seems to be the fairly common take among economists/tech folks about inequality being fine along as wealth grows, we're not living in a zero-sum world etc.
Problem with that attitude is that it's mostly circular and asserts its conclusion. Inequality does not matter because social well-being and so on is only a measure of absolute wealth, so the only thing left is to show that wealth is growing etc.
It's worthwhile to question the assumption which people like Robert Sapolsky have done.[1] One thing that he figured out is that even when one accounts for the worse material outcomes of inequality like worse healthcare access, there is an extremely large difference in outcome based on inequality itself. Gaps in social hierarchy matter and inform how people perceive their environment and their place in society. Compressing inequality itself may drastically increase social and individual well-being as inequality appears to induce significant stress in human populations.
The same is true for many studies about happiness. Happiness is indeed influenced by material wealth, but to a significantly smaller degree than one might imagine. Countries like Germany and Nigeria, for example, report similar levels of happiness even despite being magnitudes apart on some wealth and econ metrics.
the key point I want to make is that, even if one disagrees with some particular data points or conclusions, the effect of inequality must be studied at a biological/social / well-being level if one wants to make meaningful statements. Asserting that humans are Homines oeconomici and using it to justify inequality is a tautological exercise.
They way I think of this is that everything is relative. Happiness is a product of success and expectations. When everyone around you is rich it influences your expectations thus reducing your happiness (except for buddhist monks?) and driving you to great success or potential despair. So it really is a zero-sum game unless (until) we evolve some enlightenment where expectations are fixed. We'd be content, but would anything ever get done? Does it matter? Sounds like a sci-fi topic.
Of course this is a super simplistic way to see it. Both success and expectations have many contributing factors themselves.
Thank you for saying this. I'm bookmarking it for the next time I hear "no one is saying we should make everyone poor." When I talk about the anti-inequality people preferring a third-world standard of living as long as no one else has it better, they typically call it a strawman. I appreciate the admission that this is actually your belief.
Robert Sapolsky is a genius. His work relating psycho-social phenomena to physiology is profound.
Other thinkers in the realm (albeit different expertise) are Gabor Mate and Stephen Porges.
I think there’s a natural inclination for any species to become hierarchical, but it’s a problem when those at the bottom of the hierarchy do not have their basic need of safety met.
PG, this is a thoughtful essay. Yet I'll point out a flaw in this thinking below.
Intellectually Honest merits here:
- you want to incentivize people to create value for society and optimize globally by raising the quality of life of (most) humans.
- Wealth creation itself is not by default at the cost of others.
Intellectually Dishonest:
- That startups and wealth creation converge on a quality of life optimization function for humanity.
In other words: startups and wealth creation operate within the randomness of free market. And most software technology in the last 30 years has not unlocked some kind of massive step function value in global problems.
If we could align more Venture Capital funding and R&D output to solve fundamental problems (in other words: can we solve access to affordable nutritious food, reduction of common disease, reducing cost of housing ahead of 5-minute media formats or SaaS Invoicing Applications?)
Housing has continued to become less affordable and poverty still prevalent in the US.
- That there is a binary debate: "should there be wealth or not?"
Social Programs, funded by government, funded by taxes on higher earners and large capital gains, are one lever to address this.
The reason the inequality gap matters is less that its a metric of the _delta in absolute wealth_ but more that opportunity and livability of average Americans has a worse outlook in the last 20 years, not a better one.
I agree with your overall sentiment, but want to expand on a few points.
Housing: It seems this is largely a policy issue rather than an economic one. Restrictive zoning and a misaligned incentive structure come to mind. Places like SF are the face of the housing shortage, but it’s a problem of supply and demand. To make affordable housing, you need a lot more housing. First, you have to satisfy the needs of all of the wealthy buyers, and this isn’t even clearly achieved. Even with subsidies, there isn’t a financial interest for developers to sell affordable housing. We need to build a ton of housing to meet demand. Policy is the inhibitor here.
Food: Food deserts exist entirely because of sprawl. The suburbanization of America means lowered density in certain Urban cores. (The Midwest and south especially) Lower density, particularly among lower income residents makes traditional grocery stores unviable. To sell produce you need sufficient traffic or else your stock will go bad. To make things worse, low income residents have less access to transportation. Thus, lower traffic. It’s not profitable to run a grocery store in the middle of urban sprawl, especially given the lack of access to transportation. Transportation is a matter of policy, again.
