Hacker News Reader

Comment by saalweachter | Hacker News Reader

The problem with differentiating between the "good investor" and the "lavish lifestyle guy" is that the good investor is actually the one that you (rather, Piketty) need to be most worried about.

People worried about inequality aren't (just) worried about the morality of consumption -- a fat cat sitting atop a mountain of cash drinking champagne and eating caviar while the peasants starve. They're worried about maintaining a democratic society, where everyone gets roughly an equal say in how things go. Highly concentrated wealth is a threat to that. Someone with enough money can single handedly change the course of politics (by funding candidates, lobbyists, or directly bribing various parties), public discourse (by controlling media corporations and through them who says what on TV or in print), and even science itself (by funding some researchers and not others).

The sleazy but short-sighted hedge fund manager bringing in a million plus a year but spending it all on yachts and McMansions isn't a threat. Bill Gates and Warren Buffett, the good investors, are the ones walking around with nukes. They could choose to blow us up at any time, and it's only through their continuing mercy that they haven't.

Wealth taxes are about disarming everyone -- good and evil -- for the safety of us all, not about morality.

View on HN

One thing that always bothers me about wealth distribution is that you can't simply move wealth around and expect things to get better. People who have wealth are going to be better with that wealth than people who don't. They grew up with wealthy people, have managed the wealth for a long time, have witnessed mistakes and successes, and overall have spent a lot of time contemplating wealth.

If you take that wealth and move it to the average person, even if their fundamental intelligence is equivalent, their experience, education, and exposure is going to be a lot lower.

"They're worried about maintaining a democratic society, where everyone gets roughly an equal say in how things go."

It's an unpopular opinion, but I don't think that everyone should have a roughly equal say in how things go. The average person isn't as well equipped to deal with large problems as the elite are. Everyone has different specialties, and different volumes of abilities. You wouldn't let an intern have an equal say as a senior engineer when designing the core infrastructure. You especially wouldn't let the janitor have an equal say - he's got no experience in desiging such things!

I'm always very uneasy about equality talks because all people are not equally suited to make global policy decisions. Nor are they equally incentivized to make the most informed and rational decisions.

I'm not saying that there isn't a problem or that we shouldn't do anything about it, but I am saying that I disagree with an egalitarian approach. We want the majority of decisions to be made by people who understand what they are deciding and have lots of experience, not to be made by individuals who mostly understand the topic from a single reddit thread. We want to make sure that the incentives of the people in power are aligned with the people who are not in power, but leveling the playing field is not an approach I find valuable.

> It's an unpopular opinion, but I don't think that everyone should have a roughly equal say in how things go. The average person isn't as well equipped to deal with large problems as the elite are.

To really get to the truths behind this opinion, it is important to distinguish one's political goals from the politically implemented policies in pursuit of those goals.

I fully agree with you that the average person is not well equipped to decide on policies. However, the vast majority of people in the elite aren't equipped for that either! Look at somebody like Bill Gross, for example, who was removed from PIMCO after continuously making bad investments based on his misunderstanding of basic economic facts. I wouldn't want somebody like that calling the shots in government.

Honestly, I would expect the connection between wealth and quality of policy analysis to be relatively weak. Education is certainly a confounding variable, but not all education is equal. (A good computer scientist doesn't necessarily make a good economist.) In fact, in certain policy areas such as economics, being part of the elite - which usually means being a high-level executive - is probably a negative for the quality of your policy analysis, because executives see the world from a micro-economic perspective rather than from the macro perspective that is needed in politics.

In any case - I agree that a certain level of "elitism" is probably justified when it comes to the question of policy analysis, though you really have to be very careful who you think the "elite" is in that context.

However, if you leave politics up to an elite, then the goals of politics will also shift to match the goals of that elite, which is probably not a good representation of the goals of the overall population. And therein lies the real crux, because when it comes to deciding what the political goals should be, everybody really does have the same qualification. And this is ultimately the reason why democracy is the right way to go.

The tough problem is to establish institutions that translate democratically established goals into good policy.

> Honestly, I would expect the connection between wealth and quality of policy analysis to be relatively weak.

Listening to the Walton heirs speak is a good way to be cured of any assumption that the economic elite might actually be smart. (And if you don't like listening to them speak, you can just read about the repeated DWI convictions.) That's 4 of the top 10 richest Americans right there.

Well said.

Bill Gross is incompetent? The guy who used to manage a 2 trillion dollar bond fund? I can think of many economically incompetent people, but Bill Gross is not one of them. A terrible manager, yes, but not incompetent.

One of my favorite Churchill quotes is, "The best argument against democracy is a 5 minute conversation with the average voter."

You're position isn't all that strange, and it does cut right to the heart of the issue. Do we really want to live in a democratic society?

Part of the problem with addressing this question is that we've generally agreed the answer is, 'Yes'. Even if we're not always willing to fully live that way. No one wants to be labelled as undemocratic, non-westerners get their countries bombed when they get that label.

Another problem with this question is that the other systems of governance we've tried have mostly been worse. When you start trying to figure out how some people can have more say than others based on their merit you inevitably end up picking winners based on something other than general merit.

Who gets to be more important than the rest? How do you hold them accountable as a class if they're the only ones that can ever hold the reigns of power?

I appreciate your honesty about this, but your opinion also scares me. Because there is no way to achieve your perfect world without privileging the rights of some over the rights of others.

I also don't like your comparison of decision making in business to that of decision making in government. In business it is easier to determine good outcomes. If more money is made, we made the right decision. Government involves morality, and outcomes cannot be measured with amoral assumptions of correctness. One person's good outcome in government is another person's bad outcome relative to morality.

You're probably right when you say that the elite are better at holding the reigns of power than the rest of us. It's a very monarchist thing to say, but it's probably right in many contexts.

And like monarchies it's something that I believe we should fight to change. John Dewey recognized this, and made it his prime motivator for compulsory education in the United States. To train citizens for a functioning democracy.

Democracy to me isn't some state that we sit in and relish. It's something we focus on improving through constant education of ourselves and by teaching those around us.

That quote is often attributed to Churchill but I haven't seen a clear citation yet. For his citable quote on democracy and the so-called Churchill Hypothesis see http://muse.jhu.edu/journals/journal_of_democracy/summary/v0....

"If more money is made, then we made the right decision"

Unfortunately this is so often true in a purely financially oriented point of view however it completely neglects moral obligations which SHOULD supersede financial incentives if need be.

Definitely. That's precisely the argument against relying on GDP or similar measures as indicators of "progress": https://www.youtube.com/v/cpkRvc-sOKk?start=54&end=141

Oh, GDP is useful, because it correlates well with most other indicators of progress that people have come up with.

> It's an unpopular opinion, but I don't think that everyone should have a roughly equal say in how things go.

So something that comes up in any discussion like this (economics, politics, global climate change) is that there are several layers of questions to the debate. Some of the questions are matters of preference, some are matters of fact or science. For instance, on the topic of inequality & a wealth tax, we could have these questions:

  * Is a democratic society desirable? (a matter of preference)
  * Does inequality (in wealth) distort the democratic process? (a matter of fact)
  * Does a wealth tax correct the inequality in a way which solves the problem? (a
    matter of fact)
  * Is the wealth tax the best way to solve the problem? (a matter of preference)

For more fun, different people could have different questions, but it still makes for plenty of hilarity when one person is arguing whether a wealth tax is effective and another is arguing whether it is desirable and another is arguing whether it is necessary, and no one understands why they aren't making any headway.

Now, to tie this around to your comment, I would clarify that what I mean by "a democratic society" is one where every person has an equal say in matters of preference. In a rational society, these are the only disagreements. I am happy to debate whether, if climate change is happening, we should do something about it. I have neither the desire nor the time to argue whether it is happening or whether it is man-made; these are matters of science and my preference matters not one bit.

The problem we have now is that both matters of fact and matters of preference are up for debate, and the extremely wealthy have a disproportionate say in both.

> It's an unpopular opinion, but I don't think that everyone should have a roughly equal say in how things go. The average person isn't as well equipped to deal with large problems as the elite are

The usual trouble with this sort of idea is who gets to decide the "elite" that makes the decisions. How do you prevent this group from becoming an insular clique and debar other people from similar opportunities etc.

Power, imho, has a tendency to be self-propogating; people who achieve it hold on to it far after it is useful and tend to bestow it on their proteges, irrespective of their suitability to the task etc. (Anyway it is an opinion; you may disagree)

No I totally agree. I believe that there should be an elite who makes most of the decisions, which is mostly how things are today, but I also believe that there needs to be methods of being sure that the elite are operating in everyon'es best interest, and that they will be replaced if they aren't.

