
An open letter to Paul Graham - zawaideh
https://medium.com/newco/an-open-letter-to-paul-graham-3d4f3369fe76#.28fltpvf4
======
mangeletti
This is a rare situation / age we're in, because we haven't seen these levels
of income inequality in a long time.

To the degree to which I would apply labels to myself, I'm a capitalist, and
I'm a libertarian. I don't trust our corrupt political system anymore, and I
certainly don't think the government has the ability to help society as much
as it hurts it, at least most of the time. Because of this, I think that any
extra taxation that the government levies will commensurately damage our
society.

That said, I can't help but think that our entire economy has been swept out
from under our feet by the financial sector. It's not tech companies and
supposedly "rich" tech founders that capture our economy. It's VCs. A VC can
give a company that would otherwise be insolvent the capital it needs to
capture an entire market, and then raise the prices. We see it time and time
again.

We're trained to believe that, without VC, the tech industry would somehow be
stifled. This is simply untrue. Without VC, a lot of our "side" projects that
create true innovation would have a chance at success. The reason many of them
don't is because they're up against the same thing from a VC-backed
competitor. Except, the VC-backed version is cheaper (or free), is backed by
an unsustainable, large team of skilled developers, and doesn't care that it's
hemorrhaging money, because once it creates a monopoly it will pay dividends
for life to the very few who own it.

~~~
badsock
I'm very much on the other side of the political spectrum, but I would have a
lot more appreciation for libertarianism if someone could come up with a
credible, practical solution for making monopolies (or monopolistic behaviour)
rare or impossible. With the proviso that it acknowledges the reality that
monopolies form even in the absence of government influence.

~~~
AndrewKemendo
_With the proviso that it acknowledges the reality that monopolies form even
in the absence of government influence._

If I remember back to my anarchist philosophy, that is ceding too much ground.
Patents, access to cheap capital, "artificial" interest rates etc... are all
government influence that large companies can take advantage of to become
monopolistic. Without those the argument goes, that firms would never get so
big because competition would sprout up immediately to cut into their market
dominance.

If you look at Standard Oil or Bell System, the case studies for all
monopolies, they all hinged on some government grated protection. In Bell's
case it was initially a patent and then subsequently "legally sanctioned
regulated monopoly." In the case of Standard Oil they utilized Trusts, which
were legally recognized forms of distributing ownership to stay within the
law.

So unfettered capitalism might not lead to long and enduring monopolies, but
it would be much nastier and competition much more fierce because the systems
on which business is built today would have to go away in total - to include
regulated banking, infrastructure standards etc...

The question should instead be: Is the world in which there is no regulation
one that you would actually want to live in? I would argue no.

edit: Note that I don't agree with this view, it is however the argument that
is made.

~~~
TeMPOraL
While government regulations provide a fertile ground for growing a monopoly,
I do not believe they're a necessary condition. A for-profit business will
seek the most effective ways to reach its goals. It happens that in our world,
those often involve abusing the regulatory framework. But if you remove that
framework, it won't make companies magically stop trying to monopolize
markets. They'll simply grab the next most effective way to do it. Maybe some
will band together, now that there is noone saying that they can't. Maybe some
will start cutting more corners on the product, or ignore even more of what
used to be environmental laws. Or maybe the few remaining competitors will
enter a literal fight, involving guns and bombs and tanks.

And now that your monopolies have guns and tanks and can openly play dirty,
good luck for the small upstarts trying to take them down. They won't be able
to.

\--

Anyway, I'm pretty sure that if all governments were to suddenly disappear
tonight, by tomorrow morning many corporations would be already on their way
to forming some new quasi-governments. I believe high-level executives are
aware that a) social order is good for business, and b) having a working
framework for establishing and enforcing contracts is vital to their
operations.

~~~
AndrewKemendo
_And now that your monopolies have guns and tanks and can openly play dirty,
good luck for the small upstarts trying to take them down._

Well exactly. That was my point. In the absence of regulation, there might not
be monopolies but it would be a Mad Max style business environment.

~~~
TeMPOraL
I think that "Mad Max style business environment" will actually evolve back to
the rule of law. That's how our present world came to be, after all. We moved
from warlords to cities, then to regions, nation states and finally to
international unions and trans-national government organizations. We moved,
because at each step, grouping together and establishing some shared rules was
good for people _and_ good for business.

~~~
AndrewKemendo
Indeed it would.

