Economic Inequality: The Simplified Version
paulgraham.com
paulgraham.com
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".
Lots of very serious people say that inequality is bad:
http://digitalcommons.bard.edu/hm_archive/333/
https://www.youtube.com/watch?v=cZ7LzE3u7Bw&mid=5328
http://www.economonitor.com/lrwray/2013/07/09/how-big-is-big...
http://bilbo.economicoutlook.net/blog/?p=11245
http://moslereconomics.com/2009/09/30/inequality-nothing-to-...
Let me try to explain it like this. It is a valid question to ask why, if one income bracket grew X% over 20 years, did a lower bracket only grow 1/2 X. It is not reasonable to simply dismiss this question as irrelevant by assumption. Because society should want income to grow in all brackets, if possible
And the question is how do we get to that acceptable level. One option is a progressive income tax with a universal basic income, or (equivalently) having the progressive income turn negative at low incomes.
Taxing consumption makes more sense since ideally we want less of it, but taxing income makes less sense because we want people to work more.
I like Randall Wray's idea of taxing the volume of people's houses, too[1] :) He also talks about abolishing all company and payroll taxes, because as soon as you let go of the notion that taxes pay for things, and that the role of taxation is actually to drive demand for currency and control aggregate demand/income inequality, your fiscal policy can get pretty wild.
It's funny how MMT can seem quite "conservative" at times because of things like abolishing company tax, but when you accept the basic tenets of MMT you can see that such things can be quite progressive (and good for society)!
[1] http://neweconomicperspectives.org/2014/06/tax-bads-goods.ht...
When people talk about income inequality being bad, they're talking about bad income inequality, not acceptable income inequality.
So things that increase income inequality in such a way that it is unchecked or unregulated are bad, and income inequality needs to be controlled directly through regulation and taxation, and directly through increased government spending and full employment.
When PG says "income inequality isn't bad per se" I take it to mean that he sees the current level of income inequality, for example, in the US, as not bad, which is incorrect. The levels of income inequality in the US are causing problems with stability in the economy. He also doesn't see a problem with increasing the current levels of inequality in income in the US.
If he means that some level of inequality of income is acceptable then he's not being very clear about it.
Just as some level of inflation is acceptable, some level of lead and arsenic in drinking water, and some level of sugar consumption is acceptable, so too is some level of income inequality acceptable.
EDIT: changed "inequality" to "equality" in first line ...
Well, then you are more generous than I am. To me, it is a classic strawman and leads the whole essay astray. But I see then we do not disagree. I thought you were trying to support the strawman with your links.
For a start, 'inequality' is a phrase borrowed from far clearer grievances such as inequality in legal rights for women, minorities etc. By using it in this economic debate it already frames the question as one of harm to a group of people.
A neutral phrase would be something like 'wealth concentration.'
From the Capital ...:
> Inequality is not necessarily bad in itself: the key question is to decide whether it is justified, whether there are reasons for it.
> when I hear people saying that economic inequality is bad and should be eliminated, I feel rather like a wild animal overhearing a conversation between hunters.
Nobody is arguing "inequality is bad and should be eliminated". People are arguing that inequality has increased too much and should be dialed back. The question is how (and what is a more reasonable level).
> I'm all for shutting down the crooked ways to get rich. But that won't eliminate economic inequality,
Ditto
> And while it would probably be a good thing for the world if people who wanted to get rich switched from playing zero-sum games to creating wealth, that would not only not eliminate economic inequality,
Ditto
> You can't end economic inequality without preventing people from getting rich, and you can't do that without preventing them from starting startups.
The policy debate is not and never was about "ending inequality". It is to find a different level. And the precise reason people are not advocating for "eliminating inequality" is incentives.
As you can see: Strawman. Strawman. Strawman. All the way. Sorry.
A lot of research shows that high society-wide economic inequality causes many bad effects, economically, politically and socially. I believe that is the basis of many concerns. According to that research, high inequality is per se bad (I don't know enough to define "high", but many others have).