Healthcare: The problems here are directly correlated with housing and food, but extend to education. There is significant over—utilization of emergency services for non-critical medical services. I believe some universal access to healthcare should exist, but not if we don’t first address the inefficiencies that exist due to a lack of health education. Education is again, largely the fault of policy.
It’s not lost on me that wealth increases access to all of these things, but I don’t think we can blame venture capital and founders. These are deeply societal issues, given poor policy decisions in our history. They aren’t attractive investments because you cannot change them in a matter of a couple of years.
A higher tax on the wealthy would incentivize focusing on these issues, but it would also slow the pace of economic growth. It’s a matter of compromise.
We heavily tax income and hardly touch capital gains, we discourage work, even if you get a decent salary the tax system obliterates that income. If you gamble with stocks you make money without doing anything productive and your lack of productivity is richly rewarded by the tax system.
Short term capital gains are taxed as ordinary income. Long term are taxed lower, but for capital gains of any kind you have to risk capital, which was already taxed when you earned it the first time.
Capital gains are not only the result of "gambling". If you found a company and later sell it, that is a capital gain. The shares are virtually worthless when you start the company, and later become valuable when you sell it.
Do you consider founding a successful company that provides a useful product and employs many people doing nothing productive?
Is there a name for the phenomenon where someone that is amazing at something (e.g. investing and helping to grow startups) then somehow is given more credibility to talk about everything else?
The exact opposite is true with under represented folks — their “take” needs to be 10x better than than the rich guy with a popular blog to be listened to.
The article is pointing out the existence and dynamics of wealth creation, which is exactly what PG is amazing at. Many of his articles do suffer from that problem, but not this one.
> "You can't prevent great variations in wealth without preventing people from getting rich, and you can't do that without preventing them from starting startups... Eliminating great variations in wealth would mean eliminating startups"
I feel the opposite. What keeps many people from starting startups is financial risk (the prior probaility of success is quite low!). Increasing the safety net, even if it means decreasing the gains, might cause more people to take the risk.
> "For example, let's attack poverty, and if necessary damage wealth in the process."
How does this not contradict his earlier point about driven people no longer wanting to start startups if
they can't get rich doing it?
> "One of the most important principles in Silicon Valley is that "you make what you measure."
I'm completely behind this statement. Attacking wealth inequality by, say, robbing the rich, is not the right approach. But I think he's mixing up what people mean when they say they don't like inequality and what they actually want to do about it. Nobody is claiming we all go back to being hunter/gatherers.
> "I think rising economic inequality is the inevitable fate of countries that don't choose something worse. "
This is a huge statement. I'm happy to see PG has iterated over every possible economic system under every possible level of technology and come to this axiom though; this will save the economists of 2532 a lot of effort they might have spent running this simulation :)
> "The acceleration of productivity we see in Silicon Valley has been happening for thousands of years... You do not want to design your society in a way that's incompatible with this curve"
What acceleration? Uber and Instagram are hardly quantum leaps from what we had > 10 years ago. The iPhone I have in my pocket today is functionally not all that different from the one 5 years ago. What's even worse is that it's questionable as to whether or not the things churning out of the valley are even good at all. No one is betting a curve: the curve is in his imagination. Change feels linear lately.
> But I think he's mixing up what people mean when they say they don't like inequality and what they actually want to do about it. Nobody is claiming we all go back to being hunter/gatherers.
The top comment on this thread, which predates your comment by an hour, is saying essentially that. Doesn't matter what the absolute wealth level is, only that the variance is small.
The thesis of PG's article is that it's important to be precise about what we mean, because many are talking about the "robbing the rich" meaning, and the way it ought to be treated is really different.
I'd say the recent shift in terminology from poverty to inequality, and in measurement from "% below an objective threshold" to "ratio between quantiles," is happening explicitly to accommodate the meaning you're disclaiming here.
>Increasing the safety net, even if it means decreasing the gains, might cause more people to take the risk.
Sure, but the operative thing here is increasing the safety net, which you could do without substantially closing the gap between rich and poor. In fact a stronger safety net might lead to more entrepreneurship and thus more founders getting rich, making the inequality stats worse.
> "let's attack poverty, and if necessary damage wealth in the process."
This is a pretty good article as Paul distinguishes the "good" (creating wealth) and "bad" (rent seeking) sources of economic inequality, and suggests addressing the bad and attacking poverty vs. simply punishing the rich.
Consider the current presidential candidates - Bernie and Warren seem to talk a lot about punishing the rich, while Andrew Yang emphasizes a more bottom-up approach of giving every American a dividend of $1,000/month. The former sounds more like a vindictive blanket punishment, the latter is directly eradicating poverty and helping people.