There are a lot of broken incentives. If one of the elite comes to the realization that they are no longer the most useful person for the job, can we trust that they'll step down? Or will they hide this fact from everyone else and continue to enjoy their position of power?

These types of problems are not solved and it's important to keep looking for better solutions. I just don't think that "all people have equal say" is a better solution.

Do you see this system of the elite ruling as an ideal that will never be reached (a la Plato's Republic) or as a practical system? Because in the latter case, you've got an intractable problem on your hands.

The problem is a basic political systems one: at some point, you need the consent of the governed. There are no stable systems on the record where a majority of those governed dislike the leadership. Either the oppressed are a minority (colonial Europe, slavery in the US) or the gov'ts are short-lived and unstable (on an order of 50-100 years, in the short term these can work). The most stable regimes that don't have majority support are ones that suppress free speech, which is hard to argue is operating "in everybody's best interest".

So, if you want a stable oligarchy that preserves some free speech, you need a group of "elites" that the whole society agrees is fit to lead them. I don't think the average voter believes themselves to be in the best position to run the country -- that's exactly why they vote for somebody else to do it.

But if you take voting out of the equation, you're trying to build a system where you have an elite that has support of the majority, without consulting the majority. At best, you have a system of guesswork that results in something similar to democracy (because the oligarchy are people the majority supports anyway). At worst, you have an unstable government.

It's a good point. But are there always only two groups, the elite and the majority, or could we create more? It seems to me power works best for everyone when it is more distributed, less uniform, and exists on a gradient from the elites down to the majority. Maybe a government structure could enforce that. For example, instead of just America's, Executive, Legislative and Judicial branches, we might also have additional branches for Education, Finance, Security, Business, etc., each having some (but not always equal) constitutional power over other branches, and all trickling down in power to the majority that has voting rights.

What you're saying is basically boils down to maximizing the complexity (integrated information) of the system. That is possible by increasing differentiation and integration. It is better power to be divided in more fragments, each differentiated from the rest, and then integrated with each other so as to be forced to create a dynamic equilibrium. That's what our brains are doing too, on a scale much more complex.

As reference, the concept of integrated information was developed by Giulio Tononi but I applied it in a different field.

Exit rights are a good starting point for a solution.

Representative democracy is the elitist idea that elites will run the government but with an escape valve to let average people have some input into the system to prevent the elites from becoming too insulated and ignoring the needs of the average people.

But representative democracy breaks down when moneyed elites take control of the voting system. Then it's just elites all around with no input from the population.

If the noble concepts supposedly behind democracy had any traction with governments, they would have led us to a direct democracy, not a representative one. Instead, we get a half-assed attempt at letting free-people to rule themselves.

Forget money as some sort of concept that breaks democracy by allowing people to game the system. The bigger problem you have to worry about is the smooth-talkers, the influential leaders and all their legions of followers. Their single influential vote, counts a whole lot more than yours, or ours, and that single vote means no equality.

What about the fact that most direct democracies, aside from making representative democracy look practical, all failed when confronted with the real world ?

Besides, having read the history of Athens, direct democracy can be described as mob rule, and there the problem of 51% of the population votes to kill off the 49% others was a very real problem. Every American probably can imagine the problems guilds created in medieval Europe, right ? Athens was a state where the equivalent of guilds could literally and legally decide to kill the competition (which they did, several times).

Besides, let's not lose sight of reality here. America would be a near-theocracy if it was a direct democracy.

>If the noble concepts supposedly behind democracy had any traction with governments, they would have led us to a direct democracy, not a representative one.

Switzerland seems to work pretty well by direct democracy.

Well, I was curious of what you mentioned, so I looked it up. Switzerland is a Federal multi-party directorial republic with elements of direct democracy.

I do recall reading up on that recent referendum they had about the capping of CEO wages that didn't go through. But thanks for the heads up, I'll look into what they have going on over there with their flavor of democracy.

We also voted against an extra week of vacation here in Switzerland. And we decided to forbid the construction of minarets, a sad low-point in the history of our democracy. But you know what? It keeps everyone involved and engaged in political matters. Because in principle anyone can make a proposal, collect enough signatures, and there will be a binding vote. The mentality is "we control the government". Of course, there is still the manipulation of the masses, politicians prefer to re-interpret what we voted about (they aren't allowed, but often there is some gray area and they can delay things), and sometimes a majority decision seems to be a very bad emotional one. But in contrary to Germany, people here feel more in control over the government, rather than being helpless observers. If you don't like something, stop complaining and start collecting signatures. I'm usually not very patriotic, but if you want to take my direct vote away, you can pry it out of my dead hands.

> If you take that wealth and move it to the average person.

Wealth redistribution doesn't necessarily mean taking money/wealth, literally, from wealthy and giving it away to poor. It includes, among others, subsidized education, free access to basic health care, nutritious food, potable water, eradication of epidemics, decent housing, decent retirement income and so on.

This is the problem I see in societies that are highly unequal (read US :-)) where in a democratically elected government is reduced to make way for capitalists. All or most of the above are controlled by multinational corporations whose sole motive is higher profits. So what ends up happening is that even a middle class family is just one calamity away (e.g., death of bread earner, a high cost health problem) from being pushed below poverty line. Even education for that matter has gotten privatized to an extent where only wealthy can afford good education; as various studies have shown education does make a significant difference when it comes to money earned over longer period. Or take 2008 recession where pension corpus of millions was reduced to zilch for no mistake of theirs.

Wealth distribution, at least in my mind, means that ensuring that most of the citizens are on level playing when it comes to basic necessities. Over and above that of course one must be rewarded as per their contribution to the society and hard work.

Poor are poor not just because they don't have money but also because they are unable to get out of it. They have to go through unspeakable ordeal just to get one meal a day and this places enormous cognitive load on the entire family. So of course children of poor, more often than not, remain poor as their basic intelligence itself gets suppressed due to lack of nutritious food, cognitive load etc.,

The book, "Poor Economics", was an eye opener for me in this regard. I once used to blame the poor for their situation but this book changed all of that. I would highly recommend it; to the extent that this should be made a mandatory reading in all colleges :-).

> We want to make sure that the incentives of the people in power are aligned with the people who are not in power.

This is really a tough ask. Unless decision makers, i.e., those in power, are accountable, every single day, to those not in power, decision makers will soon align themselves with private, capitalist corporations. You have a multi billion dollar arms manufacturer, oil corporations funding millions to election campaigns of US presidents. And then you have US citizens who get to vote once in five years; we also know that the voting itself can be rigged, public opinion can be swayed and etc., Now, whom do you think would the president side with? Oil corporation or US citizens? The answer is obvious! And so you will end up having Iraq war which is yet another way to funnel massive amount of tax payer money to private corporations; the cruel irony is that most of foot soldiers who are fighting the war and dying come from poor, disadvantaged families.

Democracy as it's played out in US (and India) today is a complete farce. The fact that executive powers and policy making is concentrated in so few a hands in itself is indicative that this isn't democracy. Instead of giving power to the few and somehow hoping that their interests are aligned with rest of the citizens what needs to be done is build strong institutions.

Democracy is fundamentally about strong institutions (court of law; education system; health care system; labor friendly laws) which are run and maintained by common citizens. Elected representatives' main job is do minor tweaks to the policies. This way the executive power remains with the commoner.

What has been happening is a very systemic eradication of these democratic institutions; privatized education, private health care; private police force; private fire fighters and so on. Once you have hallowed the core of democracy by privatizing it you are left with just a handful of elected representatives who wield enormous power over rest of the citizens. They of course end up serving private corporations. US is run and controlled, more or less, by just a handful of private corporations which are in turn owned by a hundred individuals. Election, democracy etc., is just to keep the citizens believing that they have a say in the way the society is run when the reality is completely opposite. India, following the foot steps of US, is getting there really fast.

Eloquently put and very true. Agree on the point about India. Similar thing has recently happened in Australia where Abbott seems to be a stooge of Rupert Murdoch and few other big corporations - and his position as PM seems to be purely ceremonial. As always, the classic talk by Lawrence Lessig [1] makes a really passionate plea to reverse this trend.

[1] http://www.ted.com/talks/lawrence_lessig_we_the_people_and_t...

Thanks for the link! Very sharp and cuts to the chase.

"Wealth redistribution doesn't necessarily mean taking money/wealth, literally, from wealthy and giving it away to poor. "

What? How could you possibly describe it any other way? You take cash from a wealthy person, and you give it to other people, either in dirk react payments or sbisized/free services.

Argue about whether that is the correct/incorrect thing to do all you lie, but don't indulge in Orwellian doublespeak that says true is false.