> [inequality due to startup founder success is good]
Generally I agree, but:
1) The question isn't whether all inequality is bad but whether current levels are bad. Nobody argues for perfect equality.
2) It overlooks the problem that many are denied the opportunity of such success because of their race, gender, social networks, or economic class,[1] which deny them access to the important resources such as education, financing, contacts, or jobs.
That's bad for the people who otherwise would succeed; it's bad for our society socially and politically to have people who are and feel excluded; and it's very bad for our economy to not utilize the >70% [2] of human resources that aren't middle-class or wealthier white males.
----
[1] AFAIK, plenty of research shows that education depends significatly on the economic class of your family
[2] Around 33% of the U.S. population is white male and some of them are poor; therefore 70% seems a safe estimate.
> denied the opportunity of such success because of their race, gender, social networks, or economic class ... which deny them access to the important resources such as education, financing, contacts, or jobs.
This is not "economic inequality", reducing "economic inequality" might reduce this or it might not. Its a proximate cause, whereas we should be focusing on ultimate causes. You even list them here: access to education, access to financing, contacts, jobs.
Focus on "economic inequality" is less likely to fix these problems than focus on fixing these problems is (likely even more detailed versions of them).
The distinction is helpful; thanks. My first point is that it's a cause, according to a lot of research.
Mostly they are concerned about dynastic wealth (Waltons, Kochs) particularly when it's economic power intertwined with political power (Kennedys, Bushes, Clintons, Romneys).
Outside of San Francisco, where many people feel real downward economic pressure from tech, most of the US seems pretty happy with the self-made uber rich. In fact, I think people are downright fond of these people. The real discomfort comes when those oligarchs look to preserve dynastic wealth and power for generation after generation using trusts and other tax avoidance strategies.
Haha, I cannot believe I defended the Kochs.
If you're not going to make money by working and creating wealth, you have to make it as a rentier, expropriating wealth created during surplus labor time of those who do work.
It causes a struggle for where the money goes - the worker who created the wealth by their labor, or to the heir in the profit of that expropriated labor time.
Poverty and unemployment are backbones of pushing that wealth towards the heir and away from the worker creating the wealth. That's why his note on ending poverty etc. is so phony. Heirs aren't trying to lower unemployment or end poverty, they work hard to create it.
It's not a secret. It's said openly in Businessweek - http://www.businessweek.com/1999/99_44/b3653163.htm . The problem as they see it is when unemployment gets too low. It puts a crimp on their parasitism on those of us who work and create wealth.
https://m.youtube.com/watch?v=okHGCz6xxiw
And she is absolutely right. Because if "inequality" is the problem then a solution is to shape society so that everyone has $1 rather than the rich having $3 and the poor having $2. If that's not a desirable solution then "inequality" is not the problem.
The other stuff is a distraction until that isn't the case.
http://www.pewresearch.org/fact-tank/2015/07/23/around-the-w...
> Americans and publics in Africa are less dissatisfied, but they are hardly happy about the way things are going. More than half of Americans (56%) say the U.S. economy is doing poorly. In the nine African nations surveyed, a median of 51% believe economic conditions are bad. Within Africa there is a particularly wide divergence of opinion. More than seven-in-ten Ghanaians (73%) judge their economy to be performing poorly, while nearly nine-in-ten Ethiopians (89%) believe their economy is in good condition.
https://www.salon.com/2016/01/03/the_middle_class_is_just_th...
> Down here at the pedestrian level, between 2010 and 2014 poverty increased in one third of America’s 3,000 counties, when compared to the 2005 to 2009 period, according to the U.S. Census’s American Community Survey. In fact, the “recovery,” that pastel-colored unicorn, was only seen in the 4 percent of the nation’s counties where poverty actually declined. The rest remained stagnant.
> It should come as no surprise. Millions of Americans lost their homes, and with them the foundation of their household wealth. During the “recovery,” census data documents that the median U.S. household income has actually declined for three years in a row and remains below its peak in 1999.
