Dorina Palade

Is predation an economic activity? Is predation a productive activity? And if

so what is its effect in the economy?

An economic activity implies production, distribution and consumption of
goods and services in a society. According to the above stated features, predation
is an economic activity, which involves distribution and consumption, but it
happens only by means of taking something from others.
However predation is not a productive activity, since the average income
per head decreases and no value added is created in the society. For example, in
the pirates economy, despite that average income per person decreases by each
newly added pirate, the equilibrium will be established at lower average income,
when nobody wants to change occupation. In this case a pirate is still a little bit
slightly better than a fisherman, but not as better off as switching the occupation
of one more pirate.
Hence, predation is a non-productive economic activity.


In the pirates economy, what does the equilibrium condition
yp(m*) > yf(m*-1) and yp(m*+1) < yf(m*) mean?

In the pirates economy, an equilibrium is established when each person
chooses an occupation completely.
Mathematically, the equilibrium condition is reached when:
yp(m*) > yf(m*-1) and yp(m*+1) < yf(m*),
where yp is each pirate expected income, yf each fisherman expected income
and m* denotes the equilibrium number of pirates. The expression (m*+/-1)
shows that there is always a trade off between switching occupations, because
each additional pirate (m*+1) decreases the average income per person.
According to the formulas, the income of a pirate (yp(m*)) exceeds the
income of a fisherman where there is one pirate less (yf(m*-1)), but it happens
only until a point at yp(m*+1), when an extra pirate would cause the economy
to get less productive and a pirate would actually gain less than a fisherman, so
there is no more incentive for people to become pirates. This happens only
when both relations are satisfied.
For example, the first person who switches to piracy - yp(1), realizes that
his income is higher than of a fisherman, yp(1)> yp(0). Subsequently, individuals
keep switching to piracy: yp(2)> yp(1), yp(3)> yp(2) etc but it happens only
until a point where remains a small number of fishermen who produce and
income of a pirate is less then his previous income from an economy is one less
predator. For example, income of the 8
th
pirate: yp(7+1) is less than income of a
fisherman in a 7 pirates economy.
Consequently, the equilibrium is reached when there is no financial
incentive for people to switch to piracy, because they would gain less than in the
previous case, when economy had one less pirate.



Does this model support the mainstream economic story about
efficiency in a free market?

The mainstream economic story about efficiency states that utility of the
whole society should be maximized, which translates into increasing the size of
the society economic pie. This theory contradicts the conclusions traced from the
pirates economy, since latter each individual seeks its own interest, which leads
to a lower average income per head and shrinks the size of the economy.
If individual would seek to maximize their efficiency, there would be only
fishermen in the society and the summed income would achieve its maximum
level, fulfilling the efficiency economic policy goal.