
Why Startups cause Economic Inequality - and Why that's Good - lupin_sansei
http://www.heritage.org//Press/Commentary/ed063007b.cfm
======
cglee
I was wondering when these super conservative groups, such as the Heritage
Foundation, would start using the "inequality is good" argument. There's a lot
to like about an utopian society based solely on meritocracy. But the truth is
there are large numbers of people who cannot compete on equal footing due to
circumstances that are/were out of their control. It's like taking a Chinese
class with a bunch of Chinese students and you're the only one who doesn't
know the difference between Mandarin and Cantonese.

Using the Google founders as the example of "inequality being good" is
ridiculous. Most people don't have a problem with rewarding innovative work;
people have problems with not providing a baseline for those who can't. In a
pure pay for performance society, those who can't perform, won't get paid. Is
this fair? On the surface, well yes, maybe. But what if the REASON for their
non-performance is based on systematic oppression and lingering effects
thereof? Is a pure pay for performance system still fair?

What about the handicapped, depressed, and otherwise ill affected?

The pay for performance (or inequality is good) argument is fine when no one
gets hurt, when the low performers, say, will get a 1% instead of 10% bonus.
But when we're talking about the lower levels of society, where people can
literally go homeless or die of untreated disease, then it's not so easy to
come up with these fantasy theories.

~~~
lupin_sansei
"It's like taking a Chinese class with a bunch of Chinese students and you're
the only one who doesn't know the difference between Mandarin and Cantonese."

But the answer to that isn't to give you all the same grade regardless of how
good your Chinese is, is it. The best thing to do is to grade you accordingly,
and for you to find some other class to study.

~~~
cglee
To carry the analogy further, it'll be if we're only rewarding on mastery of
Chinese. For those who are not on equal footing, what other "class" can they
take?

"Good inequality", that is, inequality resulting from differing levels of
productivity, is only relevant when everyone starts at roughly the same level.

When current inequalities already exist, isolating the productivity variable
is very difficult without a social and historical context.

~~~
lupin_sansei
"To carry the analogy further, it'll be if we're only rewarding on mastery of
Chinese. For those who are not on equal footing, what other "class" can they
take?"

Whatever class they like (Math, science, etc.). Preferably one they are better
at than Chinese.

""Good inequality", that is, inequality resulting from differing levels of
productivity, is only relevant when everyone starts at roughly the same
level."

So you're saying that since people are born with differing abilities then they
should all get paid the same?

You understand that one of the chief ways to motivate people to be more
productive is to pay them for it. Who would be willing to work start up hours
if you only got paid the same as someone who worked 40 hours a week?

~~~
cglee
That's not what I'm saying.

------
davidw
Like all things, though, some moderation is probably a good idea. Even if this
argument makes perfect logical sense, it makes apes unhappy to see other apes
getting way more bananas than they are, and if you start to talk politics
rather than simply economics, this has practical consequences. Better to
balance things out a little bit before things get out of hand and the apes
with few bananas vote in someone with truly bad ideas about redistributing
wealth.

I once saw a not-really-serious idea by a center-left economist that having
money is good and just, as the article says, but perhaps what should be taxed
are the very visible bananas (fancy cars, "bling") that the better off apes
use to flaunt their wealth.

~~~
willarson
Is taxation an appropriate venue for implementing and enforcing cultural
norms? Flaunting wealth is a cultural phenomenon, and demarcating it as wrong
is an entirely subjective decision.

I think following the "we should appease others to keep the masses from taking
everything" argument we end up creating a world far too similar to Ayn Rand's
Atlas Shrugged. Actually, the entire argument is very much Objectivist. I
wonder if there is a connection.

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geebee
The popularity of this argument depends almost completely on who you choose
for your examples.

Most people seem to agree when you talk about Sergey Brin and Larry Page? They
started a company from nothing, added trememdous value to the world, and
pocketed some big bucks for themselves. Rock on, those are the kind of guys
who make you feel fine, even positive, about income inequality.

Next in line come the CEOs who take over an existing company and help
themselves to some of the wealth. Some of these CEOs do such a good job
generating growth that most people feel fine about it (Google's still a good
example - nobody seems to feel that Eric Schmidt's weath is undeserved). But
Grasso's payday (what was it, $160M?) upset a lot of people. And Semel's
severance package is truly bewildering to me.

And lastly, we do have some of the genuinely worrisome wealth (mabye worse
than the 17th century England or Saudi Arabia kind) in the US. This is what PG
wrote about when he discussed the intersection of wealth and political power.
For example, I heard about the CEO of a large military contractor. He was
elected to the second highest office in the land, where he used his influence
to start a war and destroy another country's infractructure. Later, he awarded
no-bid contracts to his former company - but he refuses to say who he met with
and when.

We need to distinguish between good inequality and bad inequality, and there's
still plenty of the bad kind out there. The key is to fight corruption, not
wealth.

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staunch
_"...who wouldn't want to swap paychecks with them..."_

I wouldn't want to. They have very low salaries :-)

------
andyanon
I agree cglee. im all for capitalism but cannot stand it when privileged
conservatives use few remarkable examples of immigrant success to gloss over
the inequalities of opportunity that are entrenched in and still plague
American society.

