
Inequality and Risk - kirubakaran
http://www.paulgraham.com/inequality.html
======
chops
While this is an older essay, this is up there with one of my favorite PG
essays

This part always has particularly far-reaching consequences.

 _The problem here is not wealth, but corruption. So why not go after
corruption?_

People like to assail lobbyists and the super-rich corporations that
supposedly buy favorable policy, and of course, everyone then blames the rich
for it. But it's not the rich that deserve the fundamental blame. It's the
politicians that directly create policy, and can enforce that policy at
gunpoint. No amount of money gives you legal authority to stick a gun in
someone's face.

It's the government, and only the government that make the laws - not the
lobbyists and not the rich. Economic power is not the same thing as political
power.

Which is why transparency (which PG also speaks about) is so key.

~~~
randallsquared
I would suggest that instead of trying to reduce bad uses of political power
via the proxy of transparency, it might be more effective to reduce the amount
of political power there is at all.

------
mdasen
Well, there are some ways that you can make start-ups more appealing for
founders without increasing the reward. In the United States, creating a
startup has considerable risk and cost. Health insurance comes to mind as the
largest cost. Europeans don't have to worry about this in the same way and,
therefore, are able to eliminate a cost of several thousand dollars from their
startup budget. They don't risk being without health coverage by creating a
startup (and that does lower the risk, therefore requiring less reward).
Likewise, unemployment insurance is better which makes it easier for those
whose start-ups might not pan out to feel secure.

So, the government can lower the risk for founders in a meaningful way. I'm
not saying that socialism is awesome or anything, just that certain social
programs reduce the risk of doing a start up.

Aaron Swartz (of reddit fame) once wrote an essay on this topic arguing this
point: <http://www.aaronsw.com/weblog/prostartup>

The lack of a social safety net requires founders to be in a good position -
good health, no dependents (spouse, kids), etc. - or get enough VC that they
can afford to go in that direction.

It's clearly not the only issue - investment dollars still need to come from
somewhere and this doesn't change that risk (other than lowering the amount
initially needed since the VC wouldn't have to pay for things like health
insurance), but personally it would go a long way for risk-averse me.

------
melmel
Did Bill Gates really think about how much of his future wealth would be taxed
when he started Microsoft? Or how about Steve Jobs when he started Apple? My
guess is ego and the desire to succeed were more important.

~~~
pg
In those two cases, probably not. What does influence a lot of founders,
though, is what happens to peers who try it. Their friend starts a startup and
sells it a few years later. How much better off is he economically? Does he
merely get enough not to work for a few years, or does he never have to work
again? Tax laws make a visible difference here. In a smaller acquisition,
which most are, taxing capital gains at the rate of regular income would very
often make the difference between someone having enough not to have to work
again versus just enough to take a few years off.

------
forinti
You don't have to eliminate inequality, but if society gave people a better
foundation to work with (health care, care in old age and education), I think
people would be more willing to take risks AND would be less prone to
corruption.

------
doki_pen
We act as if most of our tax money goes to poor people. That just isn't the
case. This entire argument is a lie on it's face. I don't think anyone
seriously thinks we should all be equal financially, only that people deserve
health care, food and shelter, even if they are "lazy" or "stupid".
Guaranteeing these basic human needs wouldn't cost as much as people think.
Even reducing the taxes that poor people pay would help immensely. It's a
fallacy that the poor don't pay taxes, they do. There are other taxes besides
income taxes, some of them even go into the same exact pool of money. Many
rich end up paying _less_ taxes then poor people do, as a percentage of their
income.

~~~
chops
_only that people deserve health care, food and shelter_

Why? These aren't automatically available in nature. They require work, and
the application of the mind, to acquire. Health Care is a service provided by
individuals. People have a "right" to health care only inasmuch as those who
are capable of delivering said health care are _willing_ to do so (that is,
voluntarily).

The same goes with food gathering/storing/preparation and building
manufacturing. Someone has to provide these services, and to state that
because someone "deserves it" that those services must be rendered (without
concern for rendering individual's agreement), well, that's the master-slave
relationship.

~~~
billybob
Your point is valid, but I think it's a bit extreme to say that guaranteeing
basic care makes everyone else a slave. A slave works for nothing to enrich
others; a doctor loses some money caring for indigent patients but doesn't
become poor while the patients become rich. There is a natural limit there.

~~~
chops
The financial differences are irrelevant. A slave is one who works for another
without choice, under threat of force.

The (American) slaves were given basic provisions for life, even some leisure
time. Their fundamental problem wasn't the money or their lifestyle, it was
the lack of choice. They didn't have the right to say "no, I refuse to serve
you."

~~~
msluyter
False dichotomy: you're either 100% free to do anything you want, or you're a
slave. There's lots of middle ground, namely that making certain choices
implies accepting certain constraints. Universal health care, for example,
needn't _force_ doctors into providing care for certain people at gunpoint. It
may imply, however, that if you choose to enter medicine that you may have to
accept certain conditions.

This is already the case, actually. Working at certain emergency rooms
obligates one to care for those that come through the door, regardless of
whether they can pay. This hardly makes the doctors & nurses who work there
slaves.

Similarly, in the US we citizens have a right to council, and if you can't
afford an attorney, one is provided by the state. Does that make court
appointed attorneys slaves?

------
billybob
I didn't understand this part:

"If you want to reduce economic inequality instead of just improving the
overall standard of living, it's not enough just to raise up the poor. What if
one of your newly minted engineers gets ambitious and goes on to become
another Bill Gates? Economic inequality will be as bad as ever."

What about your newly minted teachers and other middle-class citizens? Does
everyone who rise from poverty become super rich?

I don't understand economics well, so I can't really counter his overall
argument, but this seemed a little offhanded.

~~~
nazgulnarsil
part of the point is that these "super rich" that everyone likes to point
fingers at are such statistical outliers that formulating economic policy
around them is ridiculous. In essence you wind up with special rules for .01%
of the population. How egalitarian is that?

~~~
AlisdairO
Why so ridiculous? Those .01% often have a vastly disproportionate impact on
the rest of the society, so it only makes sense to have special rules for
them.

~~~
nazgulnarsil
the point is that it's hypocritical from the egalitarian soapbox that the
people stand on.

~~~
AlisdairO
Not really. The .01% generally have vastly greater power and effective rights
within society - ensuring that that doesn't go overboard isn't so crazy.

------
biohacker42
Strongly agree with the second part: _The problem here is not wealth, but
corruption_

Kind of confused by the first part. Was that about progressive tax rates or
communism?

I don't know anyone who has ever declined an opportunity to make money just
because the tax on the profit was too high. Does anyone have specific
examples?

~~~
randallsquared
I used to work in manufacturing, and it was fairly common to hear people
decline overtime using the reason that it would be taxed enough more that it
wasn't worth it for them. Part of this might have been due to a
misunderstanding of how income taxes work (everyone I knew there, including
myself, had the impression that higher rates were applied to the entire amount
of your income), but that doesn't alter the point in this case.

