Theory of the Three Economic Societies

The Theory of the Three Economic Societies

By Richard Pearlman 1982

Note: I first defined this theory in 1982. Since that time no anomalies to the theory have come to my attention. You may use this theory for predictions and planning.

Depending on the wealth of the society distribution of goods and services use different methods:

  1. Societies without the wealth to break the cycle of poverty generally use religion to allocate consumption and ambition.
  2. Societies with the wealth to break the cycle of poverty may or not want to break the cycle of poverty – China and Singapore want to break the cycle whereas most of the South American oligarchies do not want change. Central control of consumption is necessary to build the infrastructure required to reach the 3rd society: capitalism. The U.S.A. is a perfect example of central control of resources to build infrastructure.
  3. Societies wealthy enough to use capitalism: Capitalism is when individuals can make investment decisions not affecting the general societal wealth. Any time an adjective is added before the word capitalism says political influence is corrupting pure capitalism. Very few societies are wealthy enough to afford capitalism (or democracy which requires enough wealth to educate the middle classes).

As a society’s wealth increases or declines the society must change between the three choices.

A society cannot be communist if enough wealth is present.

Socialism has too many definitions and therefore cannot be part of any economic theory. See Wikipedia for the many definitions of socialism.

How wealth is distributed to the various economic classes within a society is a key for breaking a cycle of poverty.

Downward losses of societal wealth are very difficult to absorb and can require a complete and painful renormalization of economic activity.