Given Paul's focus on the value and promotion of entrepreneurship, it would seem that Yang's $1,000/month would do more than any other policy being discussed to further that cause. I'd imagine way more people would start businesses and take greater risks in general if they knew worst case scenario they'd have $1,000/month to fall back on.
You could say the same thing about eliminating private health, dental, and vision insurance (or at the very least, making it so that all providers are required to accept public insurance). Making coverage a right instead of a privilege would at least lessen the foothold that employers have on the necks of their employees.
Why the hell am I being downvoted? If you disagree, then explain why. Don't just downvote people because you disagree with their opinion, this is not Reddit (or at least it didn't used to be).
Wow just wow. What an incredibly awful piece of writing. Where are the facts to support any of his claims. Most of them are provably wrong. Economists study these things. Picketty for instance wrote a gigantic books showing that rates of return on Capital vs productivity growth are a huge reason for inequality. We can see that as a huge percentage of the wealthy inherited their money. We have extremely low rates of productivity growth in the US right now by historical standards. We have huge rates of corporate stock buybacks that outpace research and development for the first time ever. Startups are not representative of the economy. In fact we’ve never had a period with fewer startups than now. New business creation is at a low peak in the US. Paul graham may be a great tech investor but he clearly has no understanding of macroeconomic trends in the US.
It is natural to have winners. In time the winners come to dominate the system such that inequality becomes a bigger problem. A question to ask is how can we rebalance it? Shall we wait until there is social unrest or strife? Or shall we create methods to rebalance before this happens?
I would go open a business today which has a fairly good chance of being successful (there is a huge demand) but I don't have money neither the connections to get it. I know kids from rich folks who do nothing all day and sleep on their phones, waste cash on microtrans online. I wish, I had folks like that. I could take risks to start different ventures, afford moving out and getting necessary medical treatment, going to a good school, attending events, hire a personal trainer for improving communication skills, posture, public speaking, learning different languages, etc.
I can do some of them right now but it's learning on hard mode with increased worrying about everything else in life because you can't afford to lose. Years are lost on one loss while others with family capital gains or connections can afford to stand back up again immediately.
One thing is absurd is poor environment forces you to decide on poor life choices. So the claim that poverty and difficulty may make you stronger is dubious or based on survivorship/exception bias.
Poor people don't know how to manage their finances, search for valid information, not to fall for scams or make long term plans because they have been trained not to.
Inequality is bad because people with more money have power over people with less. Ideally, we would live in a democracy (understood by the Greeks to mean rule by the poor, given they massively outnumber the rich), but we don't. We should change this.
Stated another way, your boss has power over you. Why? It could be because they earned a lot of money through their own labor, or it could be because they had access to capital that you do not. Uber loses money hand over fist, but Uber management has more power than their drivers. Why? Management has access to capital, and drivers do not.
What? The fact that your boss has power over you within a company has nothing to do with how much money they personally have relative to you. There is no correlation.
A place to look at is Scandinavia. Although it's far from perfect, the gap between rich and poor is smaller, it feels doable to move social classes and taxes redistribute excessive wealth effectively.
That is my experience. In contrast, I've felt that places like UK treat you like an untermensch if you have less money. And addressing PG's point, in the UK rich classes have lobbied to set laws in their favor. Pure rent seeking or as PG puts it here stealing. For example, they have architected the real estate market in such a way that if you are poor it's hard to climb the property ladder and you will be poised to give them a big chunk of your income.
The causes are by regulatory and political capture when money in politics corruption is allowed in ever-increasing amounts becoming a self-reinforcing, vicious cycle. Beyond any notion of "pie," this also permits greater and greater wealth transfer poor -> rich, through raising taxes on the lower classes, raising fines, increasing prison terms and cutting support services. It's often touted as "austerity," "reducing bloat," "reducing regulations," and "private-public partnerships."
When inequality becomes too extreme, a country becomes a third-world country with high corruption, low civic involvement and is often perched on the cliff of revolution. Brazil and the US come to mind.
Another problem is the word "democracy" doesn't have one meaning. The most wide-held view would seem to be: officials are elected and do the people's work. The US, as with many developed economies, has become a de-facto klepto-plutocracy masquerading a democracy (psephocracy, technically) because very little attention is given to the people's problems with most policies, money and effort going towards catering to and subsidizing the rich. Furthermore, "democracy" has a different meaning in diplo-speak, it means "whatever the prevailing hegemony wants" in that context. In addition, regular people often conflate democracy with many of elements anarchy, which also doesn't scale in the real world.
