Economic Inequality: The Simplified Version | Hacker News Reader

Economic Inequality: The Simplified Version

paulgraham.com

100 pointsjanvdberg140 comments

> But economic inequality per se is not bad.

Both essays feel like they are built on a strawman argument. Nobody serious said inequality was bad or good, not even Piketty. The discussion is about degrees, and PG adds nothing to it by arguing categorically.

That we are talking degrees of inequality is also the reason why economists argue with statistics and do not differentiate much between specific causes or mechanisms on the micro level. Sorry to burst that bubble but PG is not a "creator of inequality" on the level that is interesting. Shifting a few hundred people around means nothing given that we are talking about income and wealth distributions over millions of households in the US alone (and increasing inequality is a global phenomenon). Clearly, tax policy, financial (de)regulation, labor market policies, even the fall of the Soviet Union, etc. are more relevant than petty arguments over whether this startup or that high freq trader made a few mega- or even gigabucks in a nice or not so nice way.

On a sidenote, the relative impacts of the trader vs the startupper on aggregate welfare is not as clearcut as intimated by PG at all, once you take second- and higher-order effects into account. Furthermore, creating wealth for some individuals may also decrease overall inequality; it depends on the starting and end positions of said individuals in the wealth distribution and the other ongoing processes in the economy.

Lastly, economic systems have a lot of feedback mechanisms, both positive (ie destabilizing) and negative (stabilizing). We should at least consider the possibility that past a certain degree of inequality, wealth becomes self-perpetuating. This is especially pertinent for US Americans, given the degenerate nature of their "democracy".

Well said.

Macroeconomics is mostly closed sytem, not open system like microeconomics. Roughly 70% of US GDP is private consumption (household final consumption expenditure). Startups that build cool products need markets that can afford to buy them.

The top 1%-2% may be wealthy, but as a consumer segment they are not big enough to justify new microprocessor plant or Apple product line. More importantly, rich don't pay for innovation. Luxury phones like Vertu are diamonds and personal service, there is no pressure for innovation. You don't need speech recognition if you can afford personal service. You don't need self driving car if you have a driver or enjoy driving with your Porsche.

It's the middle class who creates demand for high-tech bleeding edge innovations. Who will buy the Oculus rifts and create enough cash flow to carry the VR-industry next 5 years? If the number of upper middle class families drops 5%, will Tesla lose 5% of their sales? The share of the GDP going to the middle class has been falling. It's down roughly 10% from 2000 and something like 30-20% from 70's.

Low income people spend more money into necessities and very small high income population just can't consume enough to be large demand creating force. If the income distribution of the country starts to resemble classical South American country, it will have the economic structure of classical South American country sooner or later.

PG has supply side view of the economy. It's not the whole picture.

Also remember Piketty, while concerned about income inequality, was most concerned about wealth/capital inequality. Thus his worldwide tax on wealth proposal. I would argue that Piketty did say that wealth inequality, on the extreme, is a net bad for society. He brought up many examples of how destabilizing extreme levels of wealth inequality, like what England and France saw at the start of the 1900s and what the United States is seeing now, can be for a society.

With that said, as it becomes easier to start and run a company with less and less human capital more of the value of that company is going to go to the capitalists who invested in said company. This I believe might make that self-perpetuating wealth cycle easier to get into. So, I can see a situation where the aggregate result of this negative pattern across all startups in the economy would outweigh any positive results an individual startup might have on society.

Note, the above is without any policy solutions and is why I strongly believe we need things like a basic income and wealth tax to help stabilize society worldwide as technology continues to make us humans more productive.

I feel like it's not hard to be happy about people making large amounts of money building things like Facebook, while at the same time worrying about a system that allows Harvard attendees like Mark Zuckerberg to do that but provides virtually no opportunity for students at Orr Academy High School in Lawndale to get to Harvard, let alone to a place where they can start something like Facebook.

I don't have to hate Paul Graham to think that economic inequality by itself, intrinsically retards equality of opportunity.

I hope we can agree that inequality of opportunity is an intrinsically bad thing.

I think this is exactly where people disagree with pg's essay.

He is talking abstractly, about whether economic inequality is bad and should be targeted. Most people will answer "no" to this.

The major criticisms of pg's points that I've seen are:

1. Your criticism - namely that economic inequality is, in itself, a bad thing. I.e. pg is wrong, we do need to target economic inequality. (I've actually seen this criticism brought up less, I believe)

2. Even if economic inequality is not bad, and we totally buy pg's abstraction that we don't want to target economic inequality on its own - in the real world, concretely, the wealthy are using their economic/political influence to give themselves more (possibly at the expense of others). I.e., pg agrees that we want to promote the good kind of economic inequality (building startups! yay!), and we should discourage the bad kind (stealing money), but misstates how prevalent each of these is. And the people arguing "against" economic inequality are actually just arguing against these specific "rent-seeking" behaviors, not against the concept of economic inequality like pg seems to think.

Btw, I'm not arguing which side is "right" here, I'm just presenting the major arguments as I see them being brought up (by e.g. Mark Suster, some economists [I think I saw Greg Mankiw talking about this topic]).

I hope we can agree that inequality of opportunity is an intrinsically bad thing.

If parents are allowed to invest in their own children, then inherently, you have inequality of opportunity, since parents have different means and will invest different amounts.

while at the same time worrying about a system that allows Harvard attendees like Mark Zuckerberg to do that but provides virtually no opportunity for students at Orr Academy High School in Lawndale to get to Harvard

If Harvard accepted 10X as many students, it would not be Harvard. If Harvard accepted students based on a lottery, it would not be Harvard. Other than increase financial aid even more, it is not clear what additional actions Harvard could do to increase equality of opportunity, that it is not already doing.

Where I'm from (Ontario) there are not very many private elementary or high schools- some, yes, but not many. A good friend of mine went to one, and his parents paid something like $20k per year for him to have that extras opportunity. He's a smart guy, and maybe his schooling was part of that.

But the reason there aren't that many is that the public sector schools are pretty good. Not perfect, but pretty good compared to what we see in many American states. Teachers jobs are hard to get because they're paid well (and yes, they have a strong union, but let's not derail this point into an argument about their merits). As a result there are very diminishing returns on private schools for kids, and so they aren't so common.

What this means is that most kids are being given an equal opportunity, the same strong education, at the cost of slightly higher taxes. We accept that, generally.

The choices when it comes to left or right leaning policies come down to how much society in general invests in children's future vs how much each parent must invest in their own child's future. When you push too far to the right, the entirety of the child's future is based on how much the parent can invest- and when that happens, we have inequality of opportunity.

There are 230 private primary and secondary schools in Ontario, most of them are lakeward.

I attended four TDSB schools and I must say, they were pretty awful.

Thankfully I got out of that system before high school. I might have gotten involved with the gangs and hard drug trade associated with my nearest high school.

It's not that Zuckerberg went to Harvard.

It's that he went to Phillips Exeter Academy.

A high school that costs over $36,000 a year (tack on more than $10k more if you're boarding there).

Zuckerberg is rare among these creatures in that he likes programming and wanted to build something. Most of them are the kind of parasites you can see in a documentary like "Born Rich" (it's on Youtube), who will live luxurious lives off the profit they expropriate off of those of us who do work and create wealth.

They are not people like you, spending months of drudge work going over BSD code back in the mid-1990s to find rfork holes and such, who two decades down the line might see a little payoff due to the efforts of their labor.

I think that PG's point is that without economic inequality there is zero opportunity. So, I'd say that unequal opportunity is better than nonexistent opportunity. (This is an over-simplification.)

Some inequality is fine, but there's such a thing as too much inequality. If you don't strengthen the position of the poor to counterbalance the position of the rich then you end up with power being increasingly concentrated in the hands of the few. The issue then is how to maintain a balance between the rich and the poor, and there are ideas of ways this could be done without entirely eliminating inequality.