The Greek philosopher Polybius referred to this cycle between anarchy and
totalitarian state as the anakyklosis

[1][https://en.wikipedia.org/wiki/Anacyclosis](https://en.wikipedia.org/wiki/Anacyclosis)

~~~
TeMPOraL
This is actually... a) very insightful, and b) something I don't recall ever
encountering before. Thanks a lot for the reference!

(Increasingly, I'm starting to feel that a lot of things I figure out for
myself - often while writing HN comments - is something that's been widely
known for thousands of years. I guess I need to sit down and read some of
those classic works.)

------
chrisco255
You have an unsubstantiated argument with presuming that taxing billionaires
or millionaires at 80% would be good for society.

Let's set aside arguments of individuality vs. socialism and whether
government should operate for the hugely debatable, ephemeral term, "the
greater good". I think that invites a separate essay on its own.

From a purely utilitarian perspective, the rich often leverage their capital
to achieve things that would be impossible or difficult to do without access
to the capital they created.

Case in point, is Elon Musk. If he didn't take home most of the money he
earned from his involvement in Paypal, the odds of Space X, Tesla, and Solar
City ever happening are decreased dramatically. When in the hands of an
extraordinarily talented individual like Musk, capital can work to create
long-lasting ripple effects that benefit society as a whole.

If you had taxed Musk at 80%, and he was left with a paltry $30 million or so,
it's likely that one or more of the above companies never happen. The
opportunity cost is that less jobs get created, unique and innovative
technology never gets formed, and the ripple effects (such as spurring
Chevrolet and others to make electric vehicles) never happen.

While not always the case, it is often the case that private capital
investments do improve society in meaningful ways.

The economy is a very fungible thing and the idea that it is approaching "zero
sum" is an unfounded one in the extreme.

~~~
lmm
> Case in point, is Elon Musk. If he didn't take home most of the money he
> earned from his involvement in Paypal, the odds of Space X, Tesla, and Solar
> City ever happening are decreased dramatically. When in the hands of an
> extraordinarily talented individual like Musk, capital can work to create
> long-lasting ripple effects that benefit society as a whole.

What you're claiming here is that Musk can allocate capital better than a
government, right? That leaving the money in his hands was better than taxing
it and spending it on government projects? (note that all three of SpaceX,
Tesla and Solar City received substantial amounts of funding from the US
government (directly or indirectly) and would likely not be viable without it,
even leaving aside all the USG-funded basic research that was necessary to
make them possible in the first place).

Even if that's true for Musk specifically (which I doubt), is it true on
average? How efficient is the average billionaire at using their money for
social good? You gloss over a lot with "While not always the case" \- how does
the average return to society on a private capital investment compare with a
public capital investment?

~~~
vixen99
Who defines 'social good'? You assume an elite that can determine efficiency!
This is the socialist conceit.

Milton Friedman:

“There are four ways in which you can spend money. You can spend your own
money on yourself. When you do that, why then you really watch out what you’re
doing, and you try to get the most for your money.

Then you can spend your own money on somebody else. For example, I buy a
birthday present for someone. Well, then I’m not so careful about the content
of the present, but I’m very careful about the cost.

Then, I can spend somebody else’s money on myself. And if I spend somebody
else’s money on myself, then I’m sure going to have a good lunch!

Finally, I can spend somebody else’s money on somebody else. And if I spend
somebody else’s money on somebody else, I’m not concerned about how much it
is, and I’m not concerned about what I get. And that’s government. ”

~~~
gjm11
Spending somebody else's money on somebody else describes a large fraction of
what many employees of a business do. It looks to me as if those employees
generally do a decent enough job of buying useful things at a reasonable
price.

How can that be, given what Milton Friedman says? Two reasons. First: there
are incentives in place to encourage them to do it. If they buy useless things
or spend too much money, someone may notice and they may lose their job. If
they find a particularly good bargain, they may be rewarded. Second: most
people are not perfectly selfish utility-maximizing _homo economicus_ , and
even when spending "somebody else's money on somebody else" they do in fact
prefer to do so in a way that benefits the second somebody-else at not too
much cost to the first one.

Guess what? Much the same applies in government. Suppose you're a doctor in a
nationally-run health system like the UK's. You examine a patient and
prescribe a drug. Does the fact that you're spending "somebody else's money on
somebody else" really mean that you won't prefer to prescribe a drug that
actually helps the patient's problem? Does it mean you won't prefer a cheaper
drug over a more expensive one that performs no better? Of course not. And if
in fact you are the way Milton Friedman professes to be -- if you prescribe
with blithe indifference to whether your patients live or die and to whether
your national health service goes bankrupt -- then there's a real risk that
someone will notice and you'll be out of a job, or pilloried in the
newspapers, or something similarly undesirable.

~~~
AnimalMuppet
The problem with government is that the bar to fire people is too high for it
to work the way you describe. And it's that way for a reason.

The system used to be that, when a party won an election, they'd fire the
existing government employees, and replace them with members of their party.
"To the victor go the spoils", and this was called the "spoils system". But
that meant that the knowledge of how the day-to-day government functioned got
lost after every election, which was non-optimal. So laws were passed to
eliminate that practice, but at the price of making it hard to fire government
employees. (Add in public sector unions, and it gets even harder.)

