people do desperate things – we are a few years off but it will come

        1. chitown2020

          If the economy worsens it could be a few months off. Alot of people have awakened to the fact that the 99% got screwed by the establishment in more ways than one. For instance, many are realizing there are no choices in who to vote for Pres..Meet the new boss, same as the old boss. The jig is up…..Its a full blown dictatorship that is on the brink of turning tyrannical in order to protect itself. The only thing keeping us free is our right to bear arms.

          1. Nathanael

            A few years, a few months? No way to tell. Calling timing on a revolution is practically impossible. The revolution first seems inevitable due to the building stresses, then seems like it can never happen (because it’s taken so long with nothing happening), and then one day it happens.

    3. Dave of Maryland

      Actually, the classic sci fi defense against lasers was nice shinny reflective mirrors. Shinny metallic foil would work as well, but we will presume the City’s military-industrial complex to be perfect, unlike our own.

      1. Guy2k

        The tinfoil suits would be a good example of a disruptive technology that would imperil the citadel. Cheap, low-tech, easy to produce. You could also have an insider function as Prometheus and give the barbians hi-tech fire.

      2. Nathanael

        A “perfect” military-industrial complex still suffers from internal conflict. The robots vs. the 500, perhaps.

    4. Mikent

      The 500 will create ways to keep the masses of unwashed yahoos divided, thus negating the only advantage those beyond the castle walls have. Ways such as gay marriage, gun control, pro life-pro choice, religion, and the birthplace of a president. Sound familiar ?

  3. Tom Crowl

    Good use of analogy!

    Though I’m not an economist let me take a shot at answering the questions:

    1. Classified as a depression?

    Likely not… since the frame of reference of those economists making the classification will be bound by the extent of the ‘social organism’ with which they are concerned. Since the ‘economists’ are likely members of Citadella’s elite core… and the core is sated… while the remaining population seems at least quiescent they will perceive the situation as stable and satisfactory. (this is clearly evident in the real world)

    (see Issues in Scaling Civilization: The Altruism Problem

    2. Markets may well clear… (which simply shows that market clearing does not necessarily equate to a sustainable economy (refers to my eventual 4th question response)

    3. Possibly… (see answer #4)

    4. Now this is where it gets tricky… because it is possible for it to persist… even for centuries… (as I believe the author’s metaphor suggests)…


    I believe this is the stage the world is now at… and behind what Brzezinski has referred to as a global political awakening among the poor of the world.

    It is this transition that so bedevils the ‘globalist paradigm’ which is (as currently formulated) a product of the “Citidalla” economist’s mindset.

    At least some of the potential solutions seem obvious to me.

    1. Tim

      Excellent point about the availability of information. The paths of history are no longer useful in predicting the course of social events. mobile real time Information discovery and dissemination will be looked upon as one of the largest single advances of this century on par with mechanized agriculture.

      Propaganda will forever be limited from its extremes in this new reality.

      If everybody had an Iphone in 1938 in Germany how would the future have turned out?

    2. tatere


      That’s quite an assertion. Based on what? What difference does information make without the ability or means to act on it? What is the mechanism? What is it that the teeming millions can learn that matters? Who’s *creating* this information?

      For instance, are you proposing that the teeming millions are developing lore amongst themselves, unbeknownst to the 500, that will eventually produce sufficient defenses against the lasers and methods of broaching the walls to allow a revolution? Presuming any concept of or desire for revolution in the first place. “We guarantee a spot in The 100,000 for any who provide credible information about heretics” seems like a cheap and practical counter to all of that.

      1. chitown2020

        For starters, it wouldn’t hurt for people to read the U.S. CONSTITUTION, and learn the the real estate laws, FED laws, securities laws, trust laws and property laws that protect their property rights. How can we protect our rights when we don’t know what the laws are? Congresswoman Marcy Kaptor gave us a clue when she said Property Law is power. If you cant put your finger on that trust agreement (legal assignment) to that note and mortgage…they are imposters. They scam us because of what we don’t know. Lies and deceptive practices are powerful weapons that they use.

        1. LifelongLib

          There are millions of people in the U.S. (and billions elsewhere) who never had enough property for “property rights” to be an issue. And I question whether there really are property “rights” or just arrangements. Arrangements that are secondary to and only valid if they support the basic rights of life, liberty, and the pursuit of happiness.

  4. Capo Regime

    I’m not worried. Ezra Klein at WAPO sez everthing will be o.k. just give Obama another term and jobs will sprout, the deserts will bloom and rivers will flow with chocolate.