I think that's exactly what PG is saying.

"For example, instead of attacking economic inequality, we should attack poverty."

One major underlying cause of poverty is disparate quality of education.

Fix education and you are fixing one major determinate of future economic inequality.

What if income inequality is a cause of educational inequality? It's not hard to think of reasons why that would be the case: schools suffer because the most capable families in their districts deploy capital to remove their children to private schools (or: because the most capable families pay test prep and consultants to advantage their kids in college admission), &c?

Zooming back out a bit: what are the demographics of successful startup founders? My intuition is that they're not a mirror image of the demographics of the country as a whole. There are a lot more well-off startup founders who went to CMU or Berkeley than there are startup founders from East St. Louis.

It's not a problem if a person picked at random from the population makes 50 million dollars with a photo sharing startup. But it starts looking a lot more like a problem when we're not picking people at random, but instead picking them mostly from the ranks of the most privileged people.

And still! I don't give a shit! I really don't think startups have much to teach us about income inequality and I don't generally believe they're a big Part Of The Problem. I'm much more troubled by the mere idea that startups might be a good lens through which to examine inequality and public policy.

Hayes makes this exact argument in Twilight of the Elites (but for wealth, not income):

"At the broader social level it means we expect a high degree of social mobility. We hope that the talented children of the poor will ascend to positions of power and prestige while the mediocre sons of the wealthy will not be charged with life-and-death decisions. Over time, in other words, society will have mechanisms that act as a sort of pump, constantly ensuring that the talented and hardworking are propelled upward, while the mediocre trickle downward.

But this ideal, appealing as it may be, runs up against the reality of what I’ll call The Iron Law of Meritocracy. The Iron Law of Meritocracy states that eventually the inequality produced by a meritocratic system will grow large enough to subvert the mechanisms of mobility. Unequal outcomes make equal opportunity impossible.

The Principle of Difference will come to overwhelm the Principle of Mobility. Those who are able to climb up the ladder will find ways to pull it up after them, or to selectively lower it down to allow their friends, allies, and kin to scramble up. In other words: “Whoever says meritocracy says oligarchy.”"

> It's not a problem if a person picked at random from the population makes 50 million dollars with a photo sharing startup. But it starts looking a lot more like a problem when we're not picking people at random, but instead picking them mostly from the ranks of the most privileged people.

Our system allocates/distributes wealth pretty much at random, but not uniformly random: the RNG is biased towards people with certain backgrounds and/or the already wealthy. So for every "Disadvantaged minority rags to riches" story, you'll find ten "Stanford grad with millionaire parents and prep school education makes even more money" stories. I'd argue that the root societal problem, though, is the jackpot-like randomness, not the skewed distribution.

In principle, though, can it be fixed?

Won't some people always have more advantages than others because they know more people who happen to be skilled at various things (e.g. technologies) than others? I mean, you have more chance to recruit skilled technologists simply by virtue of being in SV and that fact itself attracts more skilled people to the area.

So people outside the area either relocate or can't compete at quite the same level. Sure, there are other places that are more or less as good, but you're probably not going to have the same connections growing up in, say, Strawberry Point, Iowa.

Tumblr was created by a high school dropout so...

Before he dropped out, he attended The Calhoun School which is a prep school in NYC that currently charges $45,540 a year for High School students.

Deleted comment

Cancer is (currently) just a part of life. Do you dislike cancer?

> Attacking economic inequality would be doubly mistaken. It would harm the good as well as the bad causes. But even worse, it would be an ineffective way to attack the bad causes.

You can't say something like this without providing evidence. Why is it ineffective? And why is it bad that it harms the "good" ways too? After all, startups are not good because they cause income inequality. Startups are good for a variety of reasons, and they also happen to cause income inequality, and it's reasonable to argue that this particular generation of income inequality is not intrinsically bad. But the value of a startup is not in the income inequality that it generates, and therefore taking steps to reduce income inequality that happen to reduce the income inequality resulting from startups does not actually mean that it's "harm[ing] the good".

Economic inequality means that some people have more money than others. If we attack all forms of it, we attack the people who worked really hard to create new things that have improved our lives (medicine, electricity, computers, etc.), which hurts everyone because the people who did do great things aren't rewarded and why try hard if people are going to hate you for being successful?

If instead we attack things like usurious debt traps, we actually help people who are being used and abused for having no money.

But this is a political thing now so anyone who doesn't follow the party line will probably provoke a xenophobic tribal reaction rather than responses.

You seem to be making the same extremist assumption that pg is, the same thing that people were complaining about with his original essay. There's a big difference between reducing income inequality and eliminating it, but you don't seem to see the difference. Trying to reduce income inequality across the board does not mean people who create value are no longer being rewarded.

And don't forget as well that the people who get rich off of things like medicine, electricity, computers etc. are often not actually the people who worked hard to create them.

I'd like to see the positions actually being advanced, then, because they've not been made very clear by anyone.

And I can find people who are advancing that sort of extremist position, though I can't say that I understand them very well. See, e.g. - https://news.ycombinator.com/item?id=10831261

Are you talking about the Medium post or about commenters on that story? I'm assuming it's the Medium post.

And if so... that Medium post is not advancing an extremist position at all. It's just disagreeing, loudly, with pg. My hunch is that any time someone declares there to be a problem with "income inequality", people like you and pg read that as declaring the problem to exist with any amount of income inequality, when in fact people typically mean extreme income inequality, given some ill-defined measure of extreme (people will always disagree over what "extreme" qualifies as, but I think most people in America agree that we've gone well past "extreme" by anyone's definition).

Edit: When I say it's not advancing an extremist position, I'm talking specifically about income inequality. The post is also arguing against the claim that startups create value, or really that the people who are getting rich in silicon valley are creating value, which is certainly a whole different discussion to be had (though it appears that the author isn't actually saying they aren't creating value, it's just saying that any value they're creating is subjective and not everybody agrees that it is, in fact, valuable). But the bits about income inequality are certainly not extremist at all.

Honestly, I got more information out of the comments than that article, which was mostly insults advancing a strawman of PG's position.

But back to what you're saying, can you give more examples at least? To pick some of the richest (most extreme?) people for wealth inequality, is it wrong that for example, Warren Buffet managed to acquire a lot of money and then give most of it to charity? The problem with advancing an ill-defined position like 'extreme' inequality is that I'm not sure that anyone is on the same page, though based on the abuse hurled at anyone asking questions, it seems like questioning it is equivalent to hating the "poors" (at least, if Medium is to be believed). I can't speak for anyone else, but in my case, I have great sympathy for the poor and I try to help where I'm able.

Is Elon Musk be another example? I'm not sure we'd have SpaceX or Tesla if he wasn't able to get rich. If there's a problem with wealth, I'd say that it's where incentives are misaligned (e.g. a CEO might get a huge bonus by laying people off).

As for value... I think too many people are unfamiliar with the terms as used in economics and that's leading to very confusing posts. Startups may create wealth (new services that didn't exist, new technology, etc.) and that's the important thing. 'Value' is either completely subjective or tied to currency (I repeat myself) so I don't think anything useful comes out of discussing that.

I think a lot of people get distracted over movements of currency, when the real focus should be the increase of global wealth and making sure that everyone has access to at least some basic standard of living. The world has been moving in that direction for a long time and I certainly hope that more people are able to live well in the future, though it seems like energy security is the most likely bottleneck.

And its a strawman. People arent attacking economic inequality, they are critiquing extreme inequality which is something rather different.

I think the original essay has all the evidence you might want. The point of this version was to not elaborate to make sure his point was crystal-clear.

Well, I don't agree with pg at all on this issue, but this is the simplified version. It's not fair to ask for citations here.

It is when this seems to be the crux of his argument. His entire argument depends on the assumptions stated in that paragraph.