~~~
phyrne
Great point,never realised thats the reason,may i say it has a very negative
effect when you have tolitarian type admin with no,age limit on
appointments,cant admins be obliged to shift people to other sections or sack
people after 12 years if results of department had a lacklustre performance
,when opposition wins? On the VC thing i think it stifles compatition and tax
paying and i dont want to have any taxes diverted for somebody to go into
space its not making my life any easier .id prefer all companies pay full
taxes in 1)the countries where the raw materials are sourced ,2) the credit
card payment,end user country ,rather than keepng money in convinient little
tax places ,charity setups and all that stuff ,its getting very unrealistic
feeding of other peoples hunger and poverty and thinking your doing good!

------
throwaway_5561
As someone who was born in Soviet Union, and (thankfully) escaped at a fairly
early age, arguments like this just completely boggle my mind.

Why do people think it's ok to take other people's money? If a billionaire has
money - regardless of whether they earned or inherited it - it's THEIR money.
If they earned it lawfully, they should pay the same % of tax that everyone
else pays - and keep the rest to do whatever they please. Who are YOU to tell
them how to spend THEIR MONEY better?

If you're jealous of them having more money than you - this is a truly free
country, nothing is stopping you from earning just as much as they have. Yes,
life isn't fair, they may be born into wealth and you're not - but try being
born in North Korea, then talk about it not being _fair_.

This is the principle that America was founded on, and what's allowed it to be
successful.

And as someone who studied just a bit of history, it seems completely insane
to me that people think taking money from the rich and distributing it to the
poor think it will turn out OK. The same exact thing happened in dozens of
socialist countries - those that are in charge of the distribution, somehow
distribute the most of it to themselves, and then take away people's freedoms
so they would stay in power. To think that something else is going to happen
is just plain ignorance of basic human nature.

~~~
crimsonalucard
The situation is far more complex than you assume.

It is impossible for one person to make a billion dollar 747. One man simply
doesn't have enough intelligence or strength to do construct such a
sophisticated device. If a 747 is worth a billion dollars then creating a
billion dollars of paper money or making the plane itself are both equivalent
concepts.

Thus why is it possible for one man to make a billion dollars in paper money
but it is not possible for one man to make a billion dollar 747? Why do
billionaires exist?

Billionaires exist only because the paper money was taken from the wealth
produced by other people. The Billionaire needs to employ workers to build a
747.

In short, for Billionaires to be Billionaires they must be an owner of some
corporation where the wealth produced by the labor of employees is unfairly
distributed to them. This is wealth inequality. This was the problem your old
country attempted and somewhat failed to resolve with communism.

Whatever you think communism is, wealth inequality is a feature of capitalism
and it is fundamentally unfair because it is taken from others.

~~~
throwaway_5561
Of course, building the 747 by yourself is not possible. But it is possible to
put together a team that has enough diverse skills to build it - that's the
whole point of entrepreneurship.

The point that everyone who talks about how inequality is bad is missing is
that without the billionaire in your example, there would be NO jobs. Pure
labor doesn't produce - there needs to be a business idea, vision, strategy,
organization, sales - all those things that the businessman in charge
provides.

The reality of the situation is that workers can be replaced - that's why they
get paid less. But the businessman creator can NOT be replaced - without
him/her in charge, there would be nothing else.

Soviet Union and other socialist countries tried taking the businessman in
charge away - and we know exactly what happened after that.

I know this system isn't "fair", but it's better than the alternatives.

~~~
crimsonalucard
Right and I agree with your main point. It's basically the point I'm trying to
drive home. Communism isn't the solution, capitalism is better but has
problems as well. We should all work to resolve those problems even if
capitalism is currently the best possible solution. Extreme Wealth inequality
is a problem of unfairness and we should strive to resolve the problem without
giving up the benefits that come with capitalism.

I disagree with the fact the billionaire can't be replaced. The billionaire
isn't some special human being. I would argue if you replace the current CEO
of apple with a random apple SW engineer, the company wouldn't change much.

In fact I would argue that skilled work, the work of software engineers is by
far much more irreplaceable. The person who coded the critical infrastructure
for the apple operating system, he is by far harder to replace then the
billionaire on top. Also note: Steve jobs died, Apple stock has gone up since
his death.