Looks like you're getting downvoted, even though your statement is basically correct. It's very sad that it's getting harder and harder to have a fruitful discussion here on HN. Some people are more interested in downvoting based on their immediate emotional reaction, rather than having a rational, honest discussion.

If you disagree with someone, then reply to their post and try to have civilized discourse, don't just immediately try to censor them.

Eh, I'm used to it. I don't particularly care about karma points. I'm proud of my unfashionable opinions. Each one is the result of careful thought, aware from the blare of popular media and popular opinion.

The herd instinct is getting stronger, and the rush to censor unfashionable opinions increases on HN. Which is funny, because one of the best essays by pg is 'what you can't say'. Closely followed by 'mind the gap'. Which essentially says that inequality is a sign of a healthy society, because lack of inequality shows the innovators and risk takers have gone elsewhere or closed up shop.

Maybe it was my tablet spelling mistakes in my post.

From my point of view, you were more likely downvoted because you singled out a single sentence of your parent's (thoughtful and lengthy) comment to knock down in bad faith, rather than making an interesting argument about wealth distribution and inequality.

Your views about these things aren't at all unfashionable on this site or in American society at large, and many who disagree with them still think they are reasonable and worth discussing. Your comment just didn't express your perspective very well!

I didn't downvote you, but your post was seriously crippled by the tablet spelling mistakes (especially replacing lie for like).

If you can, I encourage you to edit it.

Edit: also, your argument adscribing the "Orwellian" adjective to the previous post is very strong and can generate negative reactions (like a downvote).

> How could you possibly describe it any other way?

You could describe it in the many thoughtful ways in which the rest of the comment did describe it, for a start.

The comment it was in reply to also made it seem like the idea is to take wealth from a single wealthy individual and bestow it upon a single poor individual, noting that the newly wealthy individual probably doesn't know what to do with it (like many lottery winners). That is clearly not the intention of literally anybody who is in favor of some redistribution of wealth. Rather, they propose many different ways (some of which were mentioned by your parent comment) that wealth would be spread across many less wealthy people.

He was trying to make a subtle point, and you've knowingly interpreted it in the strongest possible way, in order to post a substance-free truism.

To then complain about "orwellian" use of language in the next sentence is just taking the piss.

>Poor are poor not just because they don't have money but also because they are unable to get out of it. They have to go through unspeakable ordeal just to get one meal a day and this places enormous cognitive load on the entire family.

That seems like it should be true intuitively, but if it were true, you'd expect higher benefit levels to correlate with higher rates of getting out of poverty. The data points to the opposite happening.

For example: http://www.manhattan-institute.org/html/cr_17.htm

That study is the complete opposite of the experience of Nordic and Northern European countries with very strong welfare programs and very high class mobility.

Methinks that given the political bias of the study and the fact that it takes a particularly period for the American economy, that there's not much to learn from it.

Also, the fact that single mothers who were on welfare are now working is not actually a good indicator for me. I want the single mothers to have to raise their children in decent environments though maternal leave and good family policies, instead of seeing them work full-time out of necessity.

The institute seems to have a political agenda/bias.

[0] http://www.rightwingwatch.org/content/manhattan-institute-po...

[1] http://www.manhattan-institute.org/southparkconservatives/

[2] http://en.wikipedia.org/wiki/Talk:Manhattan_Institute_for_Po...

I think welfare is only one tool against poverty, far from being the whole solution. Actually nordish countries have many more tools against equality, like health coverage and free education. Welfare, even in those countries, is the last "fallback", nothing more. So the study is really biased on the people with the most problems. No surprise they don't get out of it well.

That's interesting, could you please share the data ?

One thing that always bothers me about wealth distribution is that you can't simply move wealth around and expect things to get better.

Things have gotten better in countries which have reduced inequality: https://www.youtube.com/watch?v=cZ7LzE3u7Bw

Don't confuse persons with populations. They are not the same thing. A person is very different from a population.

Ok, lets assume you are correct: Experience beggars experience. Those with know how of Russian should speak Russian, those with know how of car will fix cars, those with money shall decide what to do with money.

Obviously we don't live in a world nearly static enough for this to occur. If so then the Zuck never would have made FB nor Carnegie would have left Ireland and we all would be worse off for it. Yes, these are historical issues. Lets try a future one.

Assume that Pablo is a UPS driver. Pablo notices that many times when he has to turn left to make a delivery, he spends a lot of the time waiting at a red left turn arrow light. Pablo, needing to make his metrics, decides to cross intersections and make Uturns and rights and all other sorts of maneuvers. Pablo shares his insights with his co-workers and friends. Everyone benefits from Pablo's insights, more packages are delivered, the company spends less fuel idling, everyone makes their metrics, etc.

Now in a world where the path was designed by Paco up at headquarters, Pablo could not make those alternative turns. If he did, he would have violated the paths that Paco designed and he would have faced repercussions. Why? Because Paco knows more than Pablo and Paco is the one responsible for designing the routes. You assume Paco has superior know how and experience and will be better. But Paco is just a man like everyone else, he makes mistakes and didn't see what Pablo was doing was beneficial. Not through malice, but just because Paco looks at google maps all day, not actual light cycles. It wasn't Paco's fault, nor was it Pablo's. It was just an oversight.

But in a world where we do not assume that the most experienced are also flawless, Pablo took it upon himself to fix the problem, and everyone is ok with that.

Multiply this example by thousands and you have a sense of what is going on out there. Also, sprinkle in some greed, malice, lies, sex and drugs, and all the other deadly sins and you get why we need democracy. It's because we all screw up, but if we screw up at least we can get each other out of it.

But there comes a class of problems which I guess need no fictional example, because we're dug up to the neck in them - coordination problems. For instance, it would be better for people to agree and stop polluting the environment, or making crappy food (I don't mean fast-food, I mean borderline-unsafe food made as cheaply as possible), or switching away from fossil fuels. But we can't do that, because anyone who tries will get quickly outcompeted in the market by anyone who defects and keep doing the wrong thing. Therefore, we're stuck in local optima instead of moving to better global ones.

There is an excellent piece by Yvain that goes into deep details of those problems[0], so I won't be repeating him here much, but the world is full of such problems, and apparent stupidity of institutions and markets are usually result of inability to coordinate.

I'm not saying to give up democracy. But we have to appreciate that it has very troubling failure modes and that they're not theoretical.

Real-life democracy tends to be extremely impotent. It has tremendous operating costs (think of all the resources wasted in a zero-sum game of political campaigning), and in the end people still can't agree on things like building infrastructure (NIMBYsm) or creating laws that benefit the population. Again, I'm not saying "ditch democracy". But there is a huge trade-off between security of decentralization and effectiveness of centralization.

There's also the case that central planning doesn't suck that much - it sucks when done for humans by humans, because central planners operate at human speed. But consider that instead of Paco setting up routes, there is a computer named PCO, tasked with collecting real-time data from all drivers and optimizing routes. PCO may alter some of instructions it sends to drivers to explore the solution space, and it will quickly figure out that doing only rights leads to less fuel used. And then it may stumble upon other optimizations, like shifting delivery times in different parts of the city depending on traffic patterns - things that are impossible to figure out by Pablo, because they require global view.

I think that central planning got a bad name because of Soviet implementation, but with modern computing, maybe we should re-evaluate its costs and benefits.

[0] - http://slatestarcodex.com/2014/07/30/meditations-on-moloch/

> People who have wealth are going to be better with that wealth than people who don't.

Do you have any empirical data to back that up? The lack of old money that Gates alludes to in his article seems to suggest otherwise.

Even with the advantages that simply having large amounts of wealth gives you (better education, easier access to seed capital for new ventures, better access to other influential people etc), surprisingly few of the modern day mega rich in the US started out with large amounts of wealth.

There's also plenty of evidence (such as http://www.businessweek.com/articles/2014-07-22/for-ceos-cor...) to suggest there's little, if any, correlation between how much a CEO earns and the success of a company.

> The average person isn't as well equipped to deal with large problems as the elite are.

I would agree that not everyone is equally well equipped to deal with large problems, but I don't see much evidence to suggest that there's much correlation between wealth and ability to successfully tackle the myriad problems facing the average society. Is a multi-millionaire businessman automatically better placed to decide on education policy than a teaching professional, or on the structure of a nations health service than medical professionals etc?

>> People who have wealth are going to be better with that wealth than people who don't. > Do you have any empirical data to back that up? The lack of old money that Gates alludes to in his article seems to suggest otherwise.