And the fact that the middle class has been hollowed out:
http://www.npr.org/sections/thetwo-way/2015/12/09/459087477/...
Two of those results may be quite desirable actually.
> Over the past 30 years, the origin of the wealth of the richest people in the United States has shifted away from old, inherited money. Our new metric, the self-made scores developed for the Forbes 400, shows that increasingly we find self-made billionaires among the ranks of the richest people in the country. This has accompanied the incredible increase in wealth of the members of the Forbes 400, which has jumped 1,832% times since 1984, when the total net worth of our list was $125 billion, compared with $2.29 trillion today.[0]
[0] http://www.forbes.com/sites/afontevecchia/2014/10/03/there-a...
This shows the confusion of the original essay, and this response.
There is the thesis, "economic equality is not bad", and then the support for the thesis, "some drivers of inequality are bad, some are good" that doesn't actually support it.
Saying that some things that concentrate wealth are not bad overall does nothing to shed light on whether vast disparities of wealth between classes of people is beneficial for a society.
With high inequality, money becomes more valuable and people start to think of everything in terms of money. Even romantic relationships become money-oriented. It's not uncommon for marriages to break up because of financial reasons. Wealth inequality causes more human suffering than moderate poverty.
People who lived in communist Russia will often tell you that people were happier under communism, even though they didn't have much - Often, they had to farm vegetables from their own gardens to supplement their diets. But they were happy because they knew that they had the same as everyone else. Also, people had no ulterior motives to do anything - When people liked you, they liked you because of who you were. When people did something nice, they did it because of purely altruistic reasons.
In capitalist society, money underlies the behaviour of everything done by everyone. You can never know if a person is good or bad because you never know their true intentions.
I think the media coverage of wealthy people is itself a bigger problem than inequality itself.
The media motivates people to work harder and acquire more wealth. Without media, only innately passionate people would launch startups. Today, most people who start a company do it because they want financial rewards.
It is human nature to want equality. It reminds me of a Russian joke about a man who finds a genie in a bottle. The genie tells the man that he can get anything he wishes but that his neighbour will get twice as much of whatever he gets. The man pauses to think for a moment and then says: "Take out one of my eyes."
I think that your point ("People who lived in communist Russia will often tell you that people were happier under communism") is unsubstantiated. I've heard this a FEW times, but mostly from older (60+) unskilled laborers (like taxi drivers) who are simply unable to adjust to the new world.
Almost all Russians realize that their country is better until capitalism. (If you want to call what they have here 'capitalism', it's more like 'crony capitalism').
Nor do I agree with "It is human nature to want equality". Humans will always jockey for status and power. That is human nature. If it can't be done with money, then they will use whatever other kind of social 'currency' exists to try to rise in the hierarchy of status... just like the pigs in 'Animal Farm'... or communist party leaders in the Soviet Union.
Mostly, people are who complaining about inequality are really complaining that they ended up at the bottom of the hierarchy and have how no clue how to or no willingness to climb it.
https://www.policyalternatives.ca/sites/default/files/upload...
Income redistribution is a valid goal of taxation -- not because the government needs to tax the rich to fund the poor (the government can fund whatever it wants since it issues the currency) but because tax policy can reduce the types of extreme inequality that cause instability.
When people become wildly rich, they often misattribute that success to their own hard work, ignoring the social conditions that made their success possible, and the role that "good fortune" plays in all such success stories. This talk by Michael Lewis is an excellent summary of why this "meritocratic mindset" is dangerous:
https://www.youtube.com/watch?v=CiQ_T5C3hIM
So yes, we should definitely address income inequality directly through tax policy.
We should also address the root causes of poverty, which are primarily lack of government will to pursue full employment since the Friedman/monetarist view of macro economics won out over the Keynsian economic theories during the supply side inflation caused by the oil shocks in the 1970s.
Edited to clear up confusion
Do you think that technology alone can't produce extreme income inequality? Why?
The argument is over economic inequality which I believe most take to mean wealth inequality, not income inequality.
