
Economic Inequality: The Simplified Version - janvdberg
http://paulgraham.com/sim.html
======
HSO
> _But economic inequality per se is not bad._

Both essays feel like they are built on a strawman argument. Nobody serious
said inequality was bad or good, not even Piketty. The discussion is about
_degrees_ , and PG adds nothing to it by arguing categorically.

That we are talking degrees of inequality is also the reason why economists
argue with statistics and do not differentiate much between specific causes or
mechanisms on the micro level. Sorry to burst that bubble but PG is not a
"creator of inequality" on the level that is interesting. Shifting a few
hundred people around means nothing given that we are talking about income and
wealth distributions over millions of households in the US alone (and
increasing inequality is a global phenomenon). Clearly, tax policy, financial
(de)regulation, labor market policies, even the fall of the Soviet Union, etc.
are more relevant than petty arguments over whether this startup or that high
freq trader made a few mega- or even gigabucks in a nice or not so nice way.

On a sidenote, the relative impacts of the trader vs the startupper on
aggregate welfare is not as clearcut as intimated by PG at all, once you take
second- and higher-order effects into account. Furthermore, creating wealth
for some individuals may also decrease overall inequality; it depends on the
starting and end positions of said individuals in the wealth distribution and
the other ongoing processes in the economy.

Lastly, economic systems have a lot of feedback mechanisms, both positive (ie
destabilizing) and negative (stabilizing). We should at least consider the
possibility that past a certain degree of inequality, wealth becomes self-
perpetuating. This is especially pertinent for US Americans, given the
degenerate nature of their "democracy".

~~~
nabla9
Well said.

Macroeconomics is mostly closed sytem, not open system like microeconomics.
Roughly 70% of US GDP is private consumption (household final consumption
expenditure). Startups that build cool products need markets that can afford
to buy them.

The top 1%-2% may be wealthy, but as a consumer segment they are not big
enough to justify new microprocessor plant or Apple product line. More
importantly, rich don't pay for innovation. Luxury phones like Vertu are
diamonds and personal service, there is no pressure for innovation. You don't
need speech recognition if you can afford personal service. You don't need
self driving car if you have a driver or enjoy driving with your Porsche.

It's the middle class who creates demand for high-tech bleeding edge
innovations. Who will buy the Oculus rifts and create enough cash flow to
carry the VR-industry next 5 years? If the number of upper middle class
families drops 5%, will Tesla lose 5% of their sales? The share of the GDP
going to the middle class has been falling. It's down roughly 10% from 2000
and something like 30-20% from 70's.

Low income people spend more money into necessities and very small high income
population just can't consume enough to be large demand creating force. If the
income distribution of the country starts to resemble classical South American
country, it will have the economic structure of classical South American
country sooner or later.

PG has supply side view of the economy. It's not the whole picture.

------
tptacek
I feel like it's not hard to be happy about people making large amounts of
money building things like Facebook, while at the same time worrying about a
system that allows Harvard attendees like Mark Zuckerberg to do that but
provides virtually no opportunity for students at Orr Academy High School in
Lawndale to get to Harvard, let alone to a place where they can start
something like Facebook.

I don't have to hate Paul Graham to think that economic inequality _by itself,
intrinsically_ retards equality of opportunity.

I hope we can agree that inequality of opportunity is an intrinsically bad
thing.

~~~
jmaistre
_I hope we can agree that inequality of opportunity is an intrinsically bad
thing._

If parents are allowed to invest in their own children, then inherently, you
have inequality of opportunity, since parents have different means and will
invest different amounts.

 _while at the same time worrying about a system that allows Harvard attendees
like Mark Zuckerberg to do that but provides virtually no opportunity for
students at Orr Academy High School in Lawndale to get to Harvard_

If Harvard accepted 10X as many students, it would not be Harvard. If Harvard
accepted students based on a lottery, it would not be Harvard. Other than
increase financial aid even more, it is not clear what additional actions
Harvard could do to increase equality of opportunity, that it is not already
doing.

~~~
mabbo
Where I'm from (Ontario) there are not very many private elementary or high
schools- some, yes, but not many. A good friend of mine went to one, and his
parents paid something like $20k per year for him to have that extras
opportunity. He's a smart guy, and maybe his schooling was part of that.

But the reason there aren't that many is that the public sector schools are
pretty good. Not perfect, but pretty good compared to what we see in many
American states. Teachers jobs are hard to get because they're paid well (and
yes, they have a strong union, but let's not derail this point into an
argument about their merits). As a result there are very diminishing returns
on private schools for kids, and so they aren't so common.

What this means is that most kids are being given an equal opportunity, the
same strong education, at the cost of slightly higher taxes. We accept that,
generally.

The choices when it comes to left or right leaning policies come down to how
much society in general invests in children's future vs how much each parent
must invest in their own child's future. When you push too far to the right,
the entirety of the child's future is based on how much the parent can invest-
and when that happens, we have inequality of opportunity.