And he wrote an entire, long essay to prove his points. Maybe you disagree that he did so, but argue about the full article, not the "here's my main points 'abstract'".

Startups aren't good because they create income inequality. Income inequality being possible is good because it provides the incentives for people to take risks and create startups. That isn't to say the current level of income inequality we see today is good - it isn't. But to get rid of income inequality completely would drastically reduce the number of startups because - what would be the point?

Would you really rather have everyone make the same amount of income regardless of what they do?

Startups are not good because they create income inequality. That's a ridiculous claim. That would only be true if income inequality was intrinsically good, and I hope nobody is trying to argue for that.

Startups are good because they create value (although that particular value is highly subjective depending on what the startup is actually doing; a startup that finds a cure for cancer is creating objective value, but a startup that brings the sharing economy to lawn maintenance is much more subjective, as any value it creates for the sharing economy comes at the cost of value destroyed in traditional lawn care services).

Startups also create income inequality. This is not an intrinsically good thing. It is just accepted as the normal way to reward people for taking a risk on a startup.

Given that, the only reason to argue against reducing income inequality generated by startups is if this reduction actually decreases the overall objective value created by startups (if fewer startups are created, but more of them create either more value or value that is more objectively valuable, is that a bad thing?)

Don't forget as well that there are plenty of ways to create value, and to create companies, that don't involve startups. Most businesses in this country aren't startups.

> Would you really rather have everyone make the same amount of income regardless of what they do?

Literally nobody is arguing for that. That's a humongous straw man, it's the same straw man pg used in his original article, and it's complete nonsense. "Reduce income inequality" does not mean eliminate all income inequality.

> Literally nobody is arguing for that. That's a humongous straw man, it's the same straw man pg used in his original article, and it's complete nonsense. "Reduce income inequality" does not mean eliminate all income inequality.

So you seem to agree that income inequality can be a good thing. If you didn't, you'd want everyone to have the same income. Maybe I misunderstood PG's essay, but the main takeaway I got was that income inequality CAN be a good thing for a society, and that the income inequality caused by successful startups are not an important enough problem (if it is even a problem) to society for us to try to focus on it.

I'm not saying income inequality can be a good thing. Not everything in this world has to be either bad or good. I think that income inequality in the abstract is not intrinsically bad. I don't know whether it's good. Maybe it is good to have some income inequality, at least in today's society (in a future post-scarcity society things might be different). Maybe it's not. I don't really know, and I don't care to debate that because it doesn't matter in the slightest since nobody is actually advocating for zero income inequality.

But it should be pretty obvious that extreme income inequality is bad for everyone (or at least, for everyone who doesn't actually possess the extreme wealth that is causing the problem, although even there they might benefit more from having a healthy society than they do from possessing such extreme wealth). How exactly you define "extreme" is debatable, but it's simply absurd to take the position that any argument in favor of reducing income inequality is equivalent to an argument in favor of having zero income inequality across the board.

False dichotomy. Nobody (or very few people) is arguing that everyone make the same amount of income regardless of what they do. The arguments are against the jackpot-like nature of income (and wealth) distribution which leads to extreme inequality.

> Startups are good for a variety of reasons, and they also happen to cause income inequality,

(emphasis mine)

One of the points of the original essay is that startups don't just happen to cause inequality. On the contrary pg claims that getting rich is precisely what fuels and motivates people to build startups.

> therefore taking steps to reduce income inequality that happen to reduce the income inequality resulting from startups does not actually mean that it's "harm[ing] the good".

The essay explicitly claims otherwise:

"You can't end economic inequality without preventing people from getting rich, and you can't do that without preventing them from starting startups."

I think I side with pg. Never met a person who chose the effort, uncertainty and sleepless nights that come with building a startup without the promise of a financial reward at the end. Every time such a reward is won, we inch a tiny bit towards greater inequality.

> And why is it bad that it harms the "good" ways too? After all, startups are not good because they cause income inequality.

Because without the potential for outsized returns significantly fewer would be founders would take the risk.

Reduced income inequality is still income inequality. Outsized returns that are reduced by some percentage are still outsized returns.

If you reduce "outsized returns" by 99.999999%, are they still "outsized"? What defines an outsized return? What's the proper amount of income inequality and what's a proper rate of return?

In a context like this, definitions are everything.

That's an extremely absurdist position to take. Why would you assume that any attempt to reduce income inequality would try to do so by 99.999999%?

You claimed "Outsized returns that are reduced by some percentage are still outsized returns". I'm asking you to define what an "outsized return" is, and provided an arbitrary "some perfectage" for context. How much does it need to be reduced before it's not outsized?

The question sounds absurd as I asked it, but only because it's in response to an equally absurd position. So. What's a non-outsized return?

You're being unnecessarily pedantic, and it's not beneficial to the conversation at all. This appears to be a silencing tactic, trying to force me to put specific numbers down when they're completely irrelevant, and refusing to address the overall point until it's done so. I do not appreciate your use of this tactic.

What I desire, at this moment in time, is for you to clarify a vague stance into a clear one.

Your attempt to dodge this eminently reasonable request is absurd and not beneficial to the conversation at all. This appears to be a silencing tactic, trying to force me to not ask for clarification of a position, and refusing to consider why this might be relevant. I do not appreciate your use of this tactic.

Have a nice day.

When people talk about income inequality and lowering it in the USA, (in my experience) they tend to mean these things:

- Increase the capital gains and inheritance tax so the wealthy pay a comparable tax percentage

- Increase government funding for public education and trade schools

- Increase spending on infrastructure projects (broadband, public transportation)

- Increase the minimum wage

- Lower the influence of the wealthy in politics

Never heard of anyone asking to kill incentives for the ambitious or to stop people from becoming wealthy.

If you do all of those things, plus raising income taxes [otherwise you would not be reducing income inequality, but only wealth inequality], then you will, by necessity, be raising taxes on successful entrepreneurs and, therefore, reducing those incentives and reducing the ability of people to become wealthy.

Ironically, those successful entrepreneurs are hugely dependent on the physical infrastructure built by government (roads, broadband), and the human infrastructure built by the public education system (us). It's not valid to put those things at odds with each other.

Depends on how you tax them. We could get rid of income tax and still strive towards reducing some of the issues surrounding income inequality.

https://m.youtube.com/watch?v=gD_dZvPwAj0

And I suspect those are the types of things PG supports though I wouldn't want to put words in his mouth.

>But economic inequality per se is not bad.

This is the controversial assertion, and it's not argued for here. So I'm not sure how this can help.

edit: As others have clarified, of course there are few people who would object to any degree of economic inequality whatsoever. In the context of this discussion, 'economic inequality' refers to economic inequality on (at least) the scale that we see at present in the US and other wealthy countries, since this is what pg is defending.

one example he gives for why economic inequality can actually be a good thing is that it causes people to want to create a startup. few founders would endure the journey without the possibility to become extremely wealthy. if startups create wealth and economic inequality is a requirement for startups to exist, then economic inequality can be a really great thing disguised as a really bad thing.

Actually I'd like some evidence on that. Do founders really care for money all that much? Does it make a world of difference for them if they make 100 million vs 1 billion from their startup (versus just the success of the company itself, i.e. how many users you reach)?

I think the effect of valuation may not be so significant on the founders motivation, specially given how you have no idea how large the startup will get from the beginning.

It sounds to me like what you're asking is actually "Do people and markets respond to incentives?".

Broadly, I think the answer is yes. Yes they do.

I think the real question is "does the existence of unicorns provide an incentive to the average founder?", and I'd say that question's a lot less definitive.

Sure, some founders have gotten filthy stinkin' rich off their startups, but those are lottery-ticket odds. Most founders seem to be aiming for either a self-sustaining small business or an acqui-hire, both of which are middle- to upper-middle-class career paths, but neither are by and large own-your-own-helicopter-class career paths.