While wealth creation isn't a zero sum game, certain important markets are zero sum.
Housing is an example. If a bunch of founders make a pile of money, they can (and do) suddenly outbid everyone else (like say the school teachers and firemen) buy a bunch of land and build mega mansions that squeeze a lot of other people out.
The issue today is that the gains/rewards for certain ideas (at certain times) are disproportional to the actual utility to society.
An example of that is the contrast between Tim Berners-Lee's networth and Mark Zuckerberg's
While I agree with much said, I believe there seems to be a flaw in how he groups wealthy individuals based on how they create wealth.
> In the real world you can create wealth as well as taking it from others. A woodworker creates wealth. He makes a chair, and you willingly give him money in return for it. A high-frequency trader does not. He makes a dollar only when someone on the other end of a trade loses a dollar.
In a market economy, people and companies are rewarded if the market sees the given service or product worth the price. The woodworker didn't create wealth out of thin air, and he gains wealth by taking it from the people that buy his wares. Same goes for a high-frequency trader, even though she doesn't build anything with her hands, the process of trading is seen as valuable by the market and if done well rewarded accordingly. The only groups that can "create wealth" are national treasuries which can print money.
Additionally he doesn't understand trading, just because they lost a dollar on a trade (likely on another index) doesn't mean they lost a dollar over all, they presumably listed the sell-order because that price is already itm.
This essay makes me uneasy. I feel PG builds a straw man. He takes, in his own words, the most naive take on inequality and ends up concluding that "Eliminating great variations in wealth would mean eliminating startups".
A simple example, would a tax on wealth above 100 million USD discourage startup founders? I don't think so.
$100 million, probably not. But that begs the questions: Is that the real number and would it stay there?
The AMT was put together to hit the top ~150 people in the 1960s. Because of how the underlying system changed and it hasn't, the AMT now regularly hits people under $100k and is only likely to drift lower.
Suppose we identify some policy that discourages startups unintentionally, and for no direct public benefit. For example, a bureaucratic snafu in the process of opening a business bank account. Should we fix it?
If we do, then more startups will get off the ground. Some of them will make it big, and their founders will get rich. Our action will have made society more unequal.
So clearly we should leave it, right? But that doesn't seem right. So maybe inequality is not exactly the right framing of what we care about.
We've had progressive taxes for a long time, and that's good, but they have not prevented inequality. So again, is it really the measure of goodness?
Why do you want to steal money from wealthy people through taxes? Isn't the problem poor people and shouldn't solutions aim to get them to create wealth?
How can someone technical write a whole essay without a single number?
>If the rich people in a society got that way by taking wealth from the poor, then you have the degenerate case of economic inequality, where the cause of poverty is the same as the cause of wealth.
"I'm sure most of those who want to decrease economic inequality want to do it mainly to help the poor, not to hurt the rich. Indeed, a good number are merely being sloppy by speaking of decreasing economic inequality when what they mean is decreasing poverty. But this is a situation where it would be good to be precise about what we want. Poverty and economic inequality are not identical."
I don’t think the progressive leaders who have been championing a wealth tax have been unclear about that though. The point of a wealth tax as described by Warren, Sanders, etc. is specifically to fund programs for poor and struggling middle class, not just as some penalty for being rich.
None of this makes any sense to me at all. I'm reading through it but there are logical fallacies abound. In the first few paragraphs..
> Which means by helping startup founders I've been helping to increase economic inequality. If economic inequality should be decreased, I shouldn't be helping founders.
No. Just...no. Founders should be starting companies that reduce inequality. By definition. The idea of a healthy marketplace for both startups and for regular people doing regular things implies a reduction in inequality. Not just a reduction in poverty, but a reduction in inequality. That is easiest done by lifting the poor out of poverty.
PG's take is to stop all progress because he is straw-man arguing against something that nobody is even taking the position on that he's arguing against. The logical fallacy count in the first few paragraphs alone make this piece difficult to read.
What happened? :(
Continuing to read...
> But some are good, like Larry Page and Sergey Brin starting the company you use to find things online.
No conversation at all about the pitfalls and issues that Google has also caused in the world? This is a carte blanche to Google that 100% of their work has been positive and it's not worthy to discuss anything they might have done that would hurt people in the world? Not everything about Google is "Good".
These takes are all so one-sided, close-minded, and wrong.
> The most naive version of which is the one based on the pie fallacy: that the rich get rich by taking money from the poor.