~~~
microcolonel
There are 230 private primary and secondary schools in Ontario, most of them
are lakeward.

I attended four TDSB schools and I must say, they were pretty awful.

Thankfully I got out of that system before high school. I might have gotten
involved with the gangs and hard drug trade associated with my nearest high
school.

------
eridius
> _Attacking economic inequality would be doubly mistaken. It would harm the
> good as well as the bad causes. But even worse, it would be an ineffective
> way to attack the bad causes._

You can't say something like this without providing evidence. Why is it
ineffective? And why is it bad that it harms the "good" ways too? After all,
startups are not good _because_ they cause income inequality. Startups are
good for a variety of reasons, and they also happen to cause income
inequality, and it's reasonable to argue that this particular generation of
income inequality is not intrinsically bad. But the value of a startup is not
in the income inequality that it generates, and therefore taking steps to
reduce income inequality that happen to reduce the income inequality resulting
from startups does not actually mean that it's "harm[ing] the good".

~~~
carc
Startups aren't good because they create income inequality. Income inequality
being possible is good because it provides the incentives for people to take
risks and create startups. That isn't to say the current level of income
inequality we see today is good - it isn't. But to get rid of income
inequality completely would drastically reduce the number of startups because
- what would be the point?

Would you really rather have everyone make the same amount of income
regardless of what they do?

~~~
eridius
Startups are not good because they create income inequality. That's a
ridiculous claim. That would only be true if income inequality was
intrinsically good, and I hope nobody is trying to argue for that.

Startups are good because they create value (although that particular value is
highly subjective depending on what the startup is actually doing; a startup
that finds a cure for cancer is creating objective value, but a startup that
brings the sharing economy to lawn maintenance is much more subjective, as any
value it creates for the sharing economy comes at the cost of value destroyed
in traditional lawn care services).

Startups also create income inequality. This is not an intrinsically good
thing. It is just accepted as the normal way to reward people for taking a
risk on a startup.

Given that, the only reason to argue against reducing income inequality
generated by startups is if this reduction actually decreases the overall
objective value created by startups (if fewer startups are created, but more
of them create either more value or value that is more objectively valuable,
is that a bad thing?)

Don't forget as well that there are plenty of ways to create value, and to
create companies, that don't involve startups. Most businesses in this country
aren't startups.

> _Would you really rather have everyone make the same amount of income
> regardless of what they do?_

Literally nobody is arguing for that. That's a humongous straw man, it's the
same straw man pg used in his original article, and it's complete nonsense.
"Reduce income inequality" does not mean eliminate all income inequality.

~~~
carc
> Literally nobody is arguing for that. That's a humongous straw man, it's the
> same straw man pg used in his original article, and it's complete nonsense.
> "Reduce income inequality" does not mean eliminate all income inequality.

So you seem to agree that income inequality can be a good thing. If you
didn't, you'd want everyone to have the same income. Maybe I misunderstood
PG's essay, but the main takeaway I got was that income inequality CAN be a
good thing for a society, and that the income inequality caused by successful
startups are not an important enough problem (if it is even a problem) to
society for us to try to focus on it.

~~~
eridius
I'm not saying income inequality can be a good thing. Not everything in this
world has to be either bad or good. I think that income inequality in the
abstract is not intrinsically bad. I don't know whether it's good. Maybe it is
good to have some income inequality, at least in today's society (in a future
post-scarcity society things might be different). Maybe it's not. I don't
really know, and I don't care to debate that because it doesn't matter in the
slightest since nobody is actually advocating for zero income inequality.