Gates looked at a list of the very wealthiest people and asked how many inherited their wealth. Even if the answer is 0%, we could still ask about other brackets. Eg, how likely are Gates' descendants to be in the bottom income bracket? How likely are the children of someone in the bottom bracket to be middle class?

>It's an unpopular opinion, but I don't think that everyone should have a roughly equal say in how things go. The average person isn't as well equipped to deal with large problems as the elite are. Everyone has different specialties, and different volumes of abilities. You wouldn't let an intern have an equal say as a senior engineer when designing the core infrastructure. You especially wouldn't let the janitor have an equal say - he's got no experience in desiging such things!

>I'm always very uneasy about equality talks because all people are not equally suited to make global policy decisions. Nor are they equally incentivized to make the most informed and rational decisions.

I completely agree with this, however I don't think the guiding principle behind having a democracy in the first place, is that you'll arrive at optimum (or even good) policy decisions, provided you give everyone a say. Rather, the franchise is supposed to serve as a check on the wealthy and the ruling class, so that they can not monopolize political power. If the disparity in wealth and power grows too great, they can circumvent even that, which is what we're seeing happen in the West now.

> I don't think that everyone should have a roughly equal say in how things go.

What is the proper alternative? I mostly agree that designing government by committee is unlikely to succeed, but the problem of choosing competent people for government roles is something we largely haven't solved in all our history.

Whilst not everyone has a good understanding of a wide range of complex topics (economics, diplomacy, medical science etc.) they have a very acute understanding of their own best interests. Having a democracy ensures that policy makers at least have to convince people that something is in their best interests.

Just because a policy maker is capable of convincing the public that something is in their best interests, does not always mean that it is.

However the fact that they have to works enough of the time that democracy is working better than other systems of government so far by many measures.

You can't keep wealth and expect things to get better either... Fortunes and the opportunities inherent to them have been lost by fools of the next generation who invested poorly or just consumed. Naturally those who earned it we would say should keep it, but I'd agree with Gates/Buffet that it is a sort of odd thing. I agree we don't want inexperienced people handling the wealth and that I would say includes family of the wealthy.

>It's an unpopular opinion, but I don't think that everyone should have a roughly equal say in how things go. The average person isn't as well equipped to deal with large problems as the elite are.

You are assuming the elite are far wiser and more ethical than the broad masses. That is not at all well-evidenced.

So just out of curiosity, do you see yourself in the "have a say" group or the "do not have a say" group?

I can't speak for OP, but I'm sure most people would pick the former for themselves, just like everyone thinks that everyone other than themselves is a horrible driver.

The fundamental attribution error is very pervasive.

This is part of why (as dumb as the average person is) I'm not down with the "elite ruling class" idea, even if we're basically stuck with that now whether we like it or not (except the elites aren't really individuals but large corporate interests who essentially own large swaths of government actors who supposedly represent citizens).

"The average person isn't as well equipped to deal with large problems as the elite are. "

I tend to disagree but I guess it depends on your definition of "Elite". If I define "Elite" as wealthy people than you are wrong. Most rich people, especially if the wealth is inherited, have little to no idea how to solve "large" problems and what are the problems in the world.

I give you two quotes to think about. Both quotes are not meant condescending but just shows how out of touch they were with the common people.

Finally I recalled the stopgap solution of a great princess who was told that the peasants had no bread, and who responded: "Let them eat brioche." (Queen Marie Antoinette)

"An ancient Chinese emperor who, being told that his subjects didn't have enough rice to eat, replied, 'Why don't they eat meat?' (何不食肉糜？)Emperor Hui of Jin in Zizhi Tongjian.

The elephant that everybody pretends that isn't in the room is that what you just called weapons is the ability to create wealth. Do we really need to take it away from everybody?

Recently, capitalists aren't the ones disrupting the economy in the US, here in Brazil, in the PIIGS, or any other place that I looked. That position is always held by people with power, but little capacity of creating wealth themselves. At general, I think Bill Gates is right, and there's little scrutiny over the distributive phenomena in an economy.

If I had to choose, I'd tax consumption (with a VAT) and redistribute a fixed rate of it by a basic income. But that's mostly because of procedural simplicity and resistance to corruption. I don't think Piketty's ideas are complete enough to base a taxation system upon them.

> The elephant that everybody pretends that isn't in the room is that what you just called weapons is the ability to create wealth. Do we really need to take it away from everybody?

Any time you're considering a tax system you have to consider the incentives it creates for people.

If you have a "wealth tax" then we have to consider how the rich will try to avoid it. First, people will convert from savings and investment to consumption. You ordinarily want to tax wasteful consumption and create an incentive for wealth creation, so that's doing the exact opposite. Second, people will convert wealth into forms that are either easy to hide from the government (e.g. gold bullion in a foreign bank vault) or are not considered wealth by the tax code or that have indeterminate market value. None of that is good.

Most importantly, the only way that a wealth tax is going to do what Piketty wants is if the rate is higher than the typical rate of return on capital. If it's lower then the effect can be no more than it would be by fiddling with the tax rate on capital returns. But if it's higher then the economic incentives it creates are catastrophic. It literally becomes more profitable to hoard cash in a mattress than invest it in anything that would disclose its existence to the government, or to move it all into foreign investments and take whatever steps necessary (up to and including renouncing citizenship) to eliminate any claim the country imposing the wealth tax has on it.

> If I had to choose, I'd tax consumption (with a VAT) and redistribute a fixed rate of it by a basic income. But that's mostly because of procedural simplicity and resistance to corruption.

This is actually a very strong alternative. VAT has an unintuitively strong similarity in effect to corporate income tax with the exception that it's much harder to avoid by diverting income to foreign subsidiaries because the VAT applies the same to imported goods as domestic. The existing corporate income tax is effectively a huge subsidy for goods imported from countries that have no or less corporate income tax.

And a basic income does exactly what you want in order to reduce the concentration of wealth: It gives people at the bottom and in the middle the ability to take the risks that promote upward mobility without having to worry about starving or freezing if it doesn't work out.

> Most importantly, the only way that a wealth tax is going to do what Piketty wants is if the rate is higher than the typical rate of return on capital.

Note that one important reason why Piketty wants a wealth tax is that this would lead to much higher quality data on the wealth distribution (I haven't read the book, but he says so very clearly in his TED talk).

> But if it's higher then the economic incentives it creates are catastrophic.

Frankly, this sounds much too alarmist. First of all, the talk is always about a progressive wealth tax in the first place. That is, few people would be affected by the highest tier.

Second, if you think about the steady state, it's clear that wealth up to the level of the highest tier of taxation wouldn't be accumulated in the first place. [0] Yes, people would try to evade taxes, but they are already doing this today. [1] More likely, this would create incentives for donations.

As a final thought, the idea of using a VAT to finance a basic income is nice, but it doesn't help against wealth inequality, because poor people generally spend a much higher fraction of their disposable income on stuff on which VAT is paid.

[0] My intuition for this comes from income taxes: During the time when highest marginal rates were much higher than today, executives didn't bother bargaining for the ridiculously high salaries that they get today, and so few people really paid those highest rates.

[1] And if you're worried about people renouncing citizenship: I think we should grow a pair and get serious about exit taxes.

> Note that one important reason why Piketty wants a wealth tax is that this would lead to much higher quality data on the wealth distribution (I haven't read the book, but he says so very clearly in his TED talk).

The problem with this argument is that it's based in the same fantasy land where people always report all of their out of state and internet purchases to their state of residence and pay sales tax on them.

> Frankly, this sounds much too alarmist. First of all, the talk is always about a progressive wealth tax in the first place. That is, few people would be affected by the highest tier.

That actually makes it worse. All the bad still applies to the people in the highest tier, but then you have the incentive to create criminal conspiracies for the purposes of tax avoidance, because putting assets in the name of someone with fewer assets will dramatically lower the tax rate. This creates a highly profitable arbitrage opportunity except for the fact that it would presumably be illegal, leaving an opportunity for criminal enterprise to step in.

> Second, if you think about the steady state, it's clear that wealth up to the level of the highest tier of taxation wouldn't be accumulated in the first place.

> My intuition for this comes from income taxes: During the time when highest marginal rates were much higher than today, executives didn't bother bargaining for the ridiculously high salaries that they get today, and so few people really paid those highest rates.

Those numbers are very misleading. The times when the highest marginal tax rates were higher also had dramatically different tax codes. In particular, "benefits" largely weren't taxed, so instead of a higher salary you would be provided with an expensive company car and whatever else necessary to provide the required level of compensation. It's the same principle as the existing corporate income tax: High nominal rates but the majority of large corporations don't pay those rates because there are widely known ways to avoid them.