  5. Capo Regime

    Its a nice explanation but it is evocative of economic models and has a certain linear aspect. What happens to Citadella when things turn out not to be a linear(or non inear) system but rather a complex adaptive system? Economics tends to force critics to frame reality in a neat linear system and spend time finding flaws in assumptions and devising new assumptions and relationships (see Keen). If in fact, neoclassical economics is junk, why bother refuting? Is it not like refuting astronomy? Complex adaptive systems–things happen in unknown ways. John Gray post humanist approach–we are just animals and our efforts to explain the world and justify ourselves has not evolved ten seconds since we tossed virgins in volcanoes.

    1. Dan Kervick

      I do like Keen’s work on modeling the economy as a complex dynamical system. But maybe the preconditions for that are missing in Citadelia? The opportunity for creativity and adaptive innovation aren’t there, so couldn’t the system could stay in stasis for a long time. Our world isn’t like that in an extremely high degree, but maybe there is all too much of an element of crony capitalist stagnation in our world, as concentrated wealth and great financial power is linked to great state power to preserve what exists for the benefit of those who are presently in charge. Note that in Citadelia the government of the society and the ownership of the society’s goods are fused into one entity.

  6. Joe Rebholz

    I’ve often wondered what it would be like if a few (500?)people owned everything or almost everything and everyone else had to rent stuff from the 500. Property would have little meaning.

  7. bluntobj

    “Imagine a world and a society in which 500 people own everything – absolutely everything.”

    This includes people.

    “1. Would economists classify the conditions of Citadelia as a depression?”

    No. There are only 500 citizens. All other beings are property, and are not included in calculating conditions.

    “2. Are the markets in Citadelia routinely clearing?”

    There is no market. The products of slave labor are not “sold” or “paid”, but are merely consumed or alloted as desired.

    “3. Is Citadelia an economy in equilibrium?”

    It’s not an economy.

    “4. Could the mass unemployment of Citadelia persist for a very long time?”

    Property cannot be unemployed, as employment implies choice. Unemployment is not possible, as the choice to work or not is not one given to property.

    Shall we imagine a change of terms? Replace workers with “Robots”, and vagrant foragers with “Wandering Robots”. The situation does not change for Citadelians. People or robots, they are all property, and therefore the exercise of analyzing their employment, wellbeing, etc. is not valid.

    What is valid is this question:

    “And here is a question for the rest of us: Could we be living in Citadelia?”

    This is an extremely valid question, Mr. Kervick, and one that would be very worthy of exploration.

    1. Dan Kervick

      I like the idea that there are no markets, because nothing is really exchanged in Citadelia. I think I would still say there is an economy, because even a system of production and consumption that doesn’t employ markets is an economy of some kind.

  8. Charles LeSeau

    “It was set in the Hawaiian Islands… Every bit of land on the islands was owned by only about forty people, and, in the story, Trout had those people decide to excercise their property rights to the full. They put up no trespassing signs on everything.

    This created terrible problems for the million other people on the islands. The law of gravity required that they stick somewhere on the surface. Either that, or they could go out into the water and bob offshore.

    But the Federal Government came through with an emergency program. It gave a big baloon full of helium to every man, woman and child who didn’t own property.
    There was a cable with a harness on it dangling from each baloon. With the help of the baloons, Hawaiians could go on inhabiting the islands without always sticking to things other people owned.”

    -Kurt Vonnegut, ‘Breakfast of Champions’

      1. Daniel

        It figures! Compared to V you’re a complete idiot, who because of priv’lege alone gets to hurl chicken-scratch shit like this to a audience you could care less about! Fail loser!

      2. charles leseau

        Definitely worth reading, as are all Vonnegut’s great books. That quote is not what Breakfast of Champions is actually about though, just so I don’t give the wrong impression. That little bit I quoted is one of about a dozen little stories* one of the main characters comes up with (Kilgore Trout, an absurdist sci-fi author, more or less Vonnegut’s fictional alter ego). Your hypothetical reminded me of it. :)

        *All the little Kilgore Trout stories from BoC in one link: http://reocities.com/Hollywood/4953/kt_boc.html

    1. chitown2020

      That is some of what they do. They set us up by creating distractions to sneak in crises or chaos in order to steal. Like what Rahm Emanuel said….never let a crisis go to waste. The self appointed owners of everything now want to self appoint themselves owners of our wealth, property and freedom. They are diabolical, maniacal, filthy and very underhanded in the way they try to entrap and steal. Their power is in the lies they can make the masses believe.

