Income Inequality and the 'Superstar Effect'

Changes in the tax code are important to consider. As a thought experiment, imagine if the top income tax rate was still 91%. (During the 30s, 40s, 50s and early 60s, it was 91% on income over $100,000, about a $1 million in today's money.) How many stars would ask for income in excess of $1 million if they knew it would be taxed at 91%? They would probably instead ask for various perks, which was the trend in the US during the mid-20th century. Asking for perks instead of cash remains the trend in those nations with strongly progressive tax rates, for instance, Sweden.

He says:

Making wealth is not the only way to get rich. For most of human history it has not even been the most common. Until a few centuries ago, the main sources of wealth were mines, slaves and serfs, land, and cattle, and the only ways to acquire these rapidly were by inheritance, marriage, conquest, or confiscation. Naturally wealth had a bad reputation.

Strongly implying that in the modern world most large fortunes come from making wealth, but presenting no actual evidence. From observation, most large fortunes come from trickery: either in markets or by being hired as a CEO and negotiating high, non-measured compensation by abusing conflicts of interest. I haven't studied the question carefully, though. Has anyone?

He also strawmans the pure-pie model. The real pie model looks something like this. A very large group of people collaborate to create something of value (even in software, there are library authors, hardware makers, ISP maintainers...). Some are part of the same company. Some are tied in via contracts, shaped by negotiators. Once the good is made, the wealth is divided up among the team. (Simultaneously, the team works on the next hunk of wealth -- it's a pipeline, not an alternator.) It is meaningful to look at the distribution phase in isolation, with the caveat that how the distribution phase impacts the production phase is a factor in how good the distribution model is.

'Blogger Danne Nordling pointed out a strange fact about the book. Its measure of inequality, the most important factor in the book, is not gini, the standard inequality result. They seem to use 20/20 richest and poorest ratio. Why make this strange choice, when their source (UN Human Development Index) has gini? I smell data mining.

First for fun I did a simple regression of life expectancy on income inequality and per capita GDP for all countries the UN has data for. The correlation between inequality and health is not statistically significant. '

  taking things by force from people performing better

The pertinent point is that people perform better through a combination of 'working hard', 'being more able' and 'luck', where the latter is not to be underestimated. You're elevating 'economically better performance' to 'being morally entitled to a greater share of our aggregate affluence'. That is as hard to defend as any other moral standard and probably not a debate you wish to engage in. I certainly don't believe all those bankers have 'performed better'. Many have merely been lucky, many others have gamed the system.

It also shouldn't be necessary to argue that point. What we care about is 'what works?'. How much wealth should people be allowed to keep, to optimize the sum of their performance not just in terms of economy, but also in terms of humanity. What have they added to this world, to all those around them?

I gladly give up half my income to live in a society like the one I live in. I love the Western European welfare state and regret the American winner-takes-all mentality that disregards how lucky you are to live this specific life in the first place. I'm not just me; I am everyone I love. You cannot convince me of allowing you to retain more of your wealth, unless you can convince me that it would not decrease the wellbeing of people I love, including those that are disabled, without a job, etc. Today you, tomorrow me.

I will offer a pre-counterpoint: equality is not (should not be) about everyone being the same or at the same level, but more "from each according to their ability" — but at the same time considering the 100% effort from everyone to be (nearly) as valuable. This leads to the second question of what you consider essential in achieving exellence: I hope you can offer more of an explanation than "more money as reward".

What's ironic is that a world of fewer and fewer superstars making more and more money is a world in which there is more and more equality - in that all the others are equally in shadow of the few superstars.

My Freshman philosopher professor told a parable. One despot asked advice from the another. The second despot lead the first to a field and proceeded to spin his staff, cutting all the stalks of grass above a certain level. That illustrated how to maintain the highest level stalk of all.

I'm into to the rejecting equality thing. I am seriously. I just suspect you haven't thought all of it through...

(for example, have you read Nietzsche?)

Arguing against a "goal of total [income] equality" wouldn't be as interesting though: pushing for total income equality is not a mainstream policy position.

I think that what you're saying is that decisions need to be made in the scope of the current context. In other words, they need to be made subjectively. In other words, we can all be equal under the law. I am just as important under the law as anyone else (at least in theory). But that doesn't mean that the courts need to treat everyone the same.

In the context of a company, all employees can be more or less equal. But that doesn't mean they need to be treated the same. Everyone is different, and you need to take that into account when you decide on salaries and position and whatnot.