It was also much more common back then for the executives to be the owners or their friends/relatives, so their "salaries" were only coming out of their own pockets anyway.

> Yes, people would try to evade taxes, but they are already doing this today.

Because the taxes we have today are also poorly conceived. What you want is a tax which applies to a very broad base and is difficult to avoid. VAT acquits itself very well on that front.

> And if you're worried about people renouncing citizenship: I think we should grow a pair and get serious about exit taxes.

Exit taxes are hopeless. Even putting aside how easy they are to avoid, the incentive that creates for the owners of growing businesses is extremely perverse: Renounce your citizenship now before you get any bigger and owe even more.

> As a final thought, the idea of using a VAT to finance a basic income is nice, but it doesn't help against wealth inequality, because poor people generally spend a much higher fraction of their disposable income on stuff on which VAT is paid.

This is a common flaw in thinking about taxation. What you spend the money on is just as important as how you raise it. Taking $50 from someone with a thousand dollars and $10 from someone with a hundred dollars but then giving them each $30 back is progressive notwithstanding that the effective tax rate on the person with a thousand dollars is much lower. At the end of the day the person who started with $100 now has $120 and the extra $20 came out of the pocket of the person with a thousand dollars. "Effective tax rate" is a totally meaningless number without "effective government benefits."

Comparing this to the current so-called progressive system is illuminating. For example, if a person making $500K makes an extra $5000 then they pay $1750 in taxes but don't lose eligibility for any benefits they were previously eligible for. If a person making $25K makes an extra $5000 then they pay $750 in taxes but also lose eligibility for more than $1000/year in need-based programs. In practical effect the marginal rate on the person making $25K is higher. Depending on what (and how many) programs they were previously eligible for, the rate can actually exceed 100% by simultaneously eliminating eligibility for multiple independent programs.

Using VAT to finance a basic income is only useless for redistributing income if income is already well distributed[1]. Otherwise, rich people will pay the majority of it (regressive or not) and poorer people will get better off. You are right that there's always a certain income that (if rich people do really invest it all) the combination will be regressive, but it can always be made big enough that it does not matter.

Also that's ignoring all the other benefits of both the VAT and basic income, in that they are cheaper than the alternatives to administer and easier to control, offer a safety net that actually works, incentive risk taking, creates no barrier for improvement at any level...

[1] Of course, the actual numbers will depend on the VAT rate, and the amount redistributed.

It's not evident in Gates's review, but one of Piketty's arguments for a wealth tax is just so we can get a better picture of wealth. He goes through great lengths to try to get data on it -- if there was a tax, even a small one, we'd have far greater transparency.

He then thinks that this would lead to changes -- because his data, no matter how good you think it is, is arguable and possibly wrong.

Does he make it clear why would the tax be needed? After all, you can impose the same information transparency requirements needed to levy the tax without actually levying it, no?

Tax evasion is a crime that's much more throughly punished than lying to sense agents or misreporting wealth. That's for obvious reasons, because tax evasion actually takes money from the hands of the government, while the later actions (that are not even consistently considered crimes) just hurt some abstract concept of data gathering, that could lead to better policies in the future, or not - nobody can be sure - for reasons that very few people can understand.

Add to that that the few people in power that do understand how data can improve policies normally have an idea what kind of improvement they'll get, and don't like it (they are in power, if they liked it, they'd already do it). While tax evasion is understood by everybody and weaken they power right now, in visible ways.

A tax does it with the force of law using the systems we already have in place. It's the cheapest, easiest, most likely to work way we have of doing this sort of thing.

Why can't we do it with the force of law using the systems we already have in place, without actually charging the tax?

The tax will make sure they list deductions, which are also useful to know.

Also, the transparency is a benefit, but so is the tax revenue. We should at least cover the expense of the program and consider if there are other taxes that should be reduced.

Haven't read Piketty - not sure I can handle it with the almost-insignificant knowledge I have about economy - but this argument seems very reasonable.

I've only read people writing ABOUT Piketty's book, and haven't seen anyone put it this way.

I'm from Brazil, and with the upcoming elections people have been all sorts of crazy down here, throwing around whatever "facts" they can find on the internet. One of the main points of disagreement between the two presidential candidates is income distribution, so "data" about it has been all over the news and conversations.

This kind of tax, if only to shed the faintest light on the matter, would definitely help. Even considering that the really wealthy people would not declare everything they have, there's only so much you can hide.

Thank you for this comment.

I think it's pretty clear from the book. I did a quick search -- this blog comment by Dan Kervick sums up the argument pretty clearly.

http://www.nakedcapitalism.com/2014/05/pikettys-wealth-tax-r...

As an example of that theory in action. Rupert Murdoch bought Fox broadcasting and both makes money from in and puts forth his personal ideology. Arguably he might have made more money with other investments, but it's been a vary solid investment. Monsanto is not just a major agricultural company they actively lobby for stronger patents. At a more pervasive level 'Climate Change' is not just science it's become a political debate with well moneyed people and organisations actively trying to influence things.

Great comment. Also, those of us who fight against inequality are not fighting for equality at all.

What we say is simple - if you have a million dollars and 100 people to share it - rather than 1 person have 990,000 and the remaining 10,000 divided among 99 we want the 1st person to have 800,000 and the remaining 200,000 to be divided among the 99. That way, the first guy can have his $5,000 wine without paying any extra tax while we have our $50 wine. In the first scenario, the first guy still gets his $5,000 wine but the remaining can barely afford two meals a day.

Don't speak for everyone. Personally I think the idea that we need wealth concentration at all is bogus. Investment is already performed by teams of skilled experts on behalf of the wealthy. We don't need individuals who simply perform the function of owning things and reaping the benefits for literally doing nothing. There are better ways we could be allocating capital. We also don't need wealth concentration to encourage people to work. The vast majority of productive people act in the economy for modest rewards and the hope of a middle class life.

The wealthy are obsolete and dangerous; we need to move on as a society from the forms that enable them.

You write as if no one has ever tried different ways of allocating capital. The 20th century is replete with examples of such "better" ways of allocating capital that failed spectacularly (often with considerable bloodshed).

No, it is full of examples of groups that established themselves as the new elites and continued maintaining the same type of semi-feudal systems they replaced.

Many of them used rhetoric about redistribution to placate the masses, yes. But there was little different but names in the methods for allocating capital in Czarist Russia and the Soviet Union: The decisions were in both cases taken by a privileged elite insulated from the effects of their decisions.

Yet it is either astonishingly arrogant or astonishingly naïve to think that "if only we got a crack at it we'd do it right."

Any mechanism of government can and will be abused. Some such mechanisms like those of centrally planned economies are not only more likely to be abused, but more easy to abuse. Worse, they are so very often employed by the same people who think on the matter and decide we're just going to have to kill the people who don't agree with us.

The only thing that makes us better is if we take those lessons from history as a warning and prioritize liberty first. These mechanisms prioritize equal outcome, which is a fools errand. Doubly so in a leaky economy.

The 20th century is also full of examples of better and worse ways of allocating capital that didn't go on in the Soviet bloc. Troll harder: there are more than two alternatives.

The vast majority of productive people act in the economy for modest rewards and the hope of a middle class life.

Devil's advocate: the vast majority of productive people do the important everyday work, but don't perform major improvements in the state of the art. What about the inventors of life-changing technology? Would the vast majority of them invest years of their life in it if it only paid the same as getting a normal job?

> Would the vast majority of them invest years of their life in it if it only paid the same as getting a normal job?

Empirically, given that academia pays much less than working in the industry, yes.

> the vast majority of productive people do the important everyday work

I beg to differ. Most productive people do completely irrelevant everyday work: optimize or sell ads, or play wall-street poker with other people's money. Very few people do the actually important work (e.g. garbage collectors, farmers, scientists, teachers).

I don't think the answer is a simple "No, they wouldn't invest those years of their life"

It seems in my experience that most people who invent life changing technology don't do it for the money; they do it because they like to create. Humans have an innate drive to create new things. While I think it makes sense to reward people who contribute to society, those rewards don't have to be unlimited.

To my mind the fundamental problem is that we insist on placing everyone on the same number line. In real life some folks may be more envious of Bill Gates while others are more envious of Joe Armstrong. In reality total ordering, or even partial ordering does not correspond to our intuitions. Real networks present a different partial ordering to each node in the network, why not build a crypto currency that exhibits this property?

Yes, stop Musk et al., doing what they're doing because we 'don't need it' 'cos it's bogus.

How your ideas could operate in other than a totalitarian state is not clear to me because you'd certainly never be able to implement them otherwise - thank goodness.