  9. Enraged

    “And there indeed are millions and millions of people in Citadelia outside those impassable walls, living on the land owned by the 500. Yet all but the 500 owners and the 100,000 laborers inside the Citadel have no significant employment at all, and their lives are utterly impoverished.”

    So, those millions and millions of people decide to unite. Waiting for the 500 to be safely put in their Citadella, they decide to erect a very big, very tall wall all around the Citadella, without any door, gate or entrance way. Millions of them together work all night long, erecting the wall with rocks from the land and forest. Being so many, they accomplish the contruction within a few hours. They realize that 100,000 workers might still be inside but you can’t make an omelett without breaking an egg. There has to be a few casualties if the world must be free…

    Once the wall has been fully built, they put a monumental sign on it: “Citadella Penitenciary”. There is no door, no gate, nothing. No on can come out. No one can get in. Within a few weeks, everyone who lived and worked in the Citadella is dead. The millions of pople celebrate and decide to keep the fortress as a reminder of what took place, for future generations.

    The end.

    1. Dan Kervick

      Interesting. But remember those flying drones. I didn’t put it in the story, but lets assume they never sleep?

      1. Enraged


        Haiti was under complete control of the French for centuries. Populated by slaves imported from different countries of Africa, the few indigenous population and the French. An Island without any means of escaping.

        What did they do? They first created a language the French couldn’t understand: Creole. A mix of French, African and indegenous languages, which allowed for communication among themselves without being understood. When you look at their history, it is very much like the Citadella. Communication allowed for unity and plannification of a revolt from within.

        Citadella must revolt from within. Those 500 need the 100,000 to manufacture, maintain and operate the lasers, the drones, etc. They have computers which can be disabled or reprogrammed. Technology is only as good as the people who operate the machines.

        1. Yves Smith Post author

          Read Mark Ames’ Going Postal. He has a chapter on slave revolts. The slave revolts in Haiti were successful because they didn’t have an effective repression/surveillance system in place. America did have one, and the very few slave uprisings were crushed swiftly and brutally.

          1. Nathanael

            America also had a much higher ratio of slaveholders/enforcers to slaves. And America made a point of cutting in the enforcers on the profits of slavery — that’s what you need to do to make a stable slavery system.

            Haiti was incapable of establishing an effective system of repression because the enforcer/slave ratio was really, REALLY low. Way way too low. There just weren’t enough enforcers to keep that many slaves down.

            This is one of the many historical data points that have led me to say that the 0.1% are making a huge mistake: if they had consistently “cut in” 10% of the population, a 10% including all the military, police, and other enforcers, they’d be set. Instead, they are even screwing those people over, the people who they expect to defend their wealth. This is known as “making your coalition too small”.

          2. Nathanael

            Note that the temptation of the rich is always to do it “Haiti style”, because until the successful revolution, Haiti was far more profitable than the US slave plantations. Paying fewer enforcers will do that!

      2. Nathanael

        The flying drones? We get back to Veblen’s Theory of the Leisure Class again. The 500 make it a point to not understand how the flying drones work. So eventually, either they run out of working drones, or someone in the 100,000 (or the million) figures out how to replicate the drones, take control of the drones, or destroy the drones.

        The 500 have no counter-action *because of their self-chosen ignorance*. The most crucial point in _Theory of the Leisure Class_ is that the leisure class considers it inherently valuable to NOT understand things like engineering, science, factory management, warfare, etc. They self-select until they are twits. Veblen never really explained what the endgame of this was, but it’s obviously revolution. (The revolutionaries will probably form a new leisure class, but it’ll take a few generations for it to degenerate to the end stage again.)

  10. craazyman

    1. Only if they were part of the ignorant millions. If they were part of the 100,000 — which is where any economist worth his PhD would be — they’d classify it correctly as a temporary structural imbalance that maket forces will alleviate.

    2. Absolutely. Do you see any cloggs? Or are you just trying to cause trouble?

    3. No doubt about it. Yes. As long as the laser blasters are working.

    4. What unemployment? You must not be a team player.

    1. Dan Kervick

      Yes, structural imbalances. They would also say employing more people would be inflationary.

  11. Counterbutcher

    Compare Bethesda MD to Camden New Jersey. You forgot to mention how the folks in Citadella wage continuous war on so-called threats, fill prisons, live under a different set of laws, and use information as a weapon to maintain hegemony – ooops, that’s real as opposed to a hacked piece of sci-fi

    1. Literary Critic

      Here’s how it really works – and they don’t have economists!