I think you may have overlooked the power of optimistic biases. A fair number of young founders do believe they stand a good chance of becoming very much upper class and base their financial decisions on this. Failing that, some people are willing to play lottery-ticket odds even with full appreciation of the risks.

That said, I think the answer hold even if you restrict the question to small self-sustaining lifestyle-businesses-size. You correctly state that there is no way of knowing how big a company will get at founding time. However, if there's an upper limit, then this may significantly affect risk evaluation. People will respond to the incentives they see, and you can't kill the incentives without affecting how people behave.

I would argue in some cases they don't. Take for example the artist who works for years, decades even, on their art without expectation of large monetary gain.

In a broad sense some people don't respond at all to incentives (assuming monetary) and others do respond but its not a recipe for personal happiness.

Personally, that's why I'm such a fan of some sort of basic income. While it reduces inequality it keeps the monetary incentive response as a choice, which ultimately equals more personal freedom.

Let me rephrase, then. People, as a population, respond to financial incentives. People respond to incentives around things they value - your artist is absolutely an example of this. Financial markets respond to financial incentives.

No basic income is going to make people feel useful and productive. Personal freedom isn't the same as personal fulfillment, after all. Basic income also isn't going to change the kind of inequality you see in the Bay area - where highly skilled professionals make multiple times the basic wage.

I assume you mean some kind of basic income indexed to the local cost of living. Without that people would need to do what people will raise nine kinds of Hell to avoid even thinking about - moving to an area they can afford.

The qualitative aspect seems pretty clear (people respond to monetary incentives), but quantification is important here. When making decisions shaping policies and legislation, you'd want to know how much innovation would be affected by increasing taxes on the high end of the income curve versus the benefit this could generate by using the additional income to fight poverty, for example.

That's a difficult question to weigh at the best of times. Among other things, you have to consider questions like the relative efficacy of small business grants versus ongoing cash transfers. There's also questions of policy preferences in non-financial terms. The list items to be considered is considerable and I won't pretend to know what's all on the list.

Anyway. I don't think it's an easily evaluated question, in large part because there are good ways to fight poverty (as a government) and ones that are no better than cash-fuelled bonfires. It's difficult to evaluate a kinda-sorta-semi-vaguely-known (change in private spending from higher taxes) against a total unknown (result of hypothetical anti-poverty programs), though.

Which is a long-winded way of saying you're right about it being a quantitative question, but I don't think it's a readily answerable one.

I don't really see how this is controversial. Do you want to reward talented people who work hard? Do you want to incentivize people to do great things? You need to allow some level of income inequality. The extreme level of income inequality we see now is a bad thing.. but that doesn't mean economic inequality is inherently bad. Most good things taken to an extreme cease to remain good things.

It's controversial because it's largely a strawman. Income inequality is not a binary thing—it's a gradient. There exists a level of income inequality that any reasonable person would agree is bad. PG seems to be trying to muddle that fact.

Just because something motivates someone to do great things doesn't mean it is good to offer that reward. If someone was motivated by the desire to own slaves, etc.

In light of the fact that increasing wealth has diminishing returns in terms of utility, what if the desire for extreme wealth is simply the desire for power? How much power inequality is acceptable in a democratic society? Couldn't you motivate people with fame instead?

Great point! That sounds like a genuine disagreement. Can you expand a bit on why economic inequality is intrinsically bad, rather than instrumentally bad?

In the strictest sense, inequality per se isn't bad or actionable: if the residents of Kepler-186f start out poor compared to those of Sol-3, it shouldn't influence our actions at all. And if they suddenly become far richer a century later as they stumble upon technological riches untold, it still shouldn't change how we live: all we can say is that in a theoretical utilitarian sense, the universe is a lot better off than otherwise.

The issue is that the human rich and the poor don't exist on separate planets (yet?). One plausible theory, though one I don't argue for or against here, is that as economic power ends up concentrated in fewer and fewer hands, so does political power and the will to change the crappy situation of the poorest, despite the hand-wringing of the more civic-minded rich. This would lead to a world that many people would rank lower than a world with less poverty and more equality.

The details are everything here: if evidence supports the idea that increased inequality raises the economic floor, then we shouldn't worry too much about it. But the people arguing otherwise aren't jealous of their next door neighbor's new car in itself but are worried that, in the actually existing world, increased economic inequality inherently leads to negative social effects.

The concentration of wealth has some observable effects that we probably don't want - for example, real estate prices.

Not that expensive real estate is bad in itself, but people who work in areas where they can't afford to live - for instance, a hypothetical cop in NY / LA / SF - have three obvious choices:

1> commute, sometimes for hours one-way. One could argue that policing outside of one's neighborhood is bad policing, but for the most part, long commutes are just a drag. And probably will last only as long as it takes for a job closer to home to open up. So now it's a turnover problem.

2> rent control or other "low-income" concession. Waiting lists are long, developers resist creating more supply, and always have to consider the risk of arbitrage.

3> extra jobs / graft - competition for outside security work is pretty tight, and I'm sure we can all agree another cop on the take is something the world doesn't need.

We could try a variant of option 2 and provide housing subsidies for certain professions, something I think the FBI does for agents in certain areas, but then we run the risk of creating castes. I doubt anyone would entertain subsidizing a barista's rent just so they wouldn't have to commute 3 hours to a Starbucks in Beverly Hills. But it might happen for a cop (probably not.)

The degenerate case is all the cops leave and the rich have the opportunity to fend for themselves.

I can't wait for the SFBARF case to reach the Supreme Court. That will change things.

I could, but that whole discussion was already had on the thread for the original article. You can find a summary of the main arguments by googling e.g. "why economic inequality is bad". I don't mean this in a snarky way, it's just that so much has already been written on the topic that I don't see the point in trying to summarize what economists, philosophers and any number of others have already said.

The previous thread had lots of reasons economic inequality is instrumentally bad. I really saw nothing about how it's intrinsically bad, and I was looking. Can you link to a specific comment maybe?

I'm not sure exactly what distinction you're making with instrumentally vs. intrinsically. People pointed out that economic equality as such has certain bad consequences. For example, wealthy people become disproportionately powerful. Here's an ok list turned up by a simple Google query:

http://ideas.ted.com/the-4-biggest-reasons-why-inequality-is...

Intrinsic wrongness of inequality is basically argument #4 from your link. It's the idea that the split of wealth is just inherently unfair, not because of any bad consequence, but because of something being wrong with having wealth too unevenly distributed whether or not it actually has any bad effects.

Claims 1-3 from your link are claims of instrumental wrongness of inequality claims 1-3 from your link. They point at bad consequences (rich people will control the media, rich people will corrupt the government, rich people will have unfair advantages for their children).

As the author of the article you links points out: "In principle, these effects could avoided, without reducing economic inequality, through such means as the public financing of political campaigns and making high-quality public education available to all children". It's not that inequality necessarily must cause these consequences, it's that it will tend to under some (most?) given policy regimes.

I think I misunderstood your original comment...when you said that "Inequality is not per se bad" was incorrect, I assumed you were making argument #4, which I did not see debated hardly at all. Most people were making some variant on arguments #1-#3.

In which case, I would respond to you: Paul does talk about the bad consequences and bad causes of inequality, and claims that you should address those causes and consequences directly rather than attempt to limit inequality in itself. The argument against this has to come in some form of "well yes, in theory it's possible to limit the bad consequences of inequality, but in practice it's too hard because X and thus we should directly attack inequality".

I didn't see anyone really saying that, everyone seemed to believe Paul thinks inequality doesn't have bad consequences or that he thinks we shouldn't address those bad consequences.