> we want the 1st person to have 800,000 and the remaining 200,000 to be divided among the 99

I know you are just throwing out hypothetical numbers but what kind of wealth distribution would you actually want? Wealth is already much more evenly distributed than the numbers you said you want.

http://en.wikipedia.org/wiki/Distribution_of_wealth

> People worried about inequality aren't (just) worried about the morality of consumption -- a fat cat sitting atop a mountain of cash drinking champagne and eating caviar while the peasants starve.

I'd go the other way in fact, if you are interested in redistributing wealth, you should encourage rich people to blow money on labor-intensive consumables. Using legal or social pressure to keep the rich from buying luxuries seems counterproductive to me.

I think you're right.

Just FYI, the line of thought of Gates here is probably based on the idea that you need "capital" in order to have a productive work force. If the rich spend all their money for consumption, then there will not be enough capital available - or so the argument goes.

I personally don't buy the argument; I believe that it goes too far into abstract models, confuses finances for the real world, and (like so much of economics) ignores the existence of banks. If Bill Gates were to sell shares to finance frivolous consumption, this would obviously not cause the physical destruction of factories and machines etc.

At the same time, it would encourage the companies he buys from to expand their production and invest. Now, some people may wonder what investors/financiers those companies can find if all the rich guys sell their investments to consume. Well, those companies can always go to banks, which have an essentially unlimited capacity for funding real-world investments.

> If the rich spend all their money for consumption, then there will not be enough capital available - or so the argument goes.

Spending money doesn't make it go away, it just gives it to someone else. If everyone spent all their money for consumption, and no one invested, that would probably be a bad thing, but short of actually punishing investment compared to other uses of money, its hard to see how that would happen.

Heck, its particular hardest to see how it would happen with the rich, anyhow. Simple declining marginal utility means that past a certain point, the additional present consumption that people find useful drops off and the value of securing an adequate future support base by investing money now vs. consuming more now increases with increasing income. The idea that we need to tax-favor investment even more than we currently do by taxing only consumption (rather than taxing income, but taxing the income from investment favorably compared to "ordinary income" and particularly favorably compared to labor income) seems to be based on a conception of human behavior that has no support at all in how humans, and particularly the rich, actually use their money in the status quo system.

Great... you make the effort of writing a balanced comment that both explains an argument of somebody and why that argument is probably misleading and/or incomplete, and it gets downvoted without a single reply actually challenging the contents (note that dragonwriter's reply simply adds another aspect to this discussion).

You shouldn't be afraid of the Gates and Buffetts of the world. These guys have found their place, they know their value and their worth and they know how to create wealth for themselves and for others. They are secure, confident, valuable human beings.

You should be FAR more afraid of all the incompetent "big shot" politicians who somehow have access to power but, due to their insecurity and low IQ, only use it to benefit by taking from others. These are the plutocrats that rule America, Russia, Europe, regardless of your illusion of democracy. These are the people you should be worried about.

What about the Kochs and Murdochs of this world? Since you mention Russia, what of the high level of corruption and organised crime that seems to be required to be rich there?

I think its telling you omit non-founding CEO's who have been placed at the heads of companies in nearly exactly the same fashion.

What about the common libertarian viewpoint that we should limit the scope of government so that the rich guys don't have any significant political power to hijack? This comes without the slowing of economic growth that would be caused by higher taxes on capital.

Exactly. We only care about who controls Washington because the gov't has such a huge say over our lives. People claim to want less power in the hands of well connected companies and lobbyists. Then they claim they want government to keep them safe from highly unpredictable events, mandate the minimum and maximum amount of money people should get, provide good healthcare to everyone, prevent kids from being bullied at school, make sure everyone's internet is fast but not faster for one site than another, make sure my french fries only contain "good" fats, allow only certain vices like alcohol but not others like some drugs, etc.

Well of course a government that attempts to do all that will be very powerful. And, of course people will spend large amounts of resources to influence a government with that level of power.

The rich don't need the government to exert influence and rig the game in their favor. For example, they can: - buy up their competitors to create monopolies - use one monopoly to build another one (e.g. "if you buy our competitor's coal, you can't use our railroad") - gain control over natural resources - collude with their competitors - abuse the legal system to kill competitors - hire marketers and fund NGOs for propaganda purposes - control the media etc.

Once they have gained control over an industry, let's say steelworking or railroads, they become like feudal lords in that industry, setting wages and prices however they wish.

Power is subject to a positive feedback loop, whether it's political power or economic power. Having power makes it easier to gain more power. That's why it will always tend to concentrate in the hands of the few.

Government power in a democracy comes from a game of "artificial equality": elections in which every person has one vote, regardless of their power "in real life". (This is different from the economy, where your power is proportional to your wealth.) For this reason, it can act against the natural tendency towards concentration of power.

I wasn't suggesting that we scrap the Antitrust Division of the US Department of Justice specifically. You make a good argument that we still need them. However, there are many other areas in which the government could be scaled back without incurring a robber baron scenario. Do some googling for "regulatory capture" and you'll see what I mean. Simplifying the tax code and the bureaucracy that comes with it is one good candidate.

I've noticed that most examples of regulatory capture provided in the Wikipedia article involve regulatory agencies failing to enforce rules on selected companies (e.g. BP was allowed to drill in the Gulf of Mexico without doing the environmental legwork, Goldman Sachs was allowed to manipulate the commodities markets, etc.), which resulted in Very Bad Things happening. These cases don't show that "big government" regulation is bad. They show that failure to regulate is bad. Off the top of my head, I can't think of too many examples of companies using the government to their own ends. OTOH, I can think of many examples of government restricting the freedom of corporations in the name of some social good. For this reason, I think that if we scaled back the government, corporations would have more power, not less. (Not to mention other negative effects of government abdicating its responsibilities in particular areas.)

Exactly. People of a partisan flavour ( and I see much evidence sprinkled throughout these comments) believe that their guy is clean and only has their best interests at heart, while the other guy is evil and greedy.

They're all in it for themselves. The key is to ensure that there isn't a big enough state to corrupt so they can consolidate and entrench their power.

A small state prevents monoloploies from being formed and from using those wielding power to consolidate their power. And then it doesn't matter how evil the guy who gets the top job is, because he just can't make a big difference.

At the heart of all this is how England managed to keep its Anglo-Saxon self-government traditions even after the continental Norman invasion and takeover. Because the Normans could only ever wield limited power at the state level, they could never fundamentally change the way the content was run at a local level. So citizen assemblies and English common law continued and was never replaced with continental law, the final iteration of which is based on napoleanic code. Thus in England, and her spun-off colonies, you're fundamentally free to do your own thing unless there is a specific law against it, while most other places state that you can only do something if there law explicitly states it.

This fantastic inheritance was all bequeathed to the citizens of those countries with legal systems based on common law precisely because England had a weak central government which reduced the ability of a king to control everyone, especially when that was a foreign king who had invaded.

They still have economic power, and no political power to keep them somewhat in check. It's the Wild West.

Interesting argument, but surely you don't think the world needs less investment? So if you're going to tax away money that would otherwise be invested in creating businesses and jobs, what do you think should be done with it instead? Or do you think the state is a more efficient investor of capital?

I do agree that wealth is a potent weapon, but that's why capitalism works best when markets, and politics are well regulated. The degree and form of regulation is a perennial problem, but it's an unavoidable one.

>Interesting argument, but surely you don't think the world needs less investment?

Right now it does. There is far too much money chasing too few investment opportunities. This is causing bubbles all over the place. Money that would have been productively invested were there demand is being funneled into property, gold, the equities market, fixed income & even bitcoin.

>Or do you think the state is a more efficient investor of capital?

Sometimes it is. It's a myth that the state is incapable of efficiently allocating capital and the private sector always does a better job. Sometimes the private sector does an atrocious job (e.g. see the massive overbuild of housing in the last decade).

If your issue is the social problems associated with extreme inequality, it's ultimately just a question of whether the tradeoff is worth it, rather than whether it grows the GDP faster or slower. There are a million ways we could restructure society, with a million consequences for the economy and the social good. It's all a matter of picking the tradeoffs we can all live with.

That being said, wealth redistribution doesn't necessarily need to mean less private sector capital investment. If you take a billion dollars away from someone who would have invested it and give a thousand each to a million people (whether through highway robbery or through raising taxes here and lowering them there), there's no reason they can't invest it all. Hell, they could invest it in a fund managed by the former billionaire, and you'd have the same amount of investment managed by the same people.