      Zardoz is a 1974 science fiction/fantasy film written, produced, and directed by John Boorman. It stars Sean Connery, Charlotte Rampling, and Sara Kestelman. Zardoz was Connery’s second post-James Bond role (after The Offence). The film was shot by cinematographer Geoffrey Unsworth on a budget of US$1 million.

      In the year AD 2293, a post-apocalyptic Earth is inhabited mostly by the Brutals, who are ruled by the Eternals. Eternals use other Brutals, called Exterminators, as the Chosen warrior class. The Exterminators worship the god Zardoz, a huge, flying, hollow stone head.

      Zardoz teaches:
      The gun is good. The penis is evil. The penis shoots seeds, and makes new life to poison the Earth with a plague of men, as once it was, but the gun shoots death, and purifies the Earth of the filth of brutals. Go forth … and kill!

      The Zardoz god head supplies the Exterminators with weapons, while the Exterminators supply it with grain. Zed (Sean Connery), an Exterminator, secrets himself within Zardoz for an initially unknown purpose. He shoots and apparently kills its pilot, Arthur Frayn (Niall Buggy), who has already identified himself as an Eternal in the story’s prologue. The stone head containing Zed returns to the Vortex, a secluded community of civilized beings, protected all around by an invisible force-field, where the immortal Eternals lead a pleasant but ultimately stifling existence.


      1. Dan Kervick

        Who in their right mind would go see a movie without any economists in it?!

  12. Elliot

    That’s quite the crypto-libertarian fascination with “empowering” the have-nots by allowing all the natural resources to be sold off and mined and otherwise exploited. Because, nothing prepares for the future like finishing off despoiling everything that’s left now; and of course he’d be shocked-shocked! to find out that the money from that wouldn’t go to the have-nots anyway.

    1. Dan Kervick

      Well what’s the alternative? Should they depopulate Citadelia? In one way or another, everything of value that supports and enhances life comes from the Earth, doesn’t it? Using it wisely and conserving it still requires using it somewhat.

  13. Dr. Bob Goldschmidt

    1. Would economists classify the conditions of Citadelia as a depression?

    Not interested in the opinion of economists any more than I am in astrologists or entrail readers.

    2. Are the markets in Citadelia routinely clearing?

    This is, as always, is in the eyes of the beholder. The 500 will believe they are clearing until forced to believe otherwise.

    3. Is Citadelia an economy in equilibrium?

    As much in equilibrium as the dark ages

    4. Could the mass unemployment of Citadelia persist for a very long time?

    See answer to 3.

    The real question we should be asking ourselves is:

    Can our economy and democracy continue to survive the four-decade erosion of worker purchasing power due to the combination of open trade with countries having order-of-magnitude lower labor rates, the emasculation of our unions and rapid automation?

  14. toxymoron

    I think real-life Bahrain, Dubai, Qatar and the like must be not that far away from Citadellia, with its 1000s of European/American expats running businesses and millions of Asians for the chores..

  15. TK421

    You forgot the part where the 100,000 support the 500 because the alternative might possibly be slightly worse.

    1. Dan Kervick

      Yes. And the 100,000 might be proud of their status. They have, like, clothes and stuff.

      Also, all the owners have to do is skimp on the amount of the surplus they return to the workers from time to time, and then tell them that the reason is that they decided to use the drones to drop some free charity crumbs over the hinterlands for the foragers. That should be enough to stoke up the resentment.

      It would help the owners also if the foragers are differently colored than the workers – or if maybe they smell funny.

  16. Peter T

    “And here is a question for the rest of us: Could we be living in Citadelia? Obviously, the conditions of the Citadelia story are extreme and fantastic.”

    Not so fantastic: it seems to resemble North Korea. The top 500 live in luxury; the 100k workers try to live in Pjoenjang or another place where you need a residence permit; and the rest vegetates in the country side, hoping to find something to eat and that they may be admitted to the 100k workers. That the 500 don’t OWN the country as PRIVATE persons but as governing clique seems only a formal difference to me, the material consequences are the same. The only real difference comes when factions inside the 500 develop and some want to distance themselves from the others while taking their property and power with them.

    The example of North Korea shows also what kind of security apparatus you would need to keep the regime stable, despite already massive propaganda. Is Kervick’s draft a role model for our times dystopia like 1984 was for the time of totalitarian regimes?