~~~
throwaway_5561
I think your Apple example is helping to disprove your point.

> I would argue if you replace the current CEO of apple with a random apple SW
> engineer, the company wouldn't change much.

That's exactly what happened in the 80's - they forced Steve Jobs out, and the
company lost all their market share and was on the verge on dying, before he
came back.

> Steve jobs died, Apple stock has gone up since his death.

By that time, Steve Jobs knew he was going to die and picked his successor
very carefully - Tim Cook is definitely a great choice. Some would argue,
however, that Apple is still thriving because of Steve's ideas, and as soon as
they run out of them, Apple will start to decline. The jury is still out on
that one, however.

------
dave_sullivan
>> Literally no one in America, save for a very few on the fringe, is talking
about “eliminating income inequality.”

I don't know about that; I've heard plenty of people talk about eliminating
income inequality as an end goal (but I live in the SF Bay Area, so maybe a
reflection of demographics out here?)

It's like saying no one but the fringe is going to vote for donald trump, and
yet those poll numbers...

>> What people are talking about is a progressive income tax to reduce
inequality.

Well, we have that. Taxes are historically low, so I'd be ok with raising them
somewhat, but not too much.

>> So by taxing the wealthy and spending it on services, we can better ensure
that the level playing field you allude to continues to exist.

This is really the crux of my argument: instead of increasing taxes first, we
should hold the government more accountable over spending and look at programs
and how they help or do not help the poor. Poverty is the metric that should
be focused on, not inequality. If inequality is reduced as a side effect, all
the better. But poverty is the problem. If government got more money from
taxes, what makes you think they would use it to effectively reduce poverty?

~~~
cmiles74
The 80% sounds over the top to myself as well, but in the article they were
using it in reference to someone with an income of 1 billion dollars per year.
To my mind, 80% on 1 billion isn't so crazy. It sounds like the far end of the
scaled tax curve. As far as I can tell, there are only a handful of people
(like maybe five) that make in excess of 1 billion a year.

I work with government agencies and I am all for them being more accountable,
I have no doubt that they could spend a lot less than they do. On the other
hand, I am entirely unwilling to wait for them to become more efficient before
deciding to severely tax the five people who make over 1 billion per year.

~~~
joslin01
So if you taxed those 5 people, you would make 4 billion. We spend over 3
trillion a year. Do you really think the punishment fits the crime?

Wiser management of federal resources would go a lot further than throwing
more money down the hole.

~~~
cmiles74
If this tax regime was put in place, people would find other ways to shelter
their money; I don't think the government would end up with a significant
windfall. Maybe they'd invest in their company or start a new company and
invest in that. I'm sure that with such a large income, they would have many
places to put that money.

~~~
joslin01
I agree, which is more reason against it.

------
salmonet
>If a billionaire is taxed 80% on the year he or she earns that billion, they
will still be worth $200 million. And they are still free to start businesses
and pursue wealth. They are still rich. They have not been “hunted” or
“killed.” The crux of your argument — that “Ending economic inequality would
mean ending startups” — is both a straw man (no one’s advocating eliminating
income inequality completely) and untrue (people can still pursue whatever
they want — they just have to pay more taxes on it.)

It sounds simple, but as remote work becomes easier it becomes more tempting
to do it in another country (a country that won't tax that person
$800,000,000).

Pg addresses this issue in his essay "So if you made it impossible to get rich
by creating wealth in your country, the ambitious people in your country would
just leave and do it somewhere else."

~~~
GFK_of_xmaspast
Someone making $800M is not doing "work".

~~~
AndrewKemendo
What are they doing then?

------
bsbechtel
One thing that is often ignored when considering a progressive income tax is
that years of income are often sacrificed in order to achieve higher earnings.
Consider an entrepreneur who earns <$30,000 for for 5+ years while re-
investing in a breakthrough technology, or a doctor who spends 10+ years
studying and living on a minimal income who one year earn $250,000+ and fall
into the highest tax bracket. Those individuals have basically concentrated
all of their earnings into a shorter time period, at (in the entrepreneur's
case) significant personal risk/expense. This can make the net lifetime
earnings of these supposedly 'rich' individuals actually less, and taxed at a
higher rate, than those who don't ever achieve this level of income.

------
Alex3917
> ... we’re looking at 2–3% growth from here on out. So, by this completely
> rational view of the "pie," it is, in fact, trending towards a zero sum
> game.