That situation is unlikely, but it also discounts the value of investments besides the sort that billionaires tend to make. While some redistributed wealth might be reinvested or 'wasted' on consumption, there are also be a lot of small investments that happen when you share the wealth. Children eat better, which improves their futures in pretty much every way. People start more small businesses, bodegas and farm stands and hair salons and startups. People spend money on education, for themselves and their children.

That sort of investment is also vital to our economic future, no less than the capital liquidity provided by the billionaires.

Investment in what, though?

We do need investment in transport infrastructure, renewable energy, health in the developing world, etc; but that doesn't offer a direct return to the investor as the benefits are distributed. In those cases arguably the state can be better. Provided the money isn't siphoned away. This is more of a rule of law / public trust issue.

Yes, the state is a more efficient investor of capital. Counterintuitive as it may be, just taking money and giving it to poor people is a very good investment in terms of the public good that results. A rich individual investing into a funded company is much more visible, but that same money spread more widely might launch hundreds of "lifestyle businesses" that would ultimately be more productive.

>"the state is a more efficient investor of capital."

Do you have evidence for this claim?

If this is the case, shouldn't the countries with the biggest governments (as a percentage of total economy) also be the ones which grow the fastest, and if not, why? How can states be so efficient when they never admit to making mistakes, (almost never) give up on failed projects, or go out of business like private investors do?

There's no evidence needed because it's a political opinion. Efficiency doesn't boils down to having the biggest GDP growth, sometimes it's not at all about the money. The HDI is probably a better metric.

Do you have evidence that states with higher government spending as a percentage of the economy have a more quickly increasing (or even a higher) HDI? It seems that efficiency of spending would influence the trajectory of your metric of interest more directly than the metric's current level (this seems obvious to me, but I can explain why in detail, if required). I can think of a few examples which would support your case, and many counterexamples, but would be happy to hear your case.

I would also think that a system's efficiency would affect the economy as well as all other indices of interest (though perhaps in varying proportion), as a healthier, happier citizenry or one with more capital goods, and better investments would grow economically as well as in other metrics.

> Or do you think the state is a more efficient investor of capital?

Absolutely! The number of inventions that was created by government investments absolutely dwarfs the number of privately funded inventions. Internet, GPS, cancer research, nuclear power.. I've never heard a logical explanation to why companies should be more efficient than states. Everyone just seem to take it as a given because "everyone knows" that governments are buerucratic and inefficient.

Your statement is fallacious. If governments are more efficient at creating inventions and advancing science, then according to that logic, a big government with greater power should be more efficient at advancing technological and scientific progress.

Yet, the majority of important technological and scientific inventions usually come from free-market based capitalistic societies. I don't see countries like North Korea, Russia and China making any scientific and technological breakthroughs, and I think it's easy to argue that they have very powerful governments.

Private sector has and always will drive the majority of progress. How much exactly, usually varies by era and political structure of the global society, but the fact that the free market ultimately drives innovation is indisputable.

USA has a larger government compared to GDP than both China and Russia (42% vs 36% and 24%). There are no stats for North Korea. If you want to argue the free-market gospel, then you have to explain why almost all third world countries have small governments and very low taxes.

Lol no they don't. Most third world countries actually have very strong authoritarian governments where any serious dissent is highly discouraged or even impossible. And even if they have low taxes, they sure compensate for that with regular currency debasement, widespread kleptocracy and stealing wealth from their citizens on a regular basis. This free-market "gospel" is based on hard facts, not some Marxist drivel.

I disagree, but I upvoted because I think it perfectly highlights the real difference of opinion.

When you say "disarm", you really mean "disarm all but the state". That is very scary to any libertarian-leaning people, even if you are using the word figuratively. It makes sense only if you if you believe the government is so nearly perfect that other influence is counterproductive.

Imagine if only the government had enough resources for science? Or worse, nobody could afford to make their political message heard, so only incumbants are viable?

No large state has shown that it deserves that much power. I'd rather see a bunch of ads I disagree with than see no non-state messages. I'd rather that some non-state actors had enough resources to try an ambitious project that is politically unpopular (think stem cells a decade ago).

Collected taxes don't necessarily have to be spent by the government. Have a look at the idea of an unconditional basic income.

Currently, 436 people (Reps, Senators and President) control nearly 4 trillion dollars, the budget for this year.

What should we do about them?

Vote for or against them in the elections provided for the purpose?

Your number is way off (435+100+more than 1 executive branch), and furthermore, if you don't follow the money that influences these actors (lobbying, revolving door, non-blind blind trusts, etc) then you don't really understand what or who is driving those decisions.

Fighting politicians is like whack-a-mole - even if you get rid of bad ones, the replacements are often just as corrupt as the ones that got replaced.

Fight the corruption first.

Exactly. It doesn't make sense to fight politicians, because they pretty much have no agency. They are public faces to the decisions made inside the system that is both influenced from outside (lobbying, et al.) as well as having its own power dynamic. If you're a honest, well-meaning, incorruptible politician, you'll get filtered out from the system at early stages. No one is going to let you take an important seat if you're uncontrollable.

That America's government does a poor job of representing American society is a separate problem. The way you solve that is by changing the voting system to proportional representation in both the congressional and presidential elections.

How can Americans be so upset at their political situation without even discussing ways in which to change it? Unconstructive complaints is just whining.

One possible solution - add more representatives to make the power less consolidated.

Another possible solution: give them only 2 trillion to spend

Devolve as much as we can. Split federal programs into state programs, then county-level programs, where the money is collected and spent on a much smaller scale.

Three steps would improve the situation(IMO): Triple the House of Representatives Term limits(12 years both house total) Repeal the 17th Ammendment

While a democracy bestows each citizen with a vote, it is just not true that everyone has a "roughly equal say in how things go". Power, influence and money are all unequal. Martin Luther King had more say in "how things go" than i ever will even though we each can only cast one vote each. The authority rests in each citizen equally but power will always be unequal

I just want to say that I agree with you in a more weighty manner than an upvote.

> They're worried about maintaining a democratic society, where everyone gets roughly an equal say in how things go. Highly concentrated wealth is a threat to that.

I agree inasmuch as it applies to government and media, but when it comes to entrepreneurship I could not disagree more.

Making progress means taking some big risks. It is the nature of big risks that it's difficult to tell at the outset which ones will succeed and which will fail. But the people who are probably best qualified to predict this are the people who have succeeded before.

If people can't take the spoils of previous success to invest in their next idea, we don't get SpaceX, Tesla, or Y Combinator. Would Y Combinator be better run as a government program, run democratically and accountable to the general population? I don't think it would.

It's easy enough to create systems that grants tax credits for investment vehicles as long as the returns are rolled over into new investments.

Many countries have preferential tax treatments for long term investment vehicles already.

But ignoring that: What is the evidence that this money is best spent by repeat entrepeneurs? Yes, there are some that do well. There's also a vast number of people that succeeds once and never again.

And consider that e.g. Tesla and SpaceX both have benefited immensely from government programs. Maybe society would be better off with wealth taxes were the proceeds were pumped into more programs like these, or even co-investment with private investors with an actual track record track record.

> The problem with differentiating between the "good investor" and the "lavish lifestyle guy" is that the good investor is actually the one that you (rather, Piketty) need to be most worried about.

Disagree. The good investor not only puts capital to work and creates wealth for others, he is also taking money out of the system. Since he is not consuming, the net effect of his increased capital hoard is to decrease prices across the board for everyone else. This can change once he decides to spend, but then he will pay consumption taxes like the others.

You completely ignore the whole argument for why the "good investor" is dangerous: He accumulates, and by accumulating he enables far more substantial interference with the democratic process.

I tend to think excessive consumption and mal-investment is worst for society. Also, the bar for bribing is not particularly high, so even the lavish spender could do damage that way. Lastly, a spender is probably more likely to do these kinds of political contributions.

You can see this in action with Soros and the Koch brothers, both of whom have invested a lot of wealth to directly influence politics and social movements that further their political ideas. Even if you agree with one or the other's political goals, the fact that anyone can have that much sway over the governance of an ostensibly democratic society is a huge mess with serious risks to society and the common good.

Their political ideas aren't their own, and I highly doubt they would put so much of their resources into them if there wasn't a large base of support there already. Government spending in the US as a percentage of GDP has almost flatlined since the early 90s. There was a spike recently, but the previous growth wasn't really sustainable with the quasi-free-market economy everyone (at least in the US) seems to prefer. The Soros' and Kochs' of the world are everywhere and always influencing things in both directions. I don't think this is a valid concern given the balance of power in our governments.