Wait. What. PG thinks that this is a fallacy? I'm going to have to stop reading to protect my sanity. The rich are definitely getting richer at the expense of the poor. The world did not start on some level playing field. The rich had privilege and status and help that the poor do not.
Every action that a rich person takes to enrich themselves rather than trying to level the playing field is by definition taking from the poor.
> Every action that a rich person takes to enrich themselves rather than trying to level the playing field is by definition taking from the poor.
J.K. Rowling was already a wealthy person before finishing her Harry Potter series. Each additional book further enriched her, but also enriched me because I got hours of enjoyment from reading another Harry Potter book which was a great trade for the ten USD or so I spent on it.
"Every action that a rich person takes to enrich themselves rather than trying to level the playing field is by definition taking from the poor."
"Taking"? When a "poor" person chooses to buy an Android or an iPhone, did Google or Apple "take" his money from him? No, the person "chose" to give money to the company because she thought that it provides some utility for her. Alternatively, you can argue that designing a smartphone is leveling the playing field, which would make more sense.
What you seem to get wrong is that BOTH can occur at the same time - leveling the playing field AND enriching themselves.
[+] [-] Barrin92|6 years ago|reply
Problem with that attitude is that it's mostly circular and asserts its conclusion. Inequality does not matter because social well-being and so on is only a measure of absolute wealth, so the only thing left is to show that wealth is growing etc.
It's worthwhile to question the assumption which people like Robert Sapolsky have done.[1] One thing that he figured out is that even when one accounts for the worse material outcomes of inequality like worse healthcare access, there is an extremely large difference in outcome based on inequality itself. Gaps in social hierarchy matter and inform how people perceive their environment and their place in society. Compressing inequality itself may drastically increase social and individual well-being as inequality appears to induce significant stress in human populations.
The same is true for many studies about happiness. Happiness is indeed influenced by material wealth, but to a significantly smaller degree than one might imagine. Countries like Germany and Nigeria, for example, report similar levels of happiness even despite being magnitudes apart on some wealth and econ metrics.
the key point I want to make is that, even if one disagrees with some particular data points or conclusions, the effect of inequality must be studied at a biological/social / well-being level if one wants to make meaningful statements. Asserting that humans are Homines oeconomici and using it to justify inequality is a tautological exercise.
[1] https://www.scientificamerican.com/article/how-economic-ineq...
[+] [-] rapind|6 years ago|reply
Of course this is a super simplistic way to see it. Both success and expectations have many contributing factors themselves.
[+] [-] closeparen|6 years ago|reply
[+] [-] bransonf|6 years ago|reply
Other thinkers in the realm (albeit different expertise) are Gabor Mate and Stephen Porges.
I think there’s a natural inclination for any species to become hierarchical, but it’s a problem when those at the bottom of the hierarchy do not have their basic need of safety met.
[+] [-] emeerson|6 years ago|reply
Intellectually Honest merits here: - you want to incentivize people to create value for society and optimize globally by raising the quality of life of (most) humans. - Wealth creation itself is not by default at the cost of others.
Intellectually Dishonest: - That startups and wealth creation converge on a quality of life optimization function for humanity.
In other words: startups and wealth creation operate within the randomness of free market. And most software technology in the last 30 years has not unlocked some kind of massive step function value in global problems.
If we could align more Venture Capital funding and R&D output to solve fundamental problems (in other words: can we solve access to affordable nutritious food, reduction of common disease, reducing cost of housing ahead of 5-minute media formats or SaaS Invoicing Applications?)
Housing has continued to become less affordable and poverty still prevalent in the US.
- That there is a binary debate: "should there be wealth or not?"
Social Programs, funded by government, funded by taxes on higher earners and large capital gains, are one lever to address this.
The reason the inequality gap matters is less that its a metric of the _delta in absolute wealth_ but more that opportunity and livability of average Americans has a worse outlook in the last 20 years, not a better one.
[+] [-] bransonf|6 years ago|reply
Housing: It seems this is largely a policy issue rather than an economic one. Restrictive zoning and a misaligned incentive structure come to mind. Places like SF are the face of the housing shortage, but it’s a problem of supply and demand. To make affordable housing, you need a lot more housing. First, you have to satisfy the needs of all of the wealthy buyers, and this isn’t even clearly achieved. Even with subsidies, there isn’t a financial interest for developers to sell affordable housing. We need to build a ton of housing to meet demand. Policy is the inhibitor here.