Not only does GDP not measure wealth, but as wealth increases you might
actually expect GDP to decrease. E.g. when self-driving cars put 20M Americans
out of work, wealth will have increased, but the GDP will decrease.

~~~
jondubois
Well that only reinforces OP's argument... In this scenario you have a few
powerful companies taking the pie away from taxi drivers, from small petrol
station owners, from small car mechanics, etc... It is a zero-sum game because
these people will have to beg on the streets. In this scenario, would the
driverless car have helped improve life for humans? Yes it would improve the
life of rich people; it will be very convenient for them to not have to
drive... But what about regular humans?

An alternative scenario would be to tax driverless car companies and give the
money back to the people whose livelihoods were taken.

I have no doubt that in a fully-automated world, society will either be
socialist or communist. If wealthy people start thinking about inequality and
actively work to improve things, then we will have socialism. If they don't,
it will just spread misery and resentment among the lower class and will
likely lead to a more dramatic change in the state of affairs.

Oppression leads to extremism. Just look at what happened after world war one
when Germany was burried in insurmountable war reparation debt... It created a
generation of resentful german extremists - And along came WW2.

~~~
forrestthewoods
That's not how it works. Automation doesn't put things in the hands of a few
powerful companies. Those items become commodities. You don't get rich selling
commodities. Corporations spend billions upon billions to make sure they
aren't reduced to commodities.

Cheap access to driverless cars will be a huge boon for the poor. Can you
imagine what it would be like to have cheap access to goods no matter where
you live? To receive delivery of materials cheaply and quickly? That's not a
wealth destroyer. That's wealth creation infrastructure.

~~~
jondubois
Maybe, but what is the point of having all that wealth if only 10% of the
population can access it?

If automation replaces 90% of jobs, then you're going to have a lot of
unemployed people with no money.

I disagree about automation becoming a commodity. Automation is all about
monopolies. You only need to write software once and only the company with the
best technology will control the whole market... Why would a consumer use a
piece of technology if it is less efficient than a competing piece of
technology?

Just look at Intel vs AMD. Intel's CPUs became just a little bit faster, and
as a result, in just a few years they decimated AMD financially.

Technology is a winner-takes-it-all game.

------
ohyes
The last few paragraphs where he laid out what PG's actual desire might be
(for VC funding to maintain the same tax status), was immensely helpful to me
in understanding the whole exchange.

Why PG chose to make a side on argument towards that leaves me a little
bemused, however

~~~
ljw1001
Because it sounds better to say job creators are being hunted than to say I
want to keep my sweetheart tax breaks.

------
randomThoughts9
I think that a lot of people that are against higher/progressive taxes or see
these level of inequality (income and wealth) as a good thing believe in the
"self-made man" myth.

But that is just a myth. When someone "makes it", can you really disregard?

\- his teacher from school

\- the doctor that saved his life when he was young

\- the guy on the street that maybe said something that triggered a chain of
actions that ended in his success

\- the books he read

\- the peace of mind provided by living in a safe place

\- etc.

Is it enough that you paid for that doctor appointment? I don't know. But you
would not be here at all without it, and that doctor himself benefited from
all of the above.

A different way of looking at things could be that, as we as a society don't
know what works and what doesn't, we invest in people. Some are lucky, and
based on their circumstances (and on their personal merit, I won't deny that)
will manage to succeed in life.

------
vannevar
From the fourth point:

 _So, by this completely rational view of the “pie,” it is, in fact, trending
towards a zero sum game._

It doesn't even matter how growth is trending. Graham's misguided criticism of
the 'myth' misses a simple mathematical fact: that the growth in income among
the top 1% dramatically outpaces overall economic growth. Consequently,
contrary to his assertion, the rich _are_ increasing their income at the
expense of the poor. There is no where else the money can be coming from. You
can argue (wrongly, in my opinion) that this is solely because the rich are
smarter and harder-working than the poor. But you cannot rationally argue that
such a shift is not happening in a broad sense.

------
digital_ins
Anyone who thinks that an 80% tax on the rich is going to yield spectacular
results should take a look at the whole host of countries following the
communist economic model as well as the countries that adopted the non-
explicit communist model (these include most of the countries in the 'Non-
Aligned Movement') to see how heavily taxing the rich as well as trusting that
the government is more efficient with capital allocation is working out.

It's not.

------
hyperliner
What is wrong with taxing 80% of the wealth is that then the return on the
equity placed into the business to make it real just decreased 80%. At _some
point_ then many of those startups won't be created because there won't be
enough return to pay for the risk. So then there will not be more of "those
jobs" and there won't be any wealth created. Therefore no taxes will be paid.
And we just reduced the pie to zero.

I am not sure what the number is, but when I hear 80% taxes, I think someone
(maybe me) is not doing their math.