Do you think that technology alone can't produce extreme income inequality? Why?
Of course not. You need people using the technology as well. Extreme inequality results from the simple fact (as exhaustively supported by Piketty) that r > g. Capital, by definition, is technology.
Combine stuff like that with executives making 300x the average (not worst) employee to see system is clearly rigged against the many for a very few. Not even top 1%: a fraction of a percent.
What is extreme economic inequality vs normal economic inequality? Honest question -- I literally have no idea.
Extreme Economic inequality example. People working in Walmart for less than a working living v.s. the Walmart family or the Koch family.
Are you saying that technology can't cause extreme economic inequality? Comparing a Wal-mart worker vs. Bill Gates, Steve Jobs, or Paul Graham sounds like extreme economic inequality by your definition.
I think you are missing exactly the point of the post, while accusing him of being confused.
However they do have something against someone like Uber or Wallmart or the Koch brothers.
"PG insist on confusing extreme economic inequality with normal economic inequality"
Last post:
"Most people have nothing against the inequality created by most startups"
His point was that startups can produce extreme income inequality (without the system being rigged). The whole point of his essay was to not lump all the causes of income inequality together.
PG believes that people are against the inequality startups create. They are not because most startups don't become family dynasties. Thats the point. Only PG is talking about startups. Thats not what people talk about when they critique economic inequality and that's what he doesn't seem to understand.
Determining an acceptable level of income inequality is a moving target requiring lots of analysis of data and whatever but there exists such a point at which you could say that income inequality is untenable, just the same as there exists a point at which inflation is untenable.
The "acceptable" level of inflation is around 3%, but even inflation in the low double digits isn't necessarily unworkable. It's somewhat arbitrary and a comoplex policy decision, but it's fair to say that such a level of income inequality exists at which it becomes untenable (even if we don't know what it is).
Seeing these studies, someone comes along and proposes a regulation that limits the amount of arsenic this factory is allowed to dump into the public water supply, to keep it within safe levels.
A critic then comes along and says: "The amount of arsenic in the water is not the root problem -- the root problem is that arsenic makes people sick. We should focus on helping people not get sick when exposed to arsenic! That way, we wouldn't have to hurt this job-creating factory."
This feels like what PG is arguing for here. In an ideal world, where governmental systems were purely representative and incorruptible, and where markets were efficient and impossible to manipulate, sure, focusing on huge economic inequality wouldn't make sense. But we don't live in this world, just like we don't live in a world where we can easily make people immune to large amounts of arsenic.
You also repeat a concern made by many critics of Graham's essay, the connection between wealth and the ability to influence public policy, access to politicians and so on. Positing that the wealth is the source of the problem and suggesting the limiting the wealth would limit the influence also doesn't hold together for me.
I'll repeat I comment I made a few weeks ago:
> There is another way to look at this problem though by asking why there is so much money being directed towards elections and politicians? One cause is the increased size and scope of government. When the role of government expands into more aspects of our lives via various taxes, regulations, subsidies, penalties, and so on it creates an incentive to influence the creation of those taxes, regulations, subsidies, and penalties.
> A smaller role for government, in particular a reduction in policies that try to pick winners and losers explicitly (e.g. taxes or fees that favor particular companies or industries), could reduce the incentive to influence the creation of "targeted" legislation.
Why on earth is no one pointing out that the excessive influence of the rich on politics is a problem that has to do with institutions being corruptible, and not with money?
Don't want rich people to influence politicians? Don't give so much power to politicians in the first place.
Poverty, poor education, etc are the underlying problem - the arsenic - and income inequality is one of the symptoms - like hair loss from chronic arsenic poisoning. Attacking income inequality directly would be like forcing haircuts on people to make wigs for people with arsenic poisoning. Not only does it not solve the problem - it helps a bit - but it actually harms innocent bystanders.
People like quick, simple solutions. It's a lot easier to raise taxes on billionaires than break the cycle of poverty or fix public schools.