    1. Willoughby

      No I think Camden doesn’t have much on North Korea. It’s third world in the US in many a hovel, open air prisons and all the other terms the ministry of assumption can come up with while they masturbate to international red baiting. Additionally, the US has more people as wards of the state (prisoners) than does evil North Korea.

    2. Abe, NYC

      I, too, thought of North Korea. Another similarity to Citadella is it has a strict hereditary hierarchy with extremely little upward mobility.

      It appears though that in the absence of external factors the North Korean regime would be indefinitely sustainable politically (a terrifying notion but likely true), but probably not economically. In 1990s its economy disintegrated, there was massive famine and hundreds of thousands of people died. The famine was eventually stopped by food aid, and people no longer die of hunger (malnutrition is still common). Would the regime have survived without foreign aid? – hard to say.

      But what happened in Korea is the famine led to re-introduction of market economy. It used to be that people worked at state enterprises and received food rations. And then they simply could not use the coupons they were still given because there was no food in stores. Many started private business: agriculture for sale (unthinkable in 1980s), widespread smuggling from China, crafts. Perhaps this allowed the regime to survive, but it certainly lessened its hold on the minds of citizens, who now realize that the Chinese and South Koreans probably leave better than themselves. Whether it happens in 5 years or 25, the regime is doomed.

      Andrei Lankov has written a lot on this, mostly in Russian and Korean but in English too: http://www.koreatimes.co.kr/www/news/nation/2012/04/304_96327.html

  17. Susan the other

    I know the genealogy of the citizens of Citadelia. They came from Eden, far far away, back in a forgotten time when capital/property and labor were the same molecule. Before labor got fracked by capital. Capital just up and proclaimed small white pebbles to have a great value all by themselves, with no need for labor, and they took all the white pebbles and set up their tents on the promontory of the hill. Whence they built a wall for emphasis. And because labor was really pissed. The ecomomy capital left behind was totally messed up and everyone else began to steal too. They proudly referred to themselves as capitalists. It was clear that Capital had pulled a fast one. They (capital) just didn’t want to do their job and so they didn’t. Since they were more ruthless than labor they gained control of their own luxurious existence. But after 50 generations it became apparent that the molecule had to be fused back together. Capital would damn well do its job or it would be no longer. Use it or lose it, the nomads chanted. And so it was that capital came to do its job.

  18. LVG

    MMT is basically what exists in China with a totally state run monetary system. Except there’s no job guarantee program in China. And this sounds a lot like China with their billions in rural areas.

    I wonder why MMTers don’t more openly embrace the Chinese model and Marxism? Oh, I know. Because then they’d have to expose their real politics for what they are.

      1. tom allen

        In the Citadel, their names are written on orbs. It’s called the “Orbs 500”.

    1. Ben Wolf

      MMT exists in every country which issues its own currency, so the political systems are irrelevant to the operational realities of being monetarily sovereign. The same tools exist in China and New Zealand, it’s how they’re employed that counts.

  19. Daniel

    Is Shelia B still paying Bank of America for her cozy little overpriced house in DC?

  20. Dave of Maryland

    Question four answers itself.

    We are given that only 100,000 have anything at all and that the remaining “millions and millions” have nothing. In the text these people are described as “nomads”, which means they are hunter-gatherers, with consequent very low population densities. Which means they’re sitting on a territory roughly the size of the eastern US, as that’s about the size of the Native population when white folks first arrived.

    But no matter. The premise is they have absolutely squat, which means in roughly three months they will all starve to death.

    If they are still living after that, it will be because they have organized their own primitive, agrarian economies. (As Natives in fact did, nomadic or not.) At that point they will no longer be “unemployed”. As there are no overlords among them (no manor houses with ruling families in them) this economy will presumably be egalitarian and barter-based. As it will be completely free of taxation (didn’t think of that, I bet), it will eventually become prosperous.

    Which leads to an interesting end-game. The 500 will need to up the ante if they want to keep the 100,000 enslaved (on an island the size of Manhattan, I suppose), as life on the outside will start to look better and better. Or go slaughter nomads on a regular basis, so the 100K will be encouraged to stay home and work. One or the other.

    Personally I’ve become frustrated with econo blogs. The next big crash is coming and despite my best efforts I’m not going to survive. Nor will a lot of others. Hard core porno is a better use of my time, but as I live with my family I can’t do that. As temperatures rise, the snark factor rises as well.

    1. Nathanael

      Most people in hard core porno have families. It all depends on the attitude of your family, y’know?