But I do agree that one must first make sure to understand the argument of the
other side before articulating a counter-argument. I think in this case, there
is also the problem that the message gets diluted because of the messenger:
unfortunately PG does not have credibility in this area because (presumably)
he has not been on the ground dealing with poverty issues as many others. Then
again, many economists haven't either, even as they also postulate solutions.

~~~
ljw1001
You're assuming these companies create a lot of jobs, but in fact they create
far fewer jobs than they did 30 years ago. As Intel founder Andy Grove said
(of companies like Apple): "plowing capital into young companies that build
their factories elsewhere will continue to yield a bad return in terms of
American jobs."

Instagram (for another example) had 13 employees when sold for $1 billion.

~~~
hyperliner
It's a fair point. But I think that the issue is that we then are lumping all
of these companies into one category and we should look into what they are
doing. So if we think that "dating apps" or "photo apps" derive less social
value then we would tax them more than startups that derive "more value" (say,
fighting disease or providing solar power). There are systems already in place
for this type of incentive, where government provides tax breaks in fields
deemed "socially more valuable."

~~~
ConfuciusSay
You have to be very careful with laws like this where a human has to sit and
evaluate the societal benefit of one business over another. Tons of
unintended, and potentially very negative, consequences to this.

Simplifying the tax system and increasing the top marginal tax rates back to
something closer to where they were 40 years ago is preferable in my opinion.

------
cryoshon
Meh. I didn't write a follow up to PG's follow up because I assumed he
wouldn't be receptive to my arguments and didn't want to start a war of words
over a topic that has been rehashed a bajillion times. Even the economists are
saying we need to reduce economic inequality if we want to avoid disaster.
That's far more topical thought and information than anyone arguing on HN can
bring to bear, I assume. (I really hope I am right.)

The OP article is definitely factual with its four main points-- I'd also like
to add that the trick of putting yourself into the opposing position's shoes
and reconstructing their argument is one of the best rhetorical techniques
that exists.

~~~
cobaltblue
Can you name three? In any case, a good economist typically just says what the
state of the world is or will be given x, y, z, not what should be. I can
think of one economist (Robin Hanson) who doesn't say "we should reduce
financial inequality".

~~~
ConfuciusSay
Here are four - Era Dabla-Norris ; Kalpana Kochhar ; Nujin Suphaphiphat ;
Frantisek Ricka ; Evridiki Tsounta.

They work at a little organization called the International Monetary Fund, and
they conclude:

"We find that increasing the income share of the poor and the middle class
actually increases growth while a rising income share of the top 20 percent
results in lower growth—that is, when the rich get richer, benefits do not
trickle down."

[https://www.imf.org/external/pubs/cat/longres.aspx?sk=42986....](https://www.imf.org/external/pubs/cat/longres.aspx?sk=42986.0)

------
oneJob
There is a follow-up by Mr. Graham [1], and there is a follow-up to his
follow-up by the original open-letter author [2].

I would like to add one thing. Given that Mr. Graham has put forth an essay on
an (macro) economic topic, and his employment of the 'per se' argument method,
there is an obvious lack of proper treatment of the basic and foundational
economic concept of 'ceteris paribus'.

Without employing the tool of 'ceteris paribus' in his his essay Mr. Graham
has left the door _wide_ open for discussion of all sorts of things which
might form a critical response to his argument: "But economic inequality per
se is not bad." On the same topic, in his follow-up he weakens his argument
substantially by prefacing it with: "I thought it might help clarify matters
if I tried to write a version so simple that it leaves no room for
misinterpretation." Less words does not necessarily make for a smaller room,
Mr. Graham.

[1] [http://www.paulgraham.com/sim.html](http://www.paulgraham.com/sim.html)

[2] [https://medium.com/@RickWebb/paul-graham-s-second-
inequality...](https://medium.com/@RickWebb/paul-graham-s-second-inequality-
essay-is-only-slightly-better-here-s-what-s-still-wrong-with-
it-9b57ba8e516d#.hum2bsuur)

------
hluska
It's interesting to me that these types of arguments always boil down taxing
the wealthy. That is a way to redistribute wealth, but what about working to
do a more efficient job of redistributing wealth from government to the
citizens?

Consider the author's idea of levying an 80% tax on people who earn $1 billion
a year. Chances are that anyone who is smart enough to earn $1 billion a year
is smart enough to hire a small army of accountants/tax attorneys to reduce
her tax load. The relevant tax authority thus has to counter by hiring their
own army of auditors/tax accountants to enforce these sorts of tax laws.

In the end, the tax authority may collect more money, but they also have to
spend significantly more. In the end, will such a scheme really result in more
money in the government's coffers??

And then, what happens to money once it reaches the G?? How much of the money
is wasted on poorly planned/executed programs? How much is wasted by massive,
overstaffed organizations? How much of the money designated for 'social
services' ends up in the hands of lower income people versus how much ends up
paying for bureaucracy?

Please tax the wealthy, but first, it's a better idea to run government in the
most efficient way possible.