Out of the usual reasons people encourage you to either found or work for a startup, "get rich" is not the primary motivator, and "get richer than other people" certainly isn't. (To claim that "get rich" implies "get richer than other people" is to invoke the pie fallacy, which Paul Graham debunked recently.) "Change the world," "have more freedom / creative control than a traditional job", etc. are, and those don't seem to require economic inequality.
For instance, Paul Graham writes in http://paulgraham.com/mit.html :
"For nearly everyone, the opinion of one's peers is the most powerful motivator of all—more powerful even than the nominal goal of most startup founders, getting rich. [...] Even if you start a startup explicitly to get rich, the money you might get seems pretty theoretical most of the time. What drives you day to day is not wanting to look bad."
If you want to imagine startups not causing economic inequality, one approach is a radical restructuring of society, probably involving heavy taxes, as I suggested in a comment previously. But another simple one is to have more people do startups, and to explicitly invest primarily in people and communities that don't have other easy routes of getting rich.
Yes.
This is discussed in detail in the original essay and in The Refragmentation essay here: http://paulgraham.com/re.html
Neither of these essays seems to discuss the good of startups in relation to economic inequality. All they discuss is the inevitability of startups, or really technology, increasing economic inequality. And "The Refragmentation" explicitly points out that a society can put a stop to this via high taxes.
(That said, it is late and maybe I didn't fully understand a sentence somewhere.)
in my experience with startups and founders, that is the absolute central motivator, to the point that it is utterly laughable to deny it.
The first one seems like an extremely common motivator, yes. The second one sometimes; the third one unlikely. But the first one does not require economic inequality; the second one might, and only the third one does.
This is what I find puzzling about pg's claim to be in the business of creating economic inequality. Sure, he's in a business that happens to have that effect now, but that hardly seems like a core requirement of the business.
(And this doesn't even address the fact that "startups do X" is sort of circular. Could non-startups, e.g. small businesses that stay small, do X just as well? Or better, because they don't have the failure rate of startups? If we are no longer able to have them run by people motivated by getting rich, is the good done by startups less likely to happen?)
The reason why inequality is the problem and not simply poverty is because when the 'target' is poverty, all we do is basically put a band-aid on the problem. We look at the poor with pity, segregate them, throw a minimal amount of money at them, maybe a social program or two, and forget about them.
However when you study inequality as a whole, you begin to see a bigger picture - one where the erosion of the middle class, the widening gap between those with capital and those without, and how that relates to poverty levels, economic growth, living conditions across society, etc...
As PG and others have said, back in the day you could be a factory worker, or any sort of blue-collar labourer and afford to have a stay at home wife, 4 children, a house and a car. Now that lifestyle is a luxury only the rich can afford. What's the difference? We know it's inequality, yet for some reason people make up all sorts of excuses and reasons for why this inequality is somehow 'better'.
Anyhow, economics is hard enough without trying to come up with overly simple explanations like "inequality is good because start-ups". There are start-ups in socialist countries (France, Sweden, Finland, Denmark, etc...), in less socialist ones (US, Canada), even in countries that barely have functional governments. Not to mention, all the research that shows a safety net actually contributes to entrepreneurship (in the US, that means upper-class family).
Paul doesn't want to ignore these problems, he just wants to call them what they are. The only problem I see is that we don't have a good term to cover all these related concepts. Alternatives like "creeping feudalism" don't have the same ring as "inequality", even if they may be more accurate.
I disagree with what he thinks are the causes of both poverty and extreme wealth. An apt proverb is that the plural of "anecdote" is not "data".
Generally speaking, people do not 'become rich' through entrepreneurship, nor do they 'become poor' because they were incarcerated. We can see through actual data, that being poor makes one more likely to commit crimes, and being rich (or at least in the top whatever % of the population) makes one more likely to become an entrepreneur.
PG's goal is desirable, but that doesn't make his analysis any more correct.
when people say that inequality is bad, what they are talking about is that it is bad that, even though average incomes grew a lot, incomes for the lower brackets grew a lot less than incomes for the higher brackets. As you can see from my link, even taking out successful startup founders ( by not looking at 1%) shows the same trend.