Food: Food deserts exist entirely because of sprawl. The suburbanization of America means lowered density in certain Urban cores. (The Midwest and south especially) Lower density, particularly among lower income residents makes traditional grocery stores unviable. To sell produce you need sufficient traffic or else your stock will go bad. To make things worse, low income residents have less access to transportation. Thus, lower traffic. It’s not profitable to run a grocery store in the middle of urban sprawl, especially given the lack of access to transportation. Transportation is a matter of policy, again.
Healthcare: The problems here are directly correlated with housing and food, but extend to education. There is significant over—utilization of emergency services for non-critical medical services. I believe some universal access to healthcare should exist, but not if we don’t first address the inefficiencies that exist due to a lack of health education. Education is again, largely the fault of policy.
It’s not lost on me that wealth increases access to all of these things, but I don’t think we can blame venture capital and founders. These are deeply societal issues, given poor policy decisions in our history. They aren’t attractive investments because you cannot change them in a matter of a couple of years.
A higher tax on the wealthy would incentivize focusing on these issues, but it would also slow the pace of economic growth. It’s a matter of compromise.
[+] [-] shams93|6 years ago|reply
[+] [-] imgabe|6 years ago|reply
Capital gains are not only the result of "gambling". If you found a company and later sell it, that is a capital gain. The shares are virtually worthless when you start the company, and later become valuable when you sell it.
Do you consider founding a successful company that provides a useful product and employs many people doing nothing productive?
[+] [-] chewz|6 years ago|reply
You provide liquidity to the market. Your saving and pension are worthless without liquidity.
[+] [-] ec109685|6 years ago|reply
The exact opposite is true with under represented folks — their “take” needs to be 10x better than than the rich guy with a popular blog to be listened to.
He should write a post on influence inequality.
[+] [-] closeparen|6 years ago|reply
[+] [-] Nasrudith|6 years ago|reply
https://en.m.wikipedia.org/wiki/Halo_effect
[+] [-] meow_mix|6 years ago|reply
I feel the opposite. What keeps many people from starting startups is financial risk (the prior probaility of success is quite low!). Increasing the safety net, even if it means decreasing the gains, might cause more people to take the risk.
> "For example, let's attack poverty, and if necessary damage wealth in the process."
How does this not contradict his earlier point about driven people no longer wanting to start startups if they can't get rich doing it?
> "One of the most important principles in Silicon Valley is that "you make what you measure."
I'm completely behind this statement. Attacking wealth inequality by, say, robbing the rich, is not the right approach. But I think he's mixing up what people mean when they say they don't like inequality and what they actually want to do about it. Nobody is claiming we all go back to being hunter/gatherers.
> "I think rising economic inequality is the inevitable fate of countries that don't choose something worse. "
This is a huge statement. I'm happy to see PG has iterated over every possible economic system under every possible level of technology and come to this axiom though; this will save the economists of 2532 a lot of effort they might have spent running this simulation :)
> "The acceleration of productivity we see in Silicon Valley has been happening for thousands of years... You do not want to design your society in a way that's incompatible with this curve"
What acceleration? Uber and Instagram are hardly quantum leaps from what we had > 10 years ago. The iPhone I have in my pocket today is functionally not all that different from the one 5 years ago. What's even worse is that it's questionable as to whether or not the things churning out of the valley are even good at all. No one is betting a curve: the curve is in his imagination. Change feels linear lately.
Also, where is the talk about externalities?
[+] [-] closeparen|6 years ago|reply
The top comment on this thread, which predates your comment by an hour, is saying essentially that. Doesn't matter what the absolute wealth level is, only that the variance is small.
The thesis of PG's article is that it's important to be precise about what we mean, because many are talking about the "robbing the rich" meaning, and the way it ought to be treated is really different.
I'd say the recent shift in terminology from poverty to inequality, and in measurement from "% below an objective threshold" to "ratio between quantiles," is happening explicitly to accommodate the meaning you're disclaiming here.
>Increasing the safety net, even if it means decreasing the gains, might cause more people to take the risk.
Sure, but the operative thing here is increasing the safety net, which you could do without substantially closing the gap between rich and poor. In fact a stronger safety net might lead to more entrepreneurship and thus more founders getting rich, making the inequality stats worse.
EDIT: clarity about top comment.
[+] [-] JDiculous|6 years ago|reply
This is a pretty good article as Paul distinguishes the "good" (creating wealth) and "bad" (rent seeking) sources of economic inequality, and suggests addressing the bad and attacking poverty vs. simply punishing the rich.