~~~
rcurry
"Please tax the wealthy, but first, it's a better idea to run government in
the most efficient way possible."

Yeah, if someone tells me that they can spend Elon Musk's money more
productively than he can, I'd kind of like them to be able to point to some
track record of having done that in the past with all the other money they've
had their hands on.

~~~
gbhn
Many people think Musk is in the top percentiles of "using money well." While
I think it is always appropriate to want the government to run better, it's
probably not fair to set such a high bar for it.

One might just as easily say "no VC should invest money in any company whose
founder has a poorer track record than Elon Musk" which is of course a
ridiculous posture.

------
paulus_magnus2
Most of problems of inequality come down to the fact that rich are allowed to
invest into land / housing.

One can argue if enormous capital gains should be taxed or not, but the
problem starts when rich park their money where it inflates "normal people"'s
necessities.

Best jobs are concentrated in few big cities, workers have to live there. Rich
don't have to live there but they corner the housing market in order to
extract maximum percentage from workers' salaries.

I don't care how much money the rich have as long as they don't inflate the
housing so I can afford to buy my own.

Capitalism has learned to extract more surplus value from labour about the
moment when worker productivity and salaries started diverging. It used to be
that the rich are very few and once they bought all the London property normal
people could live their lives. Nowadays there are so many foreign billionaires
(China) who either have money or can access cheap debt that they can corner
property market in every major city.

------
hallowed_ed
'Dr. Mr Graham' surely it's just 'Dr' or just 'Mr'. It can't be both. We're
not German here.

~~~
grabcocque
Maybe he's German? In German it's customary to say "Frau/Herr Doktor XXX"
(Madam/Mr. Dr. XXX)

------
rythie
In living (for some), 80%+ tax rates have been used and tax was very high for
about 5 decades:

    
    
      - the top marginal rate of tax was 62% in 1932 (up from 25% in 1931)
      - rising to 91% in 1963 (income over $200k)
      - It was at 70% in 1981 (before dropping to 50% in 1982)
    

[http://taxfoundation.org/article/us-federal-individual-
incom...](http://taxfoundation.org/article/us-federal-individual-income-tax-
rates-history-1913-2013-nominal-and-inflation-adjusted-brackets)

and a graph here:
[http://visualizingeconomics.com/blog/2010/02/04/historical-m...](http://visualizingeconomics.com/blog/2010/02/04/historical-
marginal-income-tax-rates)

Though I can find very little that talks about the affects of this taxation on
society.

~~~
chrisco255
The 80%+ tax rate were used to pay for WWII debts. Also, tax loopholes were
absolutely rampant prior to the 1986 tax reform act. Because tax rates and
deductions are so fungible, and vary from country to country and even state to
state (if we factor state and local taxes) the only objective measure is to
look at tax revenue as a percentage of GDP:
[https://en.wikipedia.org/wiki/List_of_countries_by_tax_reven...](https://en.wikipedia.org/wiki/List_of_countries_by_tax_revenue_as_percentage_of_GDP)

------
digital_ins
Also the talk of GDP growth slowing down is so off-putting. It just goes to
show that the author has no understanding of economics. GDP growth tends to
slow down as the base increases. The entire article sounded like an adult
making the case that if he ate more, he'd grow taller.

------
acgourley
I read PG as saying, "You can't fix exponential forces with linear solutions."
Furthermore I got the impression PG's essay is in favor of progressive reform
such as reduced incarceration rates and even something like basic income but
is going out of the way to make the point it still won't get rid of in
equality because it _cannot_ as long as we embrace technology. He's trying to
say instead of going after the impossible bogeyman (inequality) let's go after
the very real bogeyman (poverty).

I feel like the author of this post reads PG totally different. He seems to
think PG is saying, "Inequality isn't a big problem and it can't be fixed and
screw these dumb poor people."

------
andrewmcwatters
I really don't like the word "progressive" being used in a context like this,
and it seems more like a cognitive anchor for associating actual progress with
this proposal.

It seems really backward and regressive if anything.

------
crimsonalucard
PG talks about startups as if they are the best thing that ever happened to
this world.

The iphone did not come from a startup. Nor did the internet. The world needs
startups but if the startup fails like the way most of them do... then it's
just wasted capital producing a good that has zero utility.

Anybody have a good argument for why we need startups for every little stupid
business idea? PG almost describes the "entrepreneur" as some sort of
genetically superior being.