It is a separate discussion whether or not startups increase income inequality ( just because startup founders get rich, it doesn't mean overall inequality has to increase because their products could raise average incomes in other brackets by raising productivity, for example ).
But, focusing on startups is just not terribly relevant for the inequality debate, again, as demonstrated by the fact, that there is a lot of inequality in the 60%th percentile vs 20th percentile, which has nothing to do with startups
Edit: to those downvoting, here is some more data
http://www.motherjones.com/mojo/2011/10/one-percent-income-i...
does it look like income growth of the 1% has much to do with startups from this data ?
So let's grant that economic inequality is good in some cases.
Even if this is the case, reducing economic inequality may be the most efficient way to solve a wide variety of societal issues. E.g. how many societies are there with high inequality where the poor aren't discriminated against or pushed around by those with money?
Sure, in theory inequality isn't the same as:
- Regulatory capture
- The political system being owned by the super wealthy
- Endless war
- Environmental atrocities
- The dismantling of public infrastructure
- The completely dysfunctional healthcare system
- The privatization of public resources
But 'not the same as' doesn't mean unrelated, since inequality is what enables these things to occur. E.g. the rich can bribe politicians to pass laws that make them richer by allowing them to poison low-income minorities or whatever. And while reducing inequality may not be the perfect solution for the reasons stated, it's not clear that a better solution exists. (Sort of like how democracy is the worst form of government, except for all others that have been tried or whatever.)
Even if economic inequality is intrinsically good, which I think it is, it doesn't follow that reducing inequality is bad.
What I'm saying is that if you take all the possible wealth distribution curves, the efficient frontier probably won't be at the extremes. That's not ignoring the negative side effects, rather it's cost-benefit analysis.
I guess if one so brazenly believes that to be true, then it must naturally follow that PG would support further inequality.
So it is not that he is against economic inequality per se. He is simply sure (perhaps falsely) of its causes, and believes that if those causes are the majority drivers, then the benefits outweigh the cost.
If he were to be proven wrong about the breakdown of these causes... his opinion might shift.
Quoted from his original essay: "And while getting rich is not the only goal of most startup founders, few would do it if one couldn't." [0]
I just can't sink my teeth into thinking that's a universal truth. It's true right now because that's the current rules of the game. You build a company and then make a ton of money, otherwise, you failed. Yet, there are 500+ reasons someone or a couple of people go into a company together, but money being the default driver, seems really cynical to me if you think that's needed to keep people starting companies.
It also has multiple consequences. Some are good, but some are bad.
Something doesn't become good or bad by its causes, but by its consequences.
Startups that capture wealth by creating value that wouldn't exist otherwise are, in my opinion, unquestionably good, even if they increase inequality.
But don't some of them try to capture wealth by striving to get monopolistic positions using network effects, mergers and acquisitions and such? Didn't Peter Thiel even write a book promoting this?
Capturing wealth through a monopoly on things that would otherwise have been created by competitors and that would yield lower margins if it wasn't for the monopolistic features of the specific market, is not that ethically different from theft.
A lot of technologies are a small jump from previous building blocks. Bob Kahn and Tim Berners-Lee are responsible for a huge core part of the innovations Facebook and others rely on but it's Zuckerberg who made all the money because he captured a natural monopoly, not because he created more value than Kahn and Berners-Lee. Twitter is a simplistic and obvious product that someone else would have created a long time ago if it hadn't already existed. If it wasn't for network effects, how do we know there wouldn't be another social network providing 10x the value to its users than the current ones? The monopolistic network effects _prevents_ this kind of innovation through competition.
I'm not saying people shouldn't get a chance to be well compensated for the risk they take and the effort they put but even in startup world, at a certain level of very high inequality, when inequality reducing free market competition forces don't seem to be materializing for long periods of time, suspicions of an unethical and detrimental ecosystem can reasonably be justified.