But it should be pretty obvious that extreme income inequality is bad for
everyone (or at least, for everyone who doesn't actually possess the extreme
wealth that is causing the problem, although even there they might benefit
more from having a healthy society than they do from possessing such extreme
wealth). How exactly you define "extreme" is debatable, but it's simply absurd
to take the position that any argument in favor of reducing income inequality
is equivalent to an argument in favor of having zero income inequality across
the board.

------
ctvo
When people talk about income inequality and lowering it in the USA, (in my
experience) they tend to mean these things:

\- Increase the capital gains and inheritance tax so the wealthy pay a
comparable tax percentage

\- Increase government funding for public education and trade schools

\- Increase spending on infrastructure projects (broadband, public
transportation)

\- Increase the minimum wage

\- Lower the influence of the wealthy in politics

Never heard of anyone asking to kill incentives for the ambitious or to stop
people from becoming wealthy.

~~~
sib
If you do all of those things, plus raising income taxes [otherwise you would
not be reducing income inequality, but only wealth inequality], then you will,
by necessity, be raising taxes on successful entrepreneurs and, therefore,
reducing those incentives and reducing the ability of people to become
wealthy.

~~~
danans
Ironically, those successful entrepreneurs are hugely dependent on the
physical infrastructure built by government (roads, broadband), and the human
infrastructure built by the public education system (us). It's not valid to
put those things at odds with each other.

------
foldr
>But economic inequality per se is not bad.

This is the controversial assertion, and it's not argued for here. So I'm not
sure how this can help.

 _edit_ : As others have clarified, of course there are few people who would
object to any degree of economic inequality whatsoever. In the context of this
discussion, 'economic inequality' refers to economic inequality on (at least)
the scale that we see at present in the US and other wealthy countries, since
this is what pg is defending.

~~~
carc
I don't really see how this is controversial. Do you want to reward talented
people who work hard? Do you want to incentivize people to do great things?
You need to allow some level of income inequality. The extreme level of income
inequality we see now is a bad thing.. but that doesn't mean economic
inequality is inherently bad. Most good things taken to an extreme cease to
remain good things.

~~~
the_gastropod
It's controversial because it's largely a strawman. Income inequality is not a
binary thing—it's a gradient. There exists a level of income inequality that
any reasonable person would agree is bad. PG seems to be trying to muddle that
fact.

------
jacobolus
I claim that economic inequality at the scale we are seeing today, with Bill
Gates, Mark Zuckerberg, Peter Thiel, Donald Trump, the Koch Brothers, the
Walton family, et al. as plutocrats, and with Paul Graham and various other
bourgeois pseudointellectuals as their kiss-up apologists, is per se bad. It
erodes the broad social/economic power balance in our society, atrophies our
civic institutions or coöpts them into quasi-fascist tools of the elite,
breaks our journalistic institutions and cheapens our political discourse,
diverts our resources into building wasteful things, and prevents us from
tackling the serious challenges we face, while leaving millions of people
struggling for basic survival.

I don’t see Paul Graham out there fighting in any concrete way for
improvements to any of the “bad things that cause inequality” he hand-waves
away. Where’s his work to improve labor rights, end police brutality,
guarantee a functioning healthcare system, track down and close tax loopholes,
expose and regulate industrial polluters, or figure out how to save the lives
of all the people economically displaced by his startup “disruptor” buddies?
Where’s his respect or help for teachers, social workers, doctors, policemen,
civil rights activists, local politicians, garbage collectors, journalists,
mail carriers, or any of the other people who keep our civil society
functioning in return for regular wages. All I see is contempt for those
“losers” (quoting from a recent tweet,
[https://twitter.com/paulg/status/672112234521231361](https://twitter.com/paulg/status/672112234521231361))
who don’t want to become rich capitalists.

How does Paul Graham’s imagined perfect society work? If everyone is a startup
founder, who is left to be the employees at all these startups, much less do
any of the other work we all need for things to keep running.

~~~
tptacek
Arguments that put Bill Gates, Mark Zuckerberg, Peter Thiel, Donald Trump, and
the Koch Brothers on one "plutocrats" team are probably the reason Paul Graham
keeps writing dubious posts about income inequality.