Many people have various political views. Allowing people with huge buckets of cash to use that cash to gain increased representation is fundamentally wrong. A representative government is supposed represent all of its constituents equally, but with the current pay-to-play/pay-to-propagandize/pay-to-astroturf regime it doesn't. We can't actually say with any degree of certainty that that the buckets of cash influencing politics are balancing out, since we haven't got a pristine state of thing to compare the current mess against, and there's plenty of evidence to suggest that huge buckets of cash have swayed things on many issues against the interests of the general public.

> A representative government is supposed represent all of its constituents equally

Yes, "supposed to", but the representation comes through the voting process, and not everyone votes, so they really represent the voters. And I assume you mean the voters are swayed by the advertising that buckets of cash pay for, since outright bribes are illegal.

The politician who rewards campaign contributors at the expense of voters is thrown out the next election. There's a check or power built into the system, but a lot of the time the new guy is bought off too. Usually the more competition and transparent the industry, the harder it is to buy off a politician. The less power a political office has, the less it will be bought off. There are all sorts of ways to fix this problem without limiting political speech.

"The politician who rewards campaign contributors at the expense of voters is thrown out the next election." [citation needed]

> A representative government is supposed represent all of its constituents equally

Supposed by whom? Certainly, even ignoring ways in which the practice deviates from the overt design, the US government doesn't even pretend to be structured in a way in which all citizens have equal representation.

Both those parties spend a lot, but you are begging the question of how much effect they have.

Yeah but the smart investor should have an outsized say in how things are done because he's the one who wants society to be economically efficient.

It's the fat cat guys are the ones that are draggin us all down.

Replace "wealth" with "intelligence", "attractiveness" or even "physical strength", and you get similar threats. Big, strong people could hurt us at any time, and "it's only through their continuing mercy that they haven't"; intelligent people could manipulate or persuade us, while attractive people could seduce us for their own benefit. And yet, we still let people go to the gym to work out and go to school and read books, even encourage them in most cases.

I find this idea of "disarming" rich people for "the safety of us all" to be itself highly dangerous, and a slippery slope. People should be punished according to the law for the illegal things they have done, not the things they could do.

First, a pretty face, high IQ and physical strength do not translate into power the way, say, a hundred million dollars does. Sure you can hurt people if you're physically strong / attractive / smart, but not that many people.

Second, if you believe law should only punish us for actually hurting people and not potentially hurting them, then you are against speed limits.

Third, taxes are not punishment any more than piracy is theft and abortion is murder.

> Second, if you believe law should only punish us for actually hurting people and not potentially hurting them, then you are against speed limits.

Germany has roads without speed limits, and they're doing just fine.

> Third, taxes are not punishment any more than piracy is theft and abortion is murder.

When did I say "taxes are punishment"? I was responding to the idea that we should take away rich people's money to prevent them from having too much power, which I think is a terrible slippery slope. Direct quote from GP:

> Wealth taxes are about disarming everyone -- good and evil -- for the safety of us all, not about morality.

Edit:

> First, a pretty face, high IQ and physical strength do not translate into power the way, say, a hundred million dollars does. Sure you can hurt people if you're physically strong / attractive / smart, but not that many people.

They do if you go into politics or the military.

So we shouldn't attempt to disincentivize countries from building up a nuclear arsenal, as long as they haven't nuked anyone yet?

You didn't answer his question whether it's ok to try to neuter the power that people derive from certain innate attributes. I.e. is it OK to make an exceptionally good looking person pay a higher tax, because there's a loose correlation between physical appearance and one's ability to secure a good future? Furthermore, doesn't everyone deserve the same shot at procreating with a good looking individual? Shouldn't we start using the power of coercion to make sure that unattractive people get to mate and have children as well? Where does it stop?

Your argument is assuming that property rights are as important and as fundamental as other human rights. I personally am quite comfortable distinguishing between "what a person can own" and "what a person can be", and don't view property rights as anywhere near as fundamental as rights like freedom of speech or association or movement.

So I think the notion of a slippery slope towards eugenics is absurd; that's like saying that dancing leads to lynching because both involve crowds of people and tend to happen at night. That's not to say that there isn't a slope towards, say, absolute communism or radically unfair property seizure, but that's way less scary.

Ok, I guess we are just going to have to agree to disagree. Our respective systems of values seem to be fundamentally different, because I believe that property rights are sacrosanct and an extension of who we are.

In case you're curious how I came to that conclusion, here goes: in most cases (not involving criminal situations), private property is basically a store of our previously invested time. We spend a portion of our lives on learning skills and then applying those skills to certain ends, such as making money and acquiring property. If we assume that a human lifetime is finite, then reserving the right to redistribute private property and wealth is basically reserving the right to take the most valuable resource humans have - their time on this Earth.

So if I'm working 10 hours a day and I'm being taxed some 40% (through a combination of income, property and consumption tax), then it means I am working only 6 hours for myself and my own personal gain, and the remaining 4 hours in fact belong to someone else. Now, I apologize in advance for this loaded language, but to me, that is a form of slavery. No one has the right to demand, at gunpoint, that people give their time and person to an end that they don't care about and that doesn't directly improve their situation.

I feel very strongly about this, to the point where I left my country of birth (a European country with ridiculously high taxes), for a much better place where the taxes are much lower and more reasonable. It's a clear example of capital flight, on a smaller scale. I know my opinion is extremely unpopular in this day and age, but it is what it is. To me, strong property rights are some of the most basic human rights, no different than freedom of speech or association.

Yeah, you're probably right. Irreconcilable differences.

I think the origin of my socialism is that, honestly, I don't trust things. This is a topic that often comes up in Bitcoin threads: there is no such thing as a perfect store of value. There is no thing I can invest my time or money in that will not decay or depreciate over time. Currencies inflate. Houses fall down. Land fluctuates in value and can agriculturally fail. The gold supply inflates at a roughly constant rate of 1.5% as people dig more up. Uranium decays, albeit slowly.

On the other hand, I have a very positive view of social networks. I grew up in the middle of a strong safety net. My parents, my siblings, my aunts and uncles and cousins, we grew up close. If I needed help, they'd give it. If I lost everything today, they'd take me in for as long as I needed. Since then, I've acquired a few close friends who would help me out, with a job or a place to crash.

So even if I cannot trust my things not to betray me, having fifty people and all their resources there to catch me if I fall brings me a great deal of security and comfort. So I like the added layer of protection that comes from a safety net of 300 million people. I don't view taxes as something being taken from me, I view them as an investment I'm making in the only resource which has a chance of holding its own against time, no different than the time and money I invest in my kith and kin.

I understand your viewpoint. It's interesting how your lack of trust for things made you become socialist, while my lack of trust for people made me develop anarcho-capitalist tendencies. I guess everyone's political philosophy tends to stem from their core personality traits. Interesting.

My issue with the concept of centralized power in the society is that it has a tendency to consolidate over time and if left unchecked, tyranny is almost inevitable. Sure, you trust your government now, but nation-states generally have a very ugly history of oppressing and even exterminating portions of their population every once in a while. I just don't believe that they can be trusted not to do it again. Not everyone is a good person, and many people in the higher rungs of power tend to have psychopathic tendencies.

So at the end of the day, you don't trust your physical assets not to betray you, but you tend to trust the society you live in. My mindset is completely opposite: I don't think that people can be trusted not to do bad things. You mentioned bitcoin, and I think this is one of the elements that it solves almost perfectly: it eliminates the need for trust, if used correctly. Strong gun rights solve the same problem, they almost completely eliminate the need for trust: I don't have to trust the society to respect my property rights, I just have to trust that most people are not crazy enough to try to get themselves shot.

I think socialism is a nice concept and I think that the idea of helping the less fortunate is commendable. The problem is that it has to rely on the coercive element (uniformed men with guns showing up at your door) if you disagree with the system.

Not to drag this out much longer; as someone who strongly believes in non-violence, self-ownership, self-governance and rejects most forms of collectivism, I can't agree with pointing guns at people in order to create a safety net for others. It defeats the spirit of charity and looks more like extortion and robbery. In my opinion, helping the less fortunate should a voluntary act that stems from one's desire to do good, rather than fear of being violated.

On the individual level, that's like saying "so we shouldn't attempt to disincentivize people from buying guns, as long as they haven't shot anyone yet?" Opinions are divided on this topic, I think "no, unless they're a clear and obvious threat".

>Wealth taxes are about disarming everyone -- good and evil -- for the safety of us all, not about morality.

Funny, I'd call that a moral imperative, and go on to say that consumption is good. Even when it's on gaudy-ass McMansions, consumption usually means, more or less, that someone, somewhere, is actually having fun with his life. We ought to be encouraging that rather than encouraging nonstop accumulation of liquid financial wealth in the guise of the Virtue of Thrift.

Reply on news.ycombinator.com