~~~
lupin_sansei
What inequalities of opportunity are entrenched in America? I'm not American
so I am genuinely interested to know.

~~~
pg
One of the worst is schools. Public schools in the US are not very good. Rich
people tend to go to private ones.

Pretty near zero representatives' and senators' kids go to DC public schools,
for example. Whether they're liberal or conservative, they seem to draw the
line at that. And there seems to be an unwritten rule they won't criticize one
another about it.

In theory this inequality ends at college, because the best colleges will take
you for free if you're poor. But in practice it doesn't, because (a) the good
colleges do "legacy admissions" and (b) the private schools are much better at
coaching their students to get into good colleges.

~~~
willarson
I don't even think the inequality ends with college, even theoretically.
Colleges use the lack of income as leverage to raise the quality of their
students, which means you can only apply to a school substantially worse than
you would be capable of reaching if you had greater financial resources (this
line gets blurred at the top, because the students getting full ride are above
the standard student at the institutions, but there isn't anywhere better they
could go anyway).

I don't think legacy admissions are a huge problem, colleges are very lenient
about admitting any student who can pay their full way, regardless of previous
connections (this is more true for private schools where the full yearly
tuition + board can be 35-50k).

On the other hand, I think your point b is crucial. The quality of private
schools, especially after 1st grade and before high school, is not
consistently better than public schools (this is anecdotal evidence from
personal experience, which I suspect the statistics would contradict, but
there are so many confounding factors that the statistics seem of dubious
quality). Instead, it is the connections the private schools have, and the
quality of their college admission counselors that are fundamental.

At my school we were hounded relentlessly to submit college applications (we
could be detained at school if we missed completing certain goals by certain
days). It was literally harder _not_ to apply to college than it was to apply
to college. They proofread all admission essays, and gave personalized advice
on where to apply, which institutions we had strong connections, etc. This
sort of thing simply doesn't exist at public schools, and its the biggest
advantage I experienced from a private high school.

~~~
Jd
Depends on where you go for college. The ivies I am familiar with separate the
applications and financial aid process the issue of 'leniency' is not there
(except when there are very large sums of money involved).

As for private schools, I think you may be confused. Many of the leading
private boarding schools are _much_ better than almost any public schools in
the nation. Counseling programs vary with the school. Schools which frequently
send kids to the ivies (or ivy-equiv) tend to have lots of experience with the
process. My public school had only a small amount. Some have none (and don't
even know when one of their students has beaten the odds and made their way
into such a school).

~~~
willarson
I tried to avoid slandering top boarding schools with the "especially after
first grade and before high school". I am a byproduct of such a boarding
schooling.

The quality of the teachers was high, and academically you don't comprehend
the gap until you reach college and realize a majority of your classmates
can't write, only read for required assignments, but were in the top 2% of
their school, and graduated with a gpa 1.0 higher than yours. That said, I
have also met a number of well prepared students from public schools (and a
large number of poorly prepared students who spent $120,000+ on their high
school education, but didn't take advantage of it).

I am a fairly strong believer that the real distinction is within the students
(as necessitated by my desire to maintain my self-worth). The most successful
students, at any institution, will be those who are self-motivated, have well
educated and intelligent parents, a well educated peer group, and are
intelligent themselves.

These are the confounding factors I mentioned. Students with parents who have
terminal degrees are more likely to be attending these elite institutions.
This parental advantage may be the strongest influence in intellectual
development, and thus clouds the value of private schools. In addition the
wealth of the students attending these schools is much higher than at a public
school (its weird when your school has children whose parents are
billionaires). This wealth provides numerous more resources for students:
tutors, summer classes, camps, et al. These addition resources provided by
surplus wealth also confound the true value of these high-end schools.

Counseling programs do vary by school, but my experience is not particularly
unusual for a higher end private school. These schools will typically have
100% of their students accepted to a school when they graduate. That doesn't
happen by accident.

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cglee
You're right. I extrapolated to where I sense the Heritage Foundation was
hinting at. Word for word, if it came from an apolitical source, there would
be nothing to argue against.

~~~
lupin_sansei
The merit of an argument is independent of its source:
<http://en.wikipedia.org/wiki/Ad_hominem>

~~~
cglee
Maybe if you're a computer or participating in high school debate. The source
matters a lot, because it indicates intent.

~~~
cglee
Ok, I committed another fallacy in the first sentence. Ignore that and just
read the second.

~~~
jey
No, the second sentence is wrong too.