Consider the current presidential candidates - Bernie and Warren seem to talk a lot about punishing the rich, while Andrew Yang emphasizes a more bottom-up approach of giving every American a dividend of $1,000/month. The former sounds more like a vindictive blanket punishment, the latter is directly eradicating poverty and helping people.
Given Paul's focus on the value and promotion of entrepreneurship, it would seem that Yang's $1,000/month would do more than any other policy being discussed to further that cause. I'd imagine way more people would start businesses and take greater risks in general if they knew worst case scenario they'd have $1,000/month to fall back on.
[+] [-] MisterBastahrd|6 years ago|reply
[+] [-] unknown|6 years ago|reply
[deleted]
[+] [-] JDiculous|6 years ago|reply
[+] [-] rjkennedy98|6 years ago|reply
[+] [-] dvduval|6 years ago|reply
[+] [-] thrwaway69|6 years ago|reply
I would go open a business today which has a fairly good chance of being successful (there is a huge demand) but I don't have money neither the connections to get it. I know kids from rich folks who do nothing all day and sleep on their phones, waste cash on microtrans online. I wish, I had folks like that. I could take risks to start different ventures, afford moving out and getting necessary medical treatment, going to a good school, attending events, hire a personal trainer for improving communication skills, posture, public speaking, learning different languages, etc. I can do some of them right now but it's learning on hard mode with increased worrying about everything else in life because you can't afford to lose. Years are lost on one loss while others with family capital gains or connections can afford to stand back up again immediately.
One thing is absurd is poor environment forces you to decide on poor life choices. So the claim that poverty and difficulty may make you stronger is dubious or based on survivorship/exception bias. Poor people don't know how to manage their finances, search for valid information, not to fall for scams or make long term plans because they have been trained not to.
[+] [-] Kaiyou|6 years ago|reply
[+] [-] gnicholas|6 years ago|reply
[+] [-] tehjoker|6 years ago|reply
Stated another way, your boss has power over you. Why? It could be because they earned a lot of money through their own labor, or it could be because they had access to capital that you do not. Uber loses money hand over fist, but Uber management has more power than their drivers. Why? Management has access to capital, and drivers do not.
[+] [-] NhanH|6 years ago|reply
[+] [-] avocado4|6 years ago|reply
Democracy in Ancient Greece explicitly meant that only the wealthy city elites would be able to vote.
[+] [-] tempsy|6 years ago|reply
[+] [-] nextos|6 years ago|reply
That is my experience. In contrast, I've felt that places like UK treat you like an untermensch if you have less money. And addressing PG's point, in the UK rich classes have lobbied to set laws in their favor. Pure rent seeking or as PG puts it here stealing. For example, they have architected the real estate market in such a way that if you are poor it's hard to climb the property ladder and you will be poised to give them a big chunk of your income.
[+] [-] beaner|6 years ago|reply
[+] [-] anonsivalley652|6 years ago|reply
When inequality becomes too extreme, a country becomes a third-world country with high corruption, low civic involvement and is often perched on the cliff of revolution. Brazil and the US come to mind.
Another problem is the word "democracy" doesn't have one meaning. The most wide-held view would seem to be: officials are elected and do the people's work. The US, as with many developed economies, has become a de-facto klepto-plutocracy masquerading a democracy (psephocracy, technically) because very little attention is given to the people's problems with most policies, money and effort going towards catering to and subsidizing the rich. Furthermore, "democracy" has a different meaning in diplo-speak, it means "whatever the prevailing hegemony wants" in that context. In addition, regular people often conflate democracy with many of elements anarchy, which also doesn't scale in the real world.
[+] [-] ripvanwinkle|6 years ago|reply
Housing is an example. If a bunch of founders make a pile of money, they can (and do) suddenly outbid everyone else (like say the school teachers and firemen) buy a bunch of land and build mega mansions that squeeze a lot of other people out.
The issue today is that the gains/rewards for certain ideas (at certain times) are disproportional to the actual utility to society.
An example of that is the contrast between Tim Berners-Lee's networth and Mark Zuckerberg's
[+] [-] closeparen|6 years ago|reply
[+] [-] zongitsrinzler|6 years ago|reply
> In the real world you can create wealth as well as taking it from others. A woodworker creates wealth. He makes a chair, and you willingly give him money in return for it. A high-frequency trader does not. He makes a dollar only when someone on the other end of a trade loses a dollar.
In a market economy, people and companies are rewarded if the market sees the given service or product worth the price. The woodworker didn't create wealth out of thin air, and he gains wealth by taking it from the people that buy his wares. Same goes for a high-frequency trader, even though she doesn't build anything with her hands, the process of trading is seen as valuable by the market and if done well rewarded accordingly. The only groups that can "create wealth" are national treasuries which can print money.