  21. steelhead23

    There seems to be a missing aspect of this little vignette. How exactly did the 500 become rich? If you wish to channel Huxley here, let me recommend a few additions to Citadellia. Meager as it may be, the 500 crave income from the nomads. Hence, they market excess production from the 100k workers to the nomads at “rock bottom prices” causing the nomads to believe that the Plutons care just a smidge for them. They are wrong of course. It is only their money, the fruits of their labor that the Plutons desire.

    Also, Plutons of my acquaintance would never allow the nomads to subsist off the land. Leisure is theirs by right of ownership and hunting and fishing would be activities only the Plutons could enjoy. Poaching would be a capital offense. What the nomads would do to generate money would be to extract raw materials for the Plutons material needs. The ever-generous Plutons would pay the nomads 10 cents on the dollar for their industriousness. Then they could purchase the necessities of life from Pluton-owned stores.

    Indeed, I think you have hit on something in this little metaphor, it is indeed happening. Were one to compare land ownership in the US in 1900 t0 today, it is obvious that wealth concentration is accelerating.

    It is worth noting the incredible propaganda efforts to decry efforts at land ownership redistribution in Latin and South America. There is no question, can be no question, that such theft will lead to ruin. The Citadelians have a propaganda machine that has effectively convinced the proles that that which is in the Pluton’s interest is also in the nomads. Nothing, my friends, nothing, could be further from the truth.

  22. Xylix

    Hmm, is there a maximum post length here? Perhaps if I divide this up into hunks?

    [1. Would economists classify the conditions of Citadelia as a depression?]

    No. Citadelia has not experienced a sudden, very large drop in its economic output.

    No shock. No depression. And no, stagnation doesn’t count unless that stagnation was proceeded by a large shock.

    To put it another way, a depression/recession is an economic event that generates misery above and beyond what was intended by societal design. The misery of Citadelia is definitely by design. Therefore no depression.

    [2. Are the markets in Citadelia routinely clearing?]

    Yes. The core 500 might be sated but the 100,000 workers (much less their friends and family) are not. As such there is always somebody to dump excess production on.

    In any case, this question is somewhat silly. That markets clear — all produced goods are sold — is a relevant measure of efficient design when production is dwarfed by demand*. When the situation is inverted — production vastly exceeds demand* — striving for a market that clears often leads to bad outcomes.

    For instance, what is better? A market that always sells all the food it produces (100% distributive efficiency), but leaves 90% of the people sated 90% of the time (81% average satiation), or a market that always sells half the food it produces (50% distributive efficiency), but leaves 100% of the people sated 100% of the time?

    The United States developed a system that over produces food for a reason. If people forget that and try to make the system more ‘efficient’ famine will inevitably ensue.

    *By demand I mean the actual psychological, sociological, and biological desire/need for the good.

    1. Xylix

      [3. Is Citadelia an economy in equilibrium?]

      No. Humans are fickle. We sates us today does not sate us tomorrow. Our desires are forever in fluctuation. This would be likewise true of the 500. Fluctuating demand requires fluctuating production and thus fluctuating labor.

      Toss in weather, sickness, death, birth, natural disasters, etc… and you get an economy with a lot of thrashing.

      Another way to say this is to ask: Is the ocean flat? Will it ever be?

      [4. Could the mass unemployment of Citadelia persist for a very long time?]

      This is a nonsensical question. Unemployment is a measure that is intended to evaluate many, often contradictory, things:

      A) How much of the ‘labor resource’ is idle?

      B) What proportion of the population is experiencing sudden economic decline?

      C) What is the structural inefficiency of the system?

      Depending on the question being asked the unemployment will vary.

      In any case, how long can it last? Until the unemployed die of course.

    2. Xylix

      And the final question…

      [Could we be living in Citadelia?]

      In terms of a sated elite, yes, there is evidence that suggests this:

      * The economy was previously propped up by debt based spending — the elite allowed the ordinary to consume ‘their’ excess production in exchange for ‘credit’.

      * When this debt based spending stopped, aggregate consumption crashed.

      * The elite, who are not debt constrained, have yet to replace this aggregate consumption. This implies they are sated.

      * At the same time interest rates have plunged, even reaching negative real rates, this further implies the elite are sated.

      I would say that this hypothesis has solid grounding, but it still needs more evidence to stand tall. If hypothesis does hold then all of the following methods should help resolve the recession/depression (this list is not exhaustive):

      * Drive up the wages of the ordinary population (by driving down the wages of the elite…).