There's nothing particularly wrong with doing damage control if you think people have misunderstood or misrepresented you. And PG is doing damage control here. Why else post such a "simplified version"?
> For example, instead of attacking economic inequality, we should attack poverty
The problem in America, and the world, is not poverty. In fact, by some metrics poverty rates have never been lower[1] and by others it's near all time lows.
The problem is the oligarchs avoiding taxes, while everyone else (even plain old millionaires shoulder the burden for them). PG reaps obscene levels of benefits from the carried interested tax loophole, so he avoids citing a plan to attack this specifically other than saying tax loopholes in general are bad.
Shame on you PG.
[1] http://money.cnn.com/2015/10/05/news/economy/poverty-world-b...
I'm not sure I buy that claim outright. I'm not sure I like asking whether THING is good based on claims about the goodness of CAUSE OF THING. If hugs caused cancer, would that make cancer good? Not certain, but I do believe it would make hugs less common.
The problem with an argument like this is that it does nothing but preach to the proverbial choir. Either I buy into pg's worldview about where notional value is derived, or I don't. If a startup founder gets rich creating some new piece of technology, do they deserve the sudden windfall cash that they received? Did the VCs who provided the capital deserve that windfall? Do the workers who actually created a lot of the value in question through their labor get compensated proportionally to the value they built?
It's not an easy question to answer in the long run. Regardless of the goodness of income itself generated from VC processes, it continues to be worthwhile to question the economic engines that run off of global income inequality. When it makes economic sense to grow cotton on one continent, ship it to another for manufacture, and ship it to yet another for sale as a T-shirt, there's something fundamentally inequitable about how we pay people for their labor.
That isn't to say I've abandoned capitalism for outright marxism. But it is hard to really think about "attacking poverty" in any meaningful way that doesn't address the marked difference in wealth and potential to earn wealth between rich and poor, especially in a globalized, post-(and still)-colonial world.
So, sure generating any income in any way will cause income inequality by pg's formulation, whether it's billions from a lucky unicorn IPO or tens from a day's labor at a US minimum wage job, or far, far less making shirts in Bangladesh. The disparity is still something to remark on, especially because that disparity is really one of the major markers of power over one's own future opportunities.
And does the owner of capital (investor, banker) deserve the profit (s)he gains? As jivardo_nucci said once on this very forum:
The simulation studies of Bouchard & Mezard show that, regardless of initial conditions, wealth distribution ends up a Pareto distribution with a small percentage taking almost all of the goods. The take-away of Bouchard & Mezard's studies: the very rich aren't rich because they earned it (i.e., because they are skillful or knowledgeable), they are rich mostly because they are lucky.
All my life I've assumed that, when people had a going concern or were rich, that they _earned_ their wealth. But Bouchard & Mezard says they're, for the most part, simply very lucky.
If luck, rather than skill, is the source of one's wealth, then has one "earned" that wealth? How can one lay exclusive claim to something given by chance? I would contend that no such claim can be made.
In particular, I would contend that income gained through luck is fair game for government acquisition through taxation, and if it is possible to distinguish that portion of wealth due to skill from that due to luck (and such appears possible), then the "lucky" portion is open game for acquisition to be spent or redistributed as decided by the powers-that-be.
Wealth Condensation: Why the Rich Get Richer (and the poor poorer): http://iwillknow.jesaurai.net/?p=387
The Mathematics of Inequality: https://www.austms.org.au/Jobs/Library4.html
FWIW Bouchard & Mezard are not the only researchers whose models say this:
Chance helps the rich get richer, simulation study finds: http://www.world-science.net/othernews/110722_chance.htm*
In my view the rhetoric of "attacking" inequality is overblown, even if I'm guilty of having used it myself. Instead, let's just say that some form of redistribution -- to use a broad term -- is not an "attack" per se, but simply a practical way to maintain a decent society.