~~~
jacobolus
Here Thomas, read this:
[http://www.nybooks.com/articles/2015/12/17/reimagining-
journ...](http://www.nybooks.com/articles/2015/12/17/reimagining-journalism-
story-one-percent/)

They’re not on one “team”, but these people have outsized wealth and influence
without any kind of accountability to the public. By virtue of having _so
much_ money, they can drive the funding of political campaigns (now without
any limits or accountability) with less and less counterbalance from the
middle class, and do whatever they like to promote their own interests,
whether those interests are aligned with the public or not. I claim this is
per se bad, even in the case that the plutocrats care about their image or
self-image and turn out to be relatively “enlightened”.

Even if Gates and Zuckerberg, e.g., are well meaning philanthropists, there’s
no evidence that their interventions are better than anyone else’s would be.
Indeed, since they tend to not have a priori knowledge of fields outside
whatever made them wealthy to begin with, and they tend to have led relatively
charmed lives protected from the struggle of those at the bottom of the social
pyramid, their interventions often look like bumbling stabs in the dark, and
sometimes cause more harm than they prevent. In education policy for example,
Gates and Zuckerberg’s efforts (and the efforts of the Waltons and other
billionaires) have mostly been disastrous distractions pushing policy in the
wrong direction. [https://www.dissentmagazine.org/article/got-dough-how-
billio...](https://www.dissentmagazine.org/article/got-dough-how-billionaires-
rule-our-schools)

Beyond that though, all the good that Gates can do is undone multiple times
over by folks like the Koch Brothers, who have explicitly decided to turn
their wealth to subverting democracy.

It would be better if we had publicly financed (or small-donor financed)
elections, more transparency/accountability for advertising and PR spending of
all kinds, and if these folks were taxed at (let’s say) the same rate they
were during the Reagan administration, and there’d be plenty of public money
to fund whatever charity projects in a publicly accountable way.

------
salmonet
Pg seems to really hate being criticized. I hope he doesn't stop writing about
controversial things (or water down his essays) because the silent majority of
us really appreciate it.

~~~
mikeg8
I believe it's less about criticism and more about a hate of being
misunderstood. But I agree that there is a majority who really appreciate his
insights (I'm definitely one of them).

~~~
x0x0
I don't know in general -- I haven't read most of pg's writing -- but his
original economic inequality essay was indistinguishable from fox news uncle.
It's a level of understanding of economic history and a well argued theory
(see eg Paul Krugman, Robert Reich, Brad DeLong, Bernie Sanders, Paul
Wellstone, others) you would expect from Glenn Beck. Mixed in with some first
principles derivation that lead pg to claim

    
    
       So let's be clear about that. Ending economic inequality would mean ending 
       startups.
    
    

with a straight face. Ignoring the fact that ending economic inequality in a
sort of perfect equality is a goal of essentially (yes, I'm sure you can find
one dude on a blog somewhere) nobody. And that startups somehow occurred in
periods with much less economic inequality.

~~~
bobby_9x
"but his original economic inequality essay was indistinguishable from fox
news uncle"

More like a much wiser Uncle telling his inexperienced nephews why they are
making a bad decision.

"And that startups somehow occurred in periods with much less economic
inequality."

Startups did occur in periods with much less economic equality, but there were
also much less government regulations.

PG is saying that the current solutions for economic equality, which is always
an increase in taxes and regulations, will mean the death of startups. He's
right. It's a warning for the future generations of startups.

Anyone with wealth won't really be effected, because other countries will
accept them (and their tax dollars) with open arms.

Look at any of the Nordic countries: They all tout income equality, but your
only options for work are the government or a big corporation.

Startups are nearly impossible to get past the initial stages because
regulations and taxes kick in and your lifeblood is cut off before you even
get a chance to get anything going. Investors also steer clear of the entire
region. This is a great indicator that it is not conducive for any sort of
small business.

This bottleneck prevents prosperity and creates an environment where citizens
are more dependent on big corporations and there is almost no chance of moving
up the socioeconomic ladder.

It also means less of a chance of getting a loan from a bank, which is another
requirement for someone with no money to start a business.

I've never met a group that tries so hard to sabotage their own future
success/vote against their own self-interests.

~~~
hfourm
Google searching reveals that while true there may be a lack of investment in
startups in these areas from VC, there are still plenty of companies forming
-- so there could be a few other variables at play then just "government
regulation".

You keep touting the same rhetoric but i'm afraid you are unwilling to
challenge your own ideas.