      * Penalize the large financial accumulations thus obligating the elite to ‘use it or lose it’.

      * Repudiate the debt and reset the cycle (a dangerous gambit, this only works on its own if lending subsequently resumes).

      * Engage in massive Keynesian stimulus financed over the long term with progressive taxation (thus generating forced financial transfer via the generated wages)

  23. Paul Tioxon

    “THE PENULTIMATE TRUTH” by Philip K. Dick, (who else?) describes the basic society of citadel. In his story, the vast population of the world lives in underground complexes where they are born, work and die. They are told it is necessary for them to work harder because the terrible war that is being fought back on the surface of the earth require this subterranean society. They produce every manner of weaponry, mostly robots. They are told never to attempt to go to the surface. They are told the surface is devastated, poisoned by weapons of war, the atmosphere unbreathable, soil incapable of sustaining plant life etc. One character makes his way to the surface to see that it is all a lie and that the very few elite get to live unimaginable lives of wealth, supported by their unremitting labors, with little in the way of consumer comforts for all of their work. There is no war. All a lie. Written in 1964. All hail Philip K Dick!!


    Please view Donald Trump’s Boeing 757, made with Rolls Royce Engines, 24 karat gold seal belt buckles and velvety soft, hand rubbed Corinthian leather seats.

      1. Paul Tioxon

        On a more serious note, since you seem engaged with yr readers. Perucci and Wysong have been studying what they call the new class society which is diamond shaped. At the top are 1-2% of the new class of super rich. Then, supporting them, the cadre, about 14-15% of the managerial corporate types, professionals, necessary technicians and some self employed entrepreneurs. The bottom 80% are composed of a rapidly deteriorating set of poor, working poor, working class and middle class all who have no security what so ever over time for wealth, housing, medical care etc. It is in its 3rd edition and updated with real world example, like the budget for the typical American family, who brings in a total of $50k/yr representing over 1/2 of the populace.


        New Class Society:
        Goodbye American Dream? by Perrucci and Wysong

        1. Nathanael

          Accurate analysis now pinpoints the superrich as being about 1/3 of 1%.

          The real danger is not this. This situation (1/3 of 1% superrich, 15% “managerial” and “professional” assistants to the superrich, >80% poor) is stable and has existed in many societies.

          The real danger is that the 0.1% have decided to attack the 15% and drive them into poverty. Similar actions triggered the French Revolution and the Russian Revolution; the 80% were already antsy, but attacking the security of the 15% is “kicking your props out from under you”.

    1. Enraged

      That theme has been done and redone over and over. Soylent Green…

      But… discussing it doesn’t change one very important fact. People don’t want the system to be corrected. People want credit and immediate gratification. The idea of waiting to get anything is unbearable. The idea of saving rings of cruel and unusual punishment. No temptor can induce anyone into anything without his consent. Banks and the Feds have the American people’s.

      True: the incentive to get into debt is getting stronger and stronger. A year ago, I could have gotten $100 to open a credit card account with Chase. Today, they’re willing to give me $250. Last I checked, “NO” was still a full sentence. Don’t get me wrong: the pressure is there, constant. Still, once people decide “NO”, no one can force them to participate into this system any longer.

      Change has to come from inside out.


      Banking Headlines

      Consumer credit surges again in March

      WASHINGTON (MarketWatch) – U.S. consumers increased their debt in March by a seasonally adjusted $21.3 billion, the Federal Reserve reported Monday. This is the seventh straight monthly gain in consumer borrowing. The increase in March, the largest since November 2001, was double the roughly $10 billion gain expected by Wall Street economists. Most of the increase came from non-revolving debt such as auto loans, personal loans and student loans-these three categories combined for a $16.2 billion jump in March. Credit card debt rose by $5.1 billion in the month after a $2.3 billion decline in February. Consumer credit increased at a 7.75% annual rate in the first quarter.

      3:00 p.m. Today3:00 p.m. May 7, 2012

      1. LifelongLib

        It’s been pointed out here many times that people aren’t going into debt because they spend too much on “stuff” — people today actually spend a smaller percentage of their income on clothes, cars, etc. than they did 40 years ago. The real drivers of middle-class debt are stagnant wages combined with skyrocketing costs for basics like housing, education, and health care. Saying that debt is the result of profligacy is in many cases blaming the victims.

  24. liberal

    Imagine a world and a society in which 500 people own everything – absolutely everything.

    Really, Jesus Christ, could we all jointly get a clue and start to discuss these topics borrowing some of the concepts of Georgism and classical economics?