I don't think it's possible to effectively address the bad consequences without limiting inequality. It certainly doesn't seem possible right now, in the U.S. (do you expect to see publicly financed political campaigns any time soon?) If pg wants to be taken seriously he needs to make a serious proposal about how we can have tons of economic inequality without the seemingly inevitable bad consequences of it. And I note that some of the proposals you mention (e.g. lots of public funding for education) are merely redistribution in disguise and do in effect take money from the rich and give it to the poor. Truthfully, pg doesn't care about the consequences of inequality because they don't affect him or his buddies, so he likes to pretend that some pie-in-the-sky scheme can magically make everything ok without actually changing the status quo.

This was debated on Intelligence Squared podcast

DECLINISTS BE DAMNED: BET ON AMERICA http://intelligencesquaredus.org/debates/past-debates/item/1...

I listened to that debate, and I while I remember inequality coming up a lot, I don't think it was really the theme; a disproportionate amount of time in the debate was taken up by Peter Zeihan talking up the mental MMORPG he plays to try to model global politics.

I claim that economic inequality at the scale we are seeing today, with Bill Gates, Mark Zuckerberg, Peter Thiel, Donald Trump, the Koch Brothers, the Walton family, et al. as plutocrats, and with Paul Graham and various other bourgeois pseudointellectuals as their kiss-up apologists, is per se bad. It erodes the broad social/economic power balance in our society, atrophies our civic institutions or coöpts them into quasi-fascist tools of the elite, breaks our journalistic institutions and cheapens our political discourse, diverts our resources into building wasteful things, and prevents us from tackling the serious challenges we face, while leaving millions of people struggling for basic survival.

I don’t see Paul Graham out there fighting in any concrete way for improvements to any of the “bad things that cause inequality” he hand-waves away. Where’s his work to improve labor rights, end police brutality, guarantee a functioning healthcare system, track down and close tax loopholes, expose and regulate industrial polluters, or figure out how to save the lives of all the people economically displaced by his startup “disruptor” buddies? Where’s his respect or help for teachers, social workers, doctors, policemen, civil rights activists, local politicians, garbage collectors, journalists, mail carriers, or any of the other people who keep our civil society functioning in return for regular wages. All I see is contempt for those “losers” (quoting from a recent tweet, https://twitter.com/paulg/status/672112234521231361) who don’t want to become rich capitalists.

How does Paul Graham’s imagined perfect society work? If everyone is a startup founder, who is left to be the employees at all these startups, much less do any of the other work we all need for things to keep running.

Arguments that put Bill Gates, Mark Zuckerberg, Peter Thiel, Donald Trump, and the Koch Brothers on one "plutocrats" team are probably the reason Paul Graham keeps writing dubious posts about income inequality.

Here Thomas, read this: http://www.nybooks.com/articles/2015/12/17/reimagining-journ...

They’re not on one “team”, but these people have outsized wealth and influence without any kind of accountability to the public. By virtue of having so much money, they can drive the funding of political campaigns (now without any limits or accountability) with less and less counterbalance from the middle class, and do whatever they like to promote their own interests, whether those interests are aligned with the public or not. I claim this is per se bad, even in the case that the plutocrats care about their image or self-image and turn out to be relatively “enlightened”.

Even if Gates and Zuckerberg, e.g., are well meaning philanthropists, there’s no evidence that their interventions are better than anyone else’s would be. Indeed, since they tend to not have a priori knowledge of fields outside whatever made them wealthy to begin with, and they tend to have led relatively charmed lives protected from the struggle of those at the bottom of the social pyramid, their interventions often look like bumbling stabs in the dark, and sometimes cause more harm than they prevent. In education policy for example, Gates and Zuckerberg’s efforts (and the efforts of the Waltons and other billionaires) have mostly been disastrous distractions pushing policy in the wrong direction. https://www.dissentmagazine.org/article/got-dough-how-billio...

Beyond that though, all the good that Gates can do is undone multiple times over by folks like the Koch Brothers, who have explicitly decided to turn their wealth to subverting democracy.

It would be better if we had publicly financed (or small-donor financed) elections, more transparency/accountability for advertising and PR spending of all kinds, and if these folks were taxed at (let’s say) the same rate they were during the Reagan administration, and there’d be plenty of public money to fund whatever charity projects in a publicly accountable way.

The plutocrats have a deep bench. They're totally going to take the pennant, like they do every year.

Is it Paul Graham's job to fix those problems that cause inequality?

I don't think it is.

I do think that it's great that people like Bill Gates invest their billions into improving the healthcare system globally, and the Zuckerbergs have invested large amounts into improving education.

It is not Paul Graham’s job to fix any particular set of problems. However, given that he hasn’t to my knowledge ever engaged with such problems at all, and he has apparently himself led a charmed life in a bubble insulated from the day-to-day concerns of regular people he keeps dismissively handwaving away, I don’t see why he has any basis on which to pontificate about the state of the society in general, or tell everyone else how they should think.

Largely agree, but since when was PG merely "bourgeois"?

Pg seems to really hate being criticized. I hope he doesn't stop writing about controversial things (or water down his essays) because the silent majority of us really appreciate it.

I believe it's less about criticism and more about a hate of being misunderstood. But I agree that there is a majority who really appreciate his insights (I'm definitely one of them).

I don't know in general -- I haven't read most of pg's writing -- but his original economic inequality essay was indistinguishable from fox news uncle. It's a level of understanding of economic history and a well argued theory (see eg Paul Krugman, Robert Reich, Brad DeLong, Bernie Sanders, Paul Wellstone, others) you would expect from Glenn Beck. Mixed in with some first principles derivation that lead pg to claim

   So let's be clear about that. Ending economic inequality would mean ending 
   startups.

with a straight face. Ignoring the fact that ending economic inequality in a sort of perfect equality is a goal of essentially (yes, I'm sure you can find one dude on a blog somewhere) nobody. And that startups somehow occurred in periods with much less economic inequality.

"but his original economic inequality essay was indistinguishable from fox news uncle"

More like a much wiser Uncle telling his inexperienced nephews why they are making a bad decision.

"And that startups somehow occurred in periods with much less economic inequality."

Startups did occur in periods with much less economic equality, but there were also much less government regulations.

PG is saying that the current solutions for economic equality, which is always an increase in taxes and regulations, will mean the death of startups. He's right. It's a warning for the future generations of startups.

Anyone with wealth won't really be effected, because other countries will accept them (and their tax dollars) with open arms.

Look at any of the Nordic countries: They all tout income equality, but your only options for work are the government or a big corporation.

Startups are nearly impossible to get past the initial stages because regulations and taxes kick in and your lifeblood is cut off before you even get a chance to get anything going. Investors also steer clear of the entire region. This is a great indicator that it is not conducive for any sort of small business.

This bottleneck prevents prosperity and creates an environment where citizens are more dependent on big corporations and there is almost no chance of moving up the socioeconomic ladder.

It also means less of a chance of getting a loan from a bank, which is another requirement for someone with no money to start a business.

I've never met a group that tries so hard to sabotage their own future success/vote against their own self-interests.

Google searching reveals that while true there may be a lack of investment in startups in these areas from VC, there are still plenty of companies forming -- so there could be a few other variables at play then just "government regulation".

You keep touting the same rhetoric but i'm afraid you are unwilling to challenge your own ideas.

Like the idea of the wealth just leaving our country. Where are they going to go? China? Socialist european countries? The answer is NO WHERE. Unless they are wealthy enough to just decide to go retire in a cheaper country, the truth is that majority of business owners will find other efficiencies in their operations in order to retain access to things like their: non-immediate family, US workforce (cultural/communication barrier actually do become very important for many service oriented businesses), and the standard of living here. I find the conservative rhetoric that the rich will just "leave us" as absolutely insane. Even if they did leave in droves, good riddance -- short term losses followed my long term progress, are those really the type of American's we should be pandering too? The ones treating the country like an emotionally abused spouse that they will leave as soon as things don't go their way?

Exactly.

It seems like PG haven't really thought this through and is going for a more superficial understanding of economic inequality.