Like the idea of the wealth just leaving our country. Where are they going to
go? China? Socialist european countries? The answer is NO WHERE. Unless they
are wealthy enough to just decide to go retire in a cheaper country, the truth
is that majority of business owners will find other efficiencies in their
operations in order to retain access to things like their: non-immediate
family, US workforce (cultural/communication barrier actually do become very
important for many service oriented businesses), and the standard of living
here. I find the conservative rhetoric that the rich will just "leave us" as
absolutely insane. Even if they did leave in droves, good riddance -- short
term losses followed my long term progress, are those really the type of
American's we should be pandering too? The ones treating the country like an
emotionally abused spouse that they will leave as soon as things don't go
their way?

------
crabasa
> But if we fix all the bad causes of economic inequality, we will still have
> increasing levels of it, due to the increasing power of technology.

So, PG's logical conclusion is that economic inequality is an _inevitable_
byproduct of technology and capitalism. I'm happy to grant him that. But it
seems to me that history (pick your favorite revolution) teaches us that no
matter what the inevitable consequences of a given system are, the majority of
the people will not stand by and see their economic futures reduced to
scraping by.

Which is why I'd love to see more people in the startup community (including
PG) discuss what steps could be taken to both incentivize creators while
simultaneously making average people better off. Because that's the amazing
thing about creating value and growing the pie. Win-win scenarios.

------
supercanuck
>So let's be clear about that. Ending economic inequality would mean ending
startups.

I'm curious why this comment was in the first version and not in the second,
simplified version since this was to me the most simplistic point pg made,
even going so far as to say "Let's be clear"

Pg seems to be arguing that income inequality and startups are mutually
exclusive and if we are to have startups, we must accept some income
inequality. Thats what I'm interpreting that to mean at least.

This to me just seems like, why can't we have both? More income equality and
startups? I'm not seeing the reasons we cannot

~~~
grecy
Though it's complete nonsense because it assumes the only motivation for
founding a startup is to gain extreme wealth

Ending extreme economic inequality would mean founders of successful startups
would no longer become absurdly richer than average.

There would absolutely still be people passionate about doing things, and they
would absolutely still make startups. Their motivation for doing so would no
longer be extreme wealth.

If people choose not to do a startup because it can't make them extremely
wealthy, that's perfectly fine.

------
jrcii
I have no more interest in a successful programmer's economic philosophy than
a successful baseball player's. That is to say, not much. As a libertarian I'm
a fan of economic inequality, I see it as the inevitable byproduct of liberty,
but who cares? I'm not an esteemed economic philosopher and neither is Paul
Graham.

I see in American society, and maybe the trend extends beyond that, that we
idolize people who have a lot of money or notoriety and consequently invest a
lot in their opinions on any topic, especially politics, regardless of their
qualifications. It's inappropriate.

------
JBiserkov
I think there are 2 types of economic inequality:

Person A has more wealth that average, because he or she _created_ a lot more
wealth than the average person can create. This is great, startups are one way
to do it, let there be more startups!

Person B has more wealth than average because he or she _stole_ a lot more
wealth than the average person can create. This is terrible, and must be
stopped!

The main issue comes from the details involved in creating or stealing said
wealth. Do CEOs create or steal wealth? Probably both. OK, what's the ratio.
You can't tell.

~~~
ebola1717
Also, Person C who has more wealth than average because his/her parents or
ancestors created the wealth? And Person D who has created more wealth than
the average person, but only because they started out as a Person C.

Edit: Obviously, I'm not suggesting that there should be no wealth
inheritance. But economic inequality can happen in a way that is neither
meritocratic nor malicious. And there's tons we can do that recognizes this
issue, without banning inheritance (scholarships, after-school programs, etc).

~~~
grondilu
> Person C who has more wealth than average because his/her parents or
> ancestors created the wealth?

Do you think it's wrong for parents to give things to their children? Do you
think it should not be allowed to let them ensure that their children will
never have to worry about money?

I personally don't.

~~~
jheriko
i'd even go as far as to say that it is a goal for a great many people in
life, and the standard position is that inheritance is a good thing, and that
taxing it stinks...