~~~
codingdave
PG (or anyone involved with YC) has a financially vested interest in everyone
believing that startups are great. I don't know the dude, so cannot presume
his full thoughts or motivations, but he is FAR from an unbiased source.

------
chrisco255
"Because poverty is not actually a bad thing that causes income inequality, it
is a circumstance of it."

Poverty is a circumstance of living in a world with limited resources where
trade offs have to be made in virtually all decisions. When I have lunch
today, I am, in a twisted interpretation, depraving someone else of that food.

In a world where everything has a cost, whether hidden or real, poverty in
some form will exist.

------
forrestthewoods
Every response post I've read is terrible. Frustratingly so.

Inequality is bad. People want to reduce inequality. Startups strive to
strictly increase inequality. Now what? An extreme progressive tax plus
startups will STILL increase inequality. Not decrease.

To be honest I want to increase inequality even more. Because I want to allow
more immigrants and refugees. You can't let in hundreds of thousands of
refugees without increasing inequality. It's not possible.

What some of these posts say, without actually saying it, is that oh some
types of inequality are bad and some are good. A small local business that
earns it's owner a 6 figure salary? Well that's _obviously_ good. When people
say inequality is bad they meant those filthy point-oh-one percenters on Wall
Street. Not the plumber who has 10 employees and made $350,000 last year.
Obviously.

Inequality is at most a 2nd order derivative. It doesn't actually matter much.
Things can be good with high inequality or they can be bad with low
inequality. It gets far more attention than it should, imo.

~~~
ConfuciusSay
The current consensus among economists is that increasing inequality will lead
to disaster for the entire economy, while decreasing inequality actually
increases growth.

Sure, you're right that nothing is set in stone, and you could have a country
that has low inequality but it's still a terrible place to live by other
metrics, but this is useless hypothesizing and speculation. What evidence do
you have to support the statement that "An extreme progressive tax plus
startups will STILL increase inequality. Not decrease." Seems to me, in the
years when the top marginal tax rates were higher, those were some of the
years with the least income inequality in American history.

Why not look at what people who study our current economies are saying instead
of speculating?

From the IMF:

"We find that increasing the income share of the poor and the middle class
actually increases growth while a rising income share of the top 20 percent
results in lower growth—that is, when the rich get richer, benefits do not
trickle down."

[https://www.imf.org/external/pubs/cat/longres.aspx?sk=42986....](https://www.imf.org/external/pubs/cat/longres.aspx?sk=42986.0)

~~~
forrestthewoods
It's not that simple. Bringing in more refugees increases inequality. Bringing
in more refugees is also good for the economy. Therefore an increase in
inequality does mean economic disaster.

Not all increases in inequality are equal. They can not be treated as such.

------
nsns
A somewhat less nuanced response, that (despite a lively conversation) never
made it to the front page:
[https://news.ycombinator.com/item?id=10831261](https://news.ycombinator.com/item?id=10831261)

------
badusername
[https://medium.com/@girlziplocked/paul-graham-is-still-
askin...](https://medium.com/@girlziplocked/paul-graham-is-still-asking-to-be-
eaten-5f021c0c0650#.84ry1qyun)

------
jondubois
I think capitalism has been a zero-sum game for a very long time. Marketing
just dominates everything now - 90% of the work people do is to figure out how
to make the company that they work for gain market share over the companies
that other people work for and the solution these days is usually marketing...
Instead of focusing their energy on how to make their product cheaper.

The cost of RAM memory seems to have stagnated. The prices of vital drugs are
going up. Property prices are going up.

The era of value-creation is over. The real winners are those who can make
other people create all the value and just capture that value.

------
lintiness
uh, money to the government doesn't end poverty, not even remotely. the
question we should all ask is whether individuals, individually motivated,
better allocate money than the government. the idea they don't give to charity
or fight poverty with their billions is also preposterous.

------
JustSomeNobody
>If a billionaire is taxed 80% on the year he or she earns that billion, they
will still be worth $200 million.

Ah, yes. One can be rich, but don't you dare be TOO rich!

~~~
ZenoArrow
What's wrong with that? The gap between the rich and the poor (and the
problems this creates) is at the core of the economic inequality issue, in
comparison with the poor, it is possible to be 'TOO rich'.

------
padseeker
It drives me nuts that Hacker News is such an awesome resource but the person
behind it is such an arrogant jerk.

Am I banned now?