I love his essays on tech and startups but this is an area where his thinking obviously isn't as developed.

I completely agree. I enjoy paul grahams essays.

It's also good for people to read well argued arguments, that are the opposite to what they believe.

If you only read stuff that you already believe, you haven't really learned anything.

> But if we fix all the bad causes of economic inequality, we will still have increasing levels of it, due to the increasing power of technology.

So, PG's logical conclusion is that economic inequality is an inevitable byproduct of technology and capitalism. I'm happy to grant him that. But it seems to me that history (pick your favorite revolution) teaches us that no matter what the inevitable consequences of a given system are, the majority of the people will not stand by and see their economic futures reduced to scraping by.

Which is why I'd love to see more people in the startup community (including PG) discuss what steps could be taken to both incentivize creators while simultaneously making average people better off. Because that's the amazing thing about creating value and growing the pie. Win-win scenarios.

>So let's be clear about that. Ending economic inequality would mean ending startups.

I'm curious why this comment was in the first version and not in the second, simplified version since this was to me the most simplistic point pg made, even going so far as to say "Let's be clear"

Pg seems to be arguing that income inequality and startups are mutually exclusive and if we are to have startups, we must accept some income inequality. Thats what I'm interpreting that to mean at least.

This to me just seems like, why can't we have both? More income equality and startups? I'm not seeing the reasons we cannot

Though it's complete nonsense because it assumes the only motivation for founding a startup is to gain extreme wealth

Ending extreme economic inequality would mean founders of successful startups would no longer become absurdly richer than average.

There would absolutely still be people passionate about doing things, and they would absolutely still make startups. Their motivation for doing so would no longer be extreme wealth.

If people choose not to do a startup because it can't make them extremely wealthy, that's perfectly fine.

I have no more interest in a successful programmer's economic philosophy than a successful baseball player's. That is to say, not much. As a libertarian I'm a fan of economic inequality, I see it as the inevitable byproduct of liberty, but who cares? I'm not an esteemed economic philosopher and neither is Paul Graham.

I see in American society, and maybe the trend extends beyond that, that we idolize people who have a lot of money or notoriety and consequently invest a lot in their opinions on any topic, especially politics, regardless of their qualifications. It's inappropriate.

I think there are 2 types of economic inequality:

Person A has more wealth that average, because he or she created a lot more wealth than the average person can create. This is great, startups are one way to do it, let there be more startups!

Person B has more wealth than average because he or she stole a lot more wealth than the average person can create. This is terrible, and must be stopped!

The main issue comes from the details involved in creating or stealing said wealth. Do CEOs create or steal wealth? Probably both. OK, what's the ratio. You can't tell.

Also, Person C who has more wealth than average because his/her parents or ancestors created the wealth? And Person D who has created more wealth than the average person, but only because they started out as a Person C.

Edit: Obviously, I'm not suggesting that there should be no wealth inheritance. But economic inequality can happen in a way that is neither meritocratic nor malicious. And there's tons we can do that recognizes this issue, without banning inheritance (scholarships, after-school programs, etc).

> Person C who has more wealth than average because his/her parents or ancestors created the wealth?

Do you think it's wrong for parents to give things to their children? Do you think it should not be allowed to let them ensure that their children will never have to worry about money?

I personally don't.

i'd even go as far as to say that it is a goal for a great many people in life, and the standard position is that inheritance is a good thing, and that taxing it stinks...

...except perhaps if its very rich people you can not equate with, so you don't see the harm of taking 1-99% of their unfathomable riches and leaving them still having a fortune beyond your dreams.

> if its very rich people you can not equate with,

oh, so you mean stealing is OK as long as it's from people you're jealous of?

The problem I have with that is that it's a foot in the door[1]. You begin with taking from ultra-rich people, expecting me to be ok with that. And then you take from slightly less rich people, and then even less rich and so on until you claim it's ok to take from anyone who's less poor than you.

So no, I don't want to let envious poor people rob rich people, no matter how rich they are.

1. https://en.wikipedia.org/wiki/Foot-in-the-door_technique

i don't agree with that line of thinking... i'm just saying that this is what i perceive in others.

Isn't that an argument to allow the existence of "Persons C" : that they end up creating "Persons D"? (A wealth creator at a level higher than what would otherwise exist)

Or we should take from Persons C's parents who made good decisions and not allow them to pass on their success to their children, thus eliminating the benefits of the wealth created by C's and D's ?

Saying Person B "stole" the wealth is not exactly helpful.

I'd say just that Person B inherited or otherwise did not personally create the wealth that they currently own.

You can tell an organization's priorities by it's finances. For a country, it's main revenue stream is taxation. Fix the unequal taxation (i.e. capital and inherited/transferred wealth being taxed at a lower rate that earned profits & direct work) and you will begin to repair wealth inequality.

"This is terrible, and must be stopped!"

Grand theft is already a crime, how else do you 'steal wealth'??

"Do CEOs create or steal wealth?"

CEOs don't 'steal' wealth.

They are paid to do a job that pretty much nobody can actually do, which is why they are paid so well. If I know a good CEO can make my company $30 million dollars, I have no problem paying him $5 million/year.

This is like saying a general has no purpose in the military because they aren't actually fighting.

Your argument is uncharitable. You might not agree with them, but there are arguments about how wealthy people "steal wealth".

They're not usually focused on CEOs specifically, but the main argument is that wealthy people use their wealth to give them political influence, which helps them pass laws that "unfairly" benefits them. (Or, if you don't want to bring fairness and morality, we can just say that wealthy people pass laws that make it more likely for them to remain wealthy, regardless of whether other people are impacted badly by this).

"They're not usually focused on CEOs specifically, but the main argument is that wealthy people use their wealth to give them political influence, which helps them pass laws that "unfairly" benefits them. (Or, if you don't want to bring fairness and morality, we can just say that wealthy people pass laws that make it more likely for them to remain wealthy, regardless of whether other people are impacted badly by this)."

This is a straw man, not an argument. Poor people have political influence too. With the popularity of Twitter and social networks, everyone does. If you don't like what a politician is doing, go out on Twitter and start a #hashtag campaign against them.

It has gotten many political figures, CEOs, and even regular employees fired.

>how else do you 'steal wealth'

For example by colluding with your competitors not to poach each-other's employees, thereby lowering your employees salaries, and stealing wealth directly from your employees. That's exactly what CEOs do. Even the Holy Steve Jobs himself.

I see bigotry, stereotypes, and generalizations are alive and well on HN. This is not an argument.

For those who missed it, here's the discussion of Paul Graham's original essay about economic inequality:

https://news.ycombinator.com/item?id=10826838

What bother me is the hand waving about fixing the bad effects of inequality without offering any concrete proposals of how that might happen.

Practically speaking, how do you reduce poverty, provide better health care and education without some form of wealth redistribution? Perhaps there are ways (I am all ears) - but progressive and fair taxation seems like a pretty reasonable approach.

My attempt at a simple rebuttal:

https://gist.github.com/harryh/fb3dae9eb14b675821e4

> "But economic inequality per se is not bad. It has multiple causes. Many are bad, but some are good."

Thank you for clarifying your points, hopefully it will help make this rebuttal equally clear. Economic inequality is bad not because of what causes it, but because of the effects it has on society. The problems boil down to issues of influence, both in the economic and political spheres. The wealthier someone gets, the more opportunity they have to game the system for their own advantage. Even if we're not aiming to eliminate the rich/poor divide completely, we still have a responsibility to ensure concentration of power is limited. This is why economic inequality is an issue.

The question for defenders of the theory that economic inequality isn't intrinsically bad is this -- does it actually matter how economic inequality was arrived at if its effects are the same?

The best example I have is the Bay Area housing market. While it is true that a lack of new construction has a role in rising costs, so does the gulf between the lowest and highest paid workers. Where income inequality is high, but people are still competing for the same scarce resources, prices are going to get further and further out of reach for people at the low end.

