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.
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.
Broadly, I think the answer is yes. Yes they do.
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.
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.
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.
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.
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.
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?
http://ideas.ted.com/the-4-biggest-reasons-why-inequality-is...
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.
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.
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.
DECLINISTS BE DAMNED: BET ON AMERICA http://intelligencesquaredus.org/debates/past-debates/item/1...