    These discussions are much more coherent if we distinguish rent-producing assets.

    Why do you think an asset like “housing” got bubbly in the first place? Hint: it ain’t the house, it’s the stuff the house is sitting on.

  25. bxg

    What’s your point? Are you trying to get an economist to concede that you have an example where there is no depression, all markets clear, and is in economic equilibrium – but, aha, got you you stupid economist – it’s nevertheless an awful place and unemployment persists for a very long time. So your theories are wrong and/or evil!

    If you aren’t trying to set this “trap” (which would be very, very, stupid), what’s your actual point? You describe a nasty world that could remain in stasis for a long time, so then pretty much any property of that society is stable (“in equilibrium”). But you ask only about the stability of economic properties, whatever they might mean in a basically non-market society. And the question about market clearing! – what markets? What do you mean by this? I would like to ask you to explain why – if it’s true – anyone could ask this question in good faith. Because if it is in good faith, you presumably have some clear idea as to what markets you are thinking about and what “routinely clearing” means? (The alternative to not knowing this is “I don’t know what this question means, but I want someone to concede these specific words, since I’m going to use them against them”)

    1. Dan Kervick

      I didn’t think there are specific right answers to these questions. I’ve asked them to a few different people, including some economists, and gotten different answers. Really what I want to suggest is that the models economists use, which are sometimes presented as expressing deep economic laws, have criteria for application that only make sense in very specific contingent and historical contexts, and that if you disrupt the context, it no longer becomes clear how to apply the model, or describe the situation in the terms provided by the model.

      A lot of economists employ models that portray the normal state of affairs as a market clearing equilibrium. When things go wrong, they sometimes say we are in a temporary state of disequilibrium, but if we just leave things alone, naturally operating economic forces will return the situation to a full employment equilibrium. So what I’m looking at is a hypothetical case in which the world is perhaps in an equilibrium as an economist would define it, but in which things are very, very bad.

      1. liberal

        Really what I want to suggest is that the models economists use, which are sometimes presented as expressing deep economic laws, have criteria for application that only make sense in very specific contingent and historical contexts…

        The models economists use make sense in no historical contexts, because rent has played a large role in all economies throughout history, yet economists prefer to ignore it.

  26. K Ackermann

    The conditions in Citadelia are a lot like the conditions in Iraq after Paul Bremer was crowned Potentate, or whatever it was.

    One big difference is that Citadelia sounds like a command economy without much of a market, whereas Iraq was a mixed kleptocracy/kakistocracy.

  27. ohmyheck

    This reminds me of “The Hunger Games”. It seems much of these questions have been addressed within the book or the movie.

    Or even “Wall-E”, for that matter.

  28. GeorgeNYC

    Let me take a stab at this:

    1. Would economists classify the conditions of Citadelia as a depression?

    Assuming that we are looking at everyone, not just the privileged 500, I would suggest that this question is dependent upon whether the population is growing. Each new person added into the outer lands would slightly increase the GDP with their meager production. The fact that the same number of people can satisfy the needs of the 500 implies that the “consumption” level for them may be stable (hence no growth in their contribution to GDP) although I guess it is possible that innovation could lead to an increase in productive and thus an actual increase in GDP utilizing the same number of workers.

    Given the importance of the consumption of the 500 to GDP I doubt there would ever be a recession as there would likely be some innovation and thus some increase in productivity leading to an increase in GDP.

    2. Are the markets in Citadelia routinely clearing?

    My knee jerk reaction was “yes.” But thinking a little more the answer is clearly no. The physical force of the government is preventing people for engaging in employment that they would otherwise want.

    3. Is Citadelia an economy in equilibrium?

    Yes. Thanks to the imposition of force.

    4. Could the mass unemployment of Citadelia persist for a very long time?

    Yes. Indefinitely. Force or the threat thereof is maintaining the equilibrium. Only until something can overcome that force will the mass unemployment change. The change need not be actual weapons but merely a change in attitude and beliefs by the 500.

    This is an excellent hypothetical. I think it encapsulates the problem of capitalism where competition results in a few winners and many losers while the winners essentially “take all.” All of the “economic” talk of markets and choice and freedom obscure the fact that markets seek equilibrium and that a situation such as this, while certainly hypothetical, does actually represent a reasonable basis for discussion as to how certain conditions can create certain outcomes.

  29. Generalfeldmarschall Von Hindenburg

    Reminds me of Zardoz!!!

    “I have seen the future and it doesn’t work!”

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