The longer an essay is, the further apart the main arguments are and the easier it is to forget parts of the essays. The ones we remember most saliently, of course, are the controversial claims that trigger an emotional response, not the paragraphs of simple history fact-stating that builds up to the conclusion. As a result, responses to the essay tend to strip out the context of claims and argue against them in a vacuum.
They're just skilled opportunists; our genetic inheritance from our reptilian cousins.
More likely from our primate ancestors, don't you think?
Nope, it's not bad until you need to buy something!
(BTW is this PG post not some strange form of denial?)
PG seems to forget about the infrastructure (bankers, financiers, venture capitalist firms, etc. - the entire financial industry) built around startups, as if the entrepreneur were a Jesus figure responsible for it all and who might somehow be crucified for it all. Psychologists call this a "grandiose delusion". Nonetheless it is glorious hogwash - an entrepreneur w/o the infrastructure is merely yet another nutball to be kicked off the front doorstep of venture capitalists. And as the dotcom boom and bust showed us, no entrepreneur is necessary at all - greed and a placard with a catchy ".com" on a door was often enough to make a fortune!
Good news: PG need not be concerned that he will be run to ground ("hunted", in his terms) before his bankers are; there are far more (and far wealthier) bankers, profiteers, and their employees than successful entrepreneurs, certainly enough to keep the masses busy for a decade should the French Revolution visit Silicon Valley!
>"The great concentrations of wealth I see around me in Silicon Valley don't seem to be destroying democracy."
They are: they work for the NSA, the CIA, the FBI, for hundreds of government agencies, for Google and Facebook. They have blindly destroyed privacy in both in our personal and social behavior. They want more. One need only open one's eyes.
http://nbviewer.ipython.org/url/norvig.com/ipython/Economics...
"Many have preconceptions about how economies work that will be challenged by the results shown here"
- How much more should a 50 year old earn more than a 20 year old on average ideally? - How much should the lifetime earning of someone holding a PhD be over someone with only a high school degree - there should be at least some premium for going through extra years of school right? - What's a reasonable amount of inequality due to people choosing a career in which they will be happier, at some cost to the paycheck? - Should people be allowed to work more (e.g. 50h/week) if they wish? This will increase inequality. - etc
A lot of those questions would be very difficult to model, but I bet the graph would look a lot more inequal at the end than most people envision their "ideal" graph to look like (which is shown in this classic video on wealth distribution: https://www.youtube.com/watch?v=QPKKQnijnsM)
It's a very complicated issue. The Capitalist class does deliverer Capitalist development. But at the same time it immediately captures most of the value that it delivers leaving a system of servitude called employment... and systems which are homogenous but yet are functional in the form that is found acceptable to its logic of production and consumption through efficiency.
On the other hand the Capitalist class because it has money and therefore power, at times acts in corrupt ways destroying the environment, taking away people's rights, making things unnecessarily hard.
Given its fight with Communism, it was not as if it played it cool, sitting back and watching and saying, maybe Communism can do certain things better.
Instead it immediately went to war demonizing and fighting it as much as it could.
It seems as if the Capitalist class can only be subdued when it feels that its own game is over. And it seems like we have to let it do just that.
People are greedy and have many social problems. This was one way of ordering them. There are a million other ways of ordering them. Whose time will soon come.
Just sit back and watch the show.
Paul is fan screaming for the home team, when the game is over and they've won. But soon there will be no more games. Their time has come and gone.
>We will not do a good job of fixing the bad causes of economic inequality unless we attack them directly.
I would replace "will not" with "may not". If the "good" and "bad" forces at work are sufficiently correlated in their ultimate causes then a blunt metric of reducing overall inequality might turn out to be a nice strategy.
EDIT: In particular if per capita income is known then the total variance and behavior in the tail may place strong constraints on the fraction of the population below a threshold.
Which, as it happens, nearly always is entwined with wealth and income inequality.
The ultra-rich get to have a megaphone for their agendas, ideologies and opinions, with a level of political influence none of us will likely ever come close to seeing.
Are they? Seems to me that question is far from settled.
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.