Friday, June 30, 2017

Chess metaphor for macroeconomics


I think of macroeconomics as being like a chess game. Similar to chess, the world economy is made of many different economic actors with different abilities and placements. The world economy has a structure that is continually evolving. Instead of relying on a particular macroeconomic theory, I think it's more effective to pragmatically analyze the structure of economic actors in an economy to determine the best course of action. In chess, players must also pragmatically analyze the structure of the pieces to make decisions.

Here is what each chess piece represents in the economy:

  • Pawns: low income people
  • Queen: billionaires
  • Rooks, bishops and knights: companies
  • King: planet earth
  • Opponent's pieces: goods and services

Pawns represents a low income people because pawns have the least mobility and are the weakest pieces on the board. If a pawn is able to miraculously reach the other side of the board, they acquire the abilities of a queen. This represents when a poor person through hard work and luck is able to become a billionaire.

The queen represents billionaires because the queen has the greatest mobility and power in the game. Billionaires are the most powerful actors in the economy.

Rooks, bishops and knights represent companies because they have a lot of power but not as much as the queen. Companies are extremely diverse, therefore it's fitting that they can be either a rook, bishop or knight.

The king represents planet earth because if the king dies, the game is over. If planet earth becomes so polluted that it's uninhabitable, it's game over for society. A defensive strategy to protect the king is symbolic of regulations to protect the environment.

The opponent's pieces represent goods and services because the goal of economics is to produce goods and services. The goal of chess is to conquer the opponent's pieces.

When playing chess, it's important that all of your pieces work together. It's important that your pieces back each other up. Unsupported pawns stand no chance of surviving. Pawns need the help of more powerful pieces to make a greater contribution. Bottom line, your pieces must act like a team. Imagine playing a game of chess without moving your queen; you will lose. This is the similar to not taxing billionaires to pay for things that will improve society.

Here's a from Adam Smith which is the one of the early uses of the chess metaphor,
...in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might choose to impress upon it. If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder. (The Theory of Moral Sentiments, 1759)
I have one last thing I want to say about metaphors. Metaphors are not supposed to be perfect equivalencies. I'm aware this metaphor has flaws if you expect chess to be a perfect representation of an economy, but that's missing the point. All metaphors break down at a certain point with enough scrutiny. This post is merely a list of connections that I think are logical.

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