Arguably, an influx of relatively highly paid workers is a result of wealth being "created", but if I'm the janitor at Stanford who has to commute from Stockton [1], does it actually matter why there is income inequality?

Income inequality means, regardless of how it is generated, that a huge amount of wealth is being created and the benefits are being concentrated to a few people. And in the case of where I live, it means things that things that used to be accessible to lots of people have been placed out of reach. It doesn't matter how it happened. Until income inequality is reduced (e.g. income at the low end increases), or something fundamental about the way markets work changes, people are still going to get hurt.

[1] http://ww2.kqed.org/news/2015/03/28/long-commute-to-silicon-...

Simplified version? The entire argument one of an economic simpleton.

Startups, ie Innovation, is of course good, it is almost entirely responsible for economic growth (simple population growth being the other).

The inequality question is about how to distribute the benefits. Especially with tech startups the benefits have gone disproportionately to the founders or early investors. Particularly when these startups "disrupt" an existing industry that employs many, then that is clearly problematic. Additonally, capitalism itself delivers the most gains to those who already have.

Of course some degree of inequality is entirely fair, but much larger taxes on the rich (preferably in the form of pre-distribution) do not stop the rich wanting to do what they do, but if handled properly, can vastly improve the lot of the poorest and give a helping hand to those who want to advance themselves but can't afford it.

We already have a massive war on poverty. Just the Govt. is $1T per year. http://www.heritage.org/multimedia/infographic/2014/12/total...

Economic Inequality is not bad per se, too much inequality is. At extremes, societies tend to tear apart in violence.

Startups are good. But execs get rewarded for dodging taxes, laying people off, global labor arb, and automation. It's not surprising inequality is increasing. There's tradeoffs in everything.

For all the hulabaloo about income inequality, tax policy could easily reverse the trend. It's not that complicated. It's a political, not an economic challenge.

> For example, instead of attacking economic inequality, we should attack poverty.

The problem is the people on the rentier side of the economic inequality scale are doing the opposite. They want poverty. The need poverty. It is the cornerstone of the rentier system.

Here is a BusinessWeek article: http://www.businessweek.com/1999/99_44/b3653163.htm

What does it see as the problem? Unemployment is too low. Too many people who want to work are working. Businessweek sees this as a problem. CEOs and LP's and rentiers see this as a problem.

Workers work. They create wealth. A carpentry shop has carpenters bang wood and nails together to make tables. The workers labor creates wealth - wood and nails becomes a table which costs more.

For the first six hours a day the worker keeps the wealth they create - their wage. The rest of that revenue goes for replenishment of supplies - wood, nails, 1/90th of a hammer cost etc.

For the last two hours a day, the worker is not paid the wealth they create. It goes in profit to the heir who owns the manufacturing plant. The worker's surplus labor time is being expropriated by the heir.

If unemployment was low, if poverty was lessened - then those who work could demand to be paid for more of their time. Increasing unemployment, increasing poverty lessens the chance of this happening.

The LP's, the heirs want poverty. It's an essential cornerstone of their profit and expropriation.

Centuries ago, most of the world were farmers under feudalism (or hunter/gatherers etc.) There was not structural unemployment then. Lords wanted farmers working hard to sow during planting and reap during harvest. Only in our modern age of capitalism do those who control production desire poverty, unemployment etc. That Businessweek article lays out a portion of that ideology, it's been spoken of elsewhere for a long time.

The idea that the heir LP's on the other end of the inequality divide want poverty to end is absurd. The reserve army of labor is a foundational necessity of the system.

> But if we fix all the bad causes of economic inequality, we will still have increasing levels of it, due to the increasing power of technology.

Which is why so many people suggested changing other things that would reduce or eliminate economic inequality. Suggestions included limiting the ratio between highest paid employee and lowest paid, or changing tax structures, etc.

And then your limiting the incentives for the potentially high paid employee to do even better!

Is inequality really that bad if the low paid employee still lives an excellent life, and is out poverty? What difference does this make?

because it's easier to not bother understanding the other side's position and instead, attack a strawman.

The argument is that technology creates income equality but you can't stop texhnology. It does this because it acts as a multiplier for creating wealth. Technology encapsulated in the form of a for profit company does this because the metric that values the impact is stock and this stock can be exchanged for dollars. Stock itself also allows another lever on top of actual revenues. This is magnified by network effects.

Taxes may mitigate the conversion of wealth into currency. For example in the US, this has a big negative impact on stock option holders when they buy their options at a strike price lower than the current valuation. At this point you have to pony up cash to the IRS even if they newly acquired stock is illiquid. As such many people may not exercise because they can't afford them and the taxes. this is a form on inequality as well... and the options return to the company.

Raising taxes could mitigate inequality but various perks or bank guaranteed loans could be arranged to circumvent the loss of benefits associated with taxing wealth (as seen in the past).

In addition Stock ownership allows the public participation in wealth generation so taxing theconversion to currency is likely negative and would be a driver of increased inequality since only the rich would buy stock (more so than now?).

So that's one side of the argument.

Just as you can't say startups create jobs without considering the jobs it displaces, I think you can't hide behind the notion that startups are generally a force of good. That way you sweep all the startups that have a net negative effect under the rug.

Studies show FB can have a negative effect on happiness. In the tech startup playbook is stated that you need to make your site/app addictive. Well we've mastered that now and it must cost billions of dollars with people's time being wasted on crap.

Even startups geared toward productivity aren't that impactful in the grand scheme, they tend to make life more convenient and only when enough customers can be found at the right pricepoint.

We're training people to be distracted by trivialities and stuff that doesn't matter. Many venture backed startups are exposing the defects of the way economy functions and just how poor we are at delivering the value that is truly needed.

We don't really need another gadget or app, we need to fix the way society has painted a growing number of people into a corner. Income inequality is just one way to expose the symptoms of an increasing problem, a problem that isn't really being focused on by startups because startups are born and survive by exploiting leverage that can be turned into profit.

Ah, but we still disagree on the point that economic inequality inevitably worsens a society, and a decrease in inequality does not correspond to a decrease in the ability for people to make startups.

I think this is a philosophical disagreement that won't be solved by clarification of ideas.

I think the reason the original essay was so controversial is that it set out to demonstrate that a society faces a binary choice:

* We allow both startups and inequality.

* We attack both startups and inequality.

This is perhaps most clearly articulated in this quote:

"You can't end economic inequality without preventing people from getting rich, and you can't do that without preventing them from starting startups."

And here strikes the controversy: on average the hacker community has a favorable view of startups while also opposing economic inequality (this is at least my general impression).

Perhaps the optimal solution is a compromise that allows startups and inequality while providing a system that eliminates the most undesirable effects of inequality. There are already systems in place to prevent extreme poverty, to ensure some minimum access to education and healthcare etc.

From the remaining issues the most pressing one is the problem of excessive concentration of political power. A system that weakens the link between money and political influence seems necessary.

A large chunk of the hacker community is probably close to libertarian, and that was well known and well criticised. (https://en.wikipedia.org/wiki/The_Californian_Ideology)

Well back in the day it was, I don't think an article like this would have been that controversial on hackernews many years ago. A lot of pauls earlier writing has similar stances.

As more people have joined, it moved quite heavily to the left.

> We attack both startups and inequality.

That would've been true if there was no non-profit startups.

We need to lower economic inequality so that more people have a chance to start startups, now you need savings and a lot of hard work only to convince an incubator or an investor and most people don't even have that chance.

Maybe we should start taxing corporations the same way we tax the average person, no more tax heavens and special tax laws, everyone pays the same unique percentage from earnings/profits and from the extra cash the government can provide a social service to allow everyone who meets certain requirements to start a startup.