[+] [-] randomcarbloke|6 years ago|reply
[+] [-] xwowsersx|6 years ago|reply
[+] [-] cuchoi|6 years ago|reply
A simple example, would a tax on wealth above 100 million USD discourage startup founders? I don't think so.
[+] [-] caseysoftware|6 years ago|reply
The AMT was put together to hit the top ~150 people in the 1960s. Because of how the underlying system changed and it hasn't, the AMT now regularly hits people under $100k and is only likely to drift lower.
Congress has a bad track record here.
[+] [-] closeparen|6 years ago|reply
If we do, then more startups will get off the ground. Some of them will make it big, and their founders will get rich. Our action will have made society more unequal.
So clearly we should leave it, right? But that doesn't seem right. So maybe inequality is not exactly the right framing of what we care about.
We've had progressive taxes for a long time, and that's good, but they have not prevented inequality. So again, is it really the measure of goodness?
[+] [-] Kaiyou|6 years ago|reply
[+] [-] meow_mix|6 years ago|reply
[+] [-] unknown|6 years ago|reply
[deleted]
[+] [-] buzzkillington|6 years ago|reply
>If the rich people in a society got that way by taking wealth from the poor, then you have the degenerate case of economic inequality, where the cause of poverty is the same as the cause of wealth.
He could have saved himself the time it took him to write that article by just looking at the wiki page: https://en.wikipedia.org/wiki/Wealth_inequality_in_the_Unite...
In summary the bottom 50% of Americans have lost all their wealth since 1989 and then gone into debt to the tune of 25% of their former wealth.
So in short Paul, yes, we are in the degenerate case and a round of guillotining is in order.
[+] [-] raspasov|6 years ago|reply
"I'm sure most of those who want to decrease economic inequality want to do it mainly to help the poor, not to hurt the rich. Indeed, a good number are merely being sloppy by speaking of decreasing economic inequality when what they mean is decreasing poverty. But this is a situation where it would be good to be precise about what we want. Poverty and economic inequality are not identical."
[+] [-] tempsy|6 years ago|reply
[+] [-] cryptoz|6 years ago|reply
> Which means by helping startup founders I've been helping to increase economic inequality. If economic inequality should be decreased, I shouldn't be helping founders.
No. Just...no. Founders should be starting companies that reduce inequality. By definition. The idea of a healthy marketplace for both startups and for regular people doing regular things implies a reduction in inequality. Not just a reduction in poverty, but a reduction in inequality. That is easiest done by lifting the poor out of poverty.
PG's take is to stop all progress because he is straw-man arguing against something that nobody is even taking the position on that he's arguing against. The logical fallacy count in the first few paragraphs alone make this piece difficult to read.
What happened? :(
Continuing to read...
> But some are good, like Larry Page and Sergey Brin starting the company you use to find things online.
No conversation at all about the pitfalls and issues that Google has also caused in the world? This is a carte blanche to Google that 100% of their work has been positive and it's not worthy to discuss anything they might have done that would hurt people in the world? Not everything about Google is "Good".
These takes are all so one-sided, close-minded, and wrong.
> The most naive version of which is the one based on the pie fallacy: that the rich get rich by taking money from the poor.
Wait. What. PG thinks that this is a fallacy? I'm going to have to stop reading to protect my sanity. The rich are definitely getting richer at the expense of the poor. The world did not start on some level playing field. The rich had privilege and status and help that the poor do not.
Every action that a rich person takes to enrich themselves rather than trying to level the playing field is by definition taking from the poor.
[+] [-] AlchemistCamp|6 years ago|reply
J.K. Rowling was already a wealthy person before finishing her Harry Potter series. Each additional book further enriched her, but also enriched me because I got hours of enjoyment from reading another Harry Potter book which was a great trade for the ten USD or so I spent on it.
[+] [-] raspasov|6 years ago|reply
"Taking"? When a "poor" person chooses to buy an Android or an iPhone, did Google or Apple "take" his money from him? No, the person "chose" to give money to the company because she thought that it provides some utility for her. Alternatively, you can argue that designing a smartphone is leveling the playing field, which would make more sense.
What you seem to get wrong is that BOTH can occur at the same time - leveling the playing field AND enriching themselves.
[+] [-] blobbers|6 years ago|reply
........<really?>
[+] [-] irishcoffee|6 years ago|reply
[+] [-] S4M|6 years ago|reply