You may well be right about what the LW karma system is about.

My $0.02 on a related subject follow, though.

A reputation system provides me with value insofar as it gives me feedback about how valuable various pieces of content are judged by people whose opinions I value.

LW-karma's biggest weakness in this area (which it shares with every other reputation system I've ever seen used anywhere) is that it doesn't distinguish between the judgments of people whose opinions I value, those whose opinions I anti-value, and those whose opinions don't matter to me at all.

Ignoring that for the moment (in effect, pretending I value everyone's opinion equally), a system modeled on "ignore the current value, upvote or downvote based on whether I like it or not" means that when comparing comment A with a score of N to comment B with a score of N/2, all that tells me is that twice as many people who read the comment net-liked A than B. This might be because twice as many people read A, and the comments were approximately equally likable. It might be because 20 times as many people read A and A was far less likable. It might be because 20 times as many people read B and A was far more likable.

In other words, a karma system modeled that way means I can't really tell based on the karma scores of a comment to what degree people found the comment likable. Since that's exactly what I want to know, a karma system modeled that way is relatively useless to me, unless I can assume that roughly the same number of people read A and B. On LW, I don't consider that assumption warranted, so to the extent that you are correctly describing the LW karma system, that system is relatively useless to me.

By contrast, a karma system modeled on "if I like it more than its current rating, upvote it, if I like it less than its current rating, downvote it," doesn't have that defect. It would, of course, have the defect that late voters count more than early voters for most comments, which creates incentives for vote-withholding and generally makes it hard to extract the information I want from vote totals. I am to a large extent prepared to ignore that failing, as it strikes me as falling into the wireheading category, and trying to stop a system that's able and inclined to wirehead from choosing to do so is like trying to push back the tides.

So on balance, I think that RobertLumley's model is more useful than yours.

Again, I'm not arguing that he's right about which model is actually in use on LW. I suspect that in practice it's neither; the actual system is far messier and more embarrassing to articulate, and in practice karma scores don't provide much useful information except in very extreme cases.

Mostly, karma scores are a mechanism for silencing people whose contributions are sufficiently widely disliked so they stop pestering everyone else. Which is fine, and I don't object to that, but let's not make more of it than it is.

Related

For what it's worth, I have changed the way I operate significantly since I joined LW. If you read the link, I originally operated by one, but now almost exclusively aim for two, primarily for the reasons TheOtherDave points out - karma is largely meaningless if you operate by one, because it doesn't tell you proportion of readers who voted.