Unfortunately governments are bought by corporations and they get special treatment, they get bigger and not only we all pay higher taxes because they pay less but it's also harder to start a company because of oligopolies and government special treatment for the 1%

> now you need savings and a lot of hard work only to convince an incubator or an investor and most people don't even have that chance.

Or you could bootstrap it.

I think most of the backlash came from the way that startup wealth was definitively placed in the "good" bucket in the prior essay.

Yes, on the whole startups create wealth and that's generally a good thing. BUT... there is a still an open question as to whether the current SV culture and associated wealth inequality is entirely "good." In other words, it's not a binary question.

There is all sorts of financial chicanery associated with startup wealth that make it decidedly unmeritocratic. I've known a number of founders make millions with unprofitable companies that hardly contributed millions of dollars worth of value to the world. As far as I'm concerned, its a virtual certainty that the current startup allocation of capital is not efficient in a utilitarian sense.

"For example, instead of attacking economic inequality, we should attack poverty."

This is such an anemic statement in the face of the reality of corporate fraud such as, "HSBC escapes action by City regulator following Swiss tax scandal" [0]

The biggest fault in the essay, in my view is not acknowledging and exploring the externalities in economics described. While the big end of town scams its way to profit, what hope has an individual?

Creating tech startups is one way to profit from this imbalance.

[0] http://www.theguardian.com/business/2016/jan/04/hsbc-escapes...

but can PG write again using only the ten hundred most common words?

https://xkcd.com/1133/

Better in being much more concise, but unfortunately, and for the same reason, even more revealing of the central emptiness of the argument.

I don't know why we're even talking about such overbroad themes, even in the longer version. Whether you believe you can "create wealth" or not, poverty is quite simply a central facet of inequality; it is part of the DEFINITION of inequality. Poverty IS inequality, along with riches. All it means, is there's an income or wealth distribution curve whose slope is nonzero.

There is no conceptual definition of inequality that doesn't include poverty. If everyone had the same wealth, that, by definition, is a situation of 1) no inequality 2) no poverty

Whereas as soon as some people have more, and others have less (which is quaintly known as a little thing we call "inequality") there is a phenomenon crying out to be described, and that phenomenon is: A poorer group exists. There is poverty. Even if the poorer group is only just slightly poorer. Which interestingly indicates that poverty is inherently comparative. Equality is absolute; inequality is always relative. Just like in math.

You probably think you happen to have a lot, and people in the Third World happen to not have a lot. No. You have a lot, BECAUSE the people in the Third World don't have a lot. And they have less BECAUSE you have more. The corporations working on your behalf extracted that wealth from them, and conveyed it to you. (And to themselves of course.) And when those people try to immigrate to your country they are just trying to follow their own money to your doorstep.

Anyway the thing everybody hates and wants to fight is not that "some people make money" but that "the Paul Graham class" can buy themselves a Congressman. They can emit ridiculous brain-farts over and over (Musk) and the media fawningly fellates. They can invest in a thing and slavish people infer directly from that, "Wow, must be real valuable!" Inequality confers unfair political advantage which leads to disproportionate opportunity which leads to further inequality in the same direction. It is not a self-stabilizing system inherently. It is prone to excesses and failure, and a shity quality of life for the majority on its way to getting there. Go ahead and push that as far as you can, see what happens.

There will always be a "poor" if there is a "rich" but I have always thought poverty was about being impoverished, and was a separate issue. My understanding was that poverty was about lacking food, shelter and security, and I can easily imagine a society in which everyone has those things while there are still richer and poorer people

Wealthy people talking about economic inequality - no matter how valid your points - is going to stir trouble.

Its like men talking to women about sexism in the workplace, or able-bodied people talking about the abundance of disabled access everywhere, white people talking about racism against black people etc.

You don't have to be wrong, or have flaws in your reasoning, to make a socially naive commentary that is easily perceived as insensitive (regardless as to meaningful content).

This is the legacy of political correctness and identity politics. We made this bed now we have to lay in it.

I refuse to lay in it!

There is one type of correctness, it is called 'correctness' everything else, 'political correctness' included is a flavour of 'wrong'.

Its also easy to overreact when you consider yourself to have been misjudged for poorly conveying a point. :)

No billionaires created a billion dollars by themselves. How much Mark Zuckerberg keeps of the multi-billion dollar company he created with his employees is not decided by the value he adds. It is decided by value he keeps from negotiating with his employees.

"Billionaire thinks current levels of income inequality are a good thing"

More NEWS at 11

There appears to be an either-or fallacy here, that somehow addressing economic inequality means people are trying to eliminate it and will only accept perfection.

Like most things in politics, action happens in the grey area,and I don't think trying to argue against extremes poses much benefit.

Technology is increasing returns to capital vs labor. One day, robots, 3d printing, and AI services (e.g. self driving everything), may put the majority of human beings out of a job. How can entrepreneurs or capitalists even get rich if the majority of people's work has no surplus value?

In such an end state, the concept of regular folks working is practically extinct and there should be a basic income, so that the massive returns to automation continue to benefit everyone and provide income for people to spend. Think of it as an extreme version of social security: Instead of 1 worker supporting 10 retirees, you have 1 robot, or 1 AI supporting hundreds of "retirees" (from birth) using "wages" that are no longer paid to the robot (labor), but to the capitalist.

Hans Moravec in _Mind Children_ outlined a version of this 20 years in how increasing productivity from automation will gradually produce a society that looks more like a hunter gather society and less than an industrial one, in that the basic needs of the population will literally "grow" on trees (robotic manufacturing bush robots)

My point is, if you want to look at extremes, then extreme unchecked technology and inequality will produce a degenerate broken economy in the long run, so quite clearly, there must be mitigating factors to keep the capitalist system going.

I like PG's framing of the issues, but dislike his conclusions, which are unsubstantiated and basically fall to a kind of nativist/natural fallacy, that because something is a natural driving force, it should not be opposed, or else bad things will happen.

History is replete with humans changing their natural physical or economic environment, and we will continue to do so.

I think one can address economic inequality and it would not prevent startups or "big winners". Moreover, I'd argue that living in a society where failure doesn't mean abject poverty, possibly a life long impact, encourages people to take more risks, and that overall, if we have in place a safety net, and fix issues with racial inequality especially, it'll be a boon for the startup economy, not a negative one. That's an unsubstantiated claim as well, but if you comparatively look at other countries, you can't really find a tight correspondence between the level of social welfare and failure of startup culture. But you can see improved social mobility, and having superior mobility and racial/cultural diversity I'd argue helps in building companies which scale globally.

Well put.

How about fixing dating/sexual inequality? You know, one guy sleeping with 20 girls is not fair to all the losers/ugly_guys like me who can't get a date. We have to redistribute partners and make sure that even the unattractive guys can get a date. We'll have to kidnap women who are into attractive/successful guys and then take them to losers like me. You think this is rape? It's not, just like taxes on goods are not theft, because the only reason attractive people can get partners is because a lot of unattractive people like me contribute by building roads, bridges, apps, infrastructure, schools, which enables attractive people to arrange dates and then use roads to get there. We are also in the friend zone all the time, while the attractive guys are getting deep inside our female friend. They have to give something back. I am proposing a 'sexual tax'.

ALSO, since pretty people inherited good genes and didn't work for it, I also propose taxing physical beauty by making pretty people look uglier by 30-40%(call it 'inheritance sexual tax'). That way, already ugly people will look great in comparison.

News Years resolutions of 'dating more' aren't going so well for you either. eh?

> And unlike high incarceration rates and tax loopholes, startups are on the whole good.

That's a highly debatable assertion. I really wish he would explain why he thinks startups are "good".

Does this have to be explained?

Startups provide service/product that people are willing to pay for.

You must be providing some value to those people for people use or pay for your product. Maybe because it's convenient, quicker or better.

And startups add that value for millions of users.

Why do you think that they are, "on the whole", bad?

Reply on news.ycombinator.com