...except perhaps if its very rich people you can not equate with, so you
don't see the harm of taking 1-99% of their unfathomable riches and leaving
them still having a fortune beyond your dreams.

~~~
grondilu
> if its very rich people you can not equate with,

oh, so you mean stealing is OK as long as it's from people you're jealous of?

The problem I have with that is that it's a foot in the door[1]. You begin
with taking from ultra-rich people, expecting me to be ok with that. And then
you take from slightly less rich people, and then even less rich and so on
until you claim it's ok to take from anyone who's less poor than you.

So no, I don't want to let envious poor people rob rich people, no matter how
rich they are.

1\. [https://en.wikipedia.org/wiki/Foot-in-the-
door_technique](https://en.wikipedia.org/wiki/Foot-in-the-door_technique)

~~~
jheriko
i don't agree with that line of thinking... i'm just saying that this is what
i perceive in others.

------
chroma
For those who missed it, here's the discussion of Paul Graham's original essay
about economic inequality:

[https://news.ycombinator.com/item?id=10826838](https://news.ycombinator.com/item?id=10826838)

------
wstrange
What bother me is the hand waving about fixing the bad effects of inequality
without offering any concrete proposals of how that might happen.

Practically speaking, how do you reduce poverty, provide better health care
and education without some form of wealth redistribution? Perhaps there are
ways (I am all ears) - but progressive and fair taxation seems like a pretty
reasonable approach.

------
harryh
My attempt at a simple rebuttal:

[https://gist.github.com/harryh/fb3dae9eb14b675821e4](https://gist.github.com/harryh/fb3dae9eb14b675821e4)

------
ZenoArrow
> "But economic inequality per se is not bad. It has multiple causes. Many are
> bad, but some are good."

Thank you for clarifying your points, hopefully it will help make this
rebuttal equally clear. Economic inequality is bad not because of what causes
it, but because of the effects it has on society. The problems boil down to
issues of influence, both in the economic and political spheres. The wealthier
someone gets, the more opportunity they have to game the system for their own
advantage. Even if we're not aiming to eliminate the rich/poor divide
completely, we still have a responsibility to ensure concentration of power is
limited. This is why economic inequality is an issue.

------
beatpanda
The question for defenders of the theory that economic inequality isn't
intrinsically bad is this -- does it actually matter how economic inequality
was arrived at if its effects are the same?

The best example I have is the Bay Area housing market. While it is true that
a lack of new construction has a role in rising costs, so does the gulf
between the lowest and highest paid workers. Where income inequality is high,
but people are still competing for the same scarce resources, prices are going
to get further and further out of reach for people at the low end.

Arguably, an influx of relatively highly paid workers is a result of wealth
being "created", but if I'm the janitor at Stanford who has to commute from
Stockton [1], does it actually matter _why_ there is income inequality?

Income inequality means, regardless of how it is generated, that a huge amount
of wealth is being created and the benefits are being concentrated to a few
people. And in the case of where I live, it means things that things that used
to be accessible to lots of people have been placed out of reach. It _doesn 't
matter_ how it happened. Until income inequality is reduced (e.g. income at
the low end increases), or something fundamental about the way markets work
changes, people are still going to get hurt.

[1] [http://ww2.kqed.org/news/2015/03/28/long-commute-to-
silicon-...](http://ww2.kqed.org/news/2015/03/28/long-commute-to-silicon-
valley-increasingly-the-norm-for-many/)

------
jacknews
Simplified version? The entire argument one of an economic simpleton.

Startups, ie Innovation, is of course good, it is almost entirely responsible
for economic growth (simple population growth being the other).

The inequality question is about how to distribute the benefits. Especially
with tech startups the benefits have gone disproportionately to the founders
or early investors. Particularly when these startups "disrupt" an existing
industry that employs many, then that is clearly problematic. Additonally,
capitalism itself delivers the most gains to those who already have.

Of course some degree of inequality is entirely fair, but much larger taxes on
the rich (preferably in the form of pre-distribution) do not stop the rich
wanting to do what they do, but if handled properly, can vastly improve the
lot of the poorest and give a helping hand to those who want to advance
themselves but can't afford it.

------
dpweb
We already have a massive war on poverty. Just the Govt. is $1T per year.
[http://www.heritage.org/multimedia/infographic/2014/12/total...](http://www.heritage.org/multimedia/infographic/2014/12/total-
welfare-spending-reaches-949-billion)

Economic Inequality is not bad per se, too much inequality is. At extremes,
societies tend to tear apart in violence.

Startups are good. But execs get rewarded for dodging taxes, laying people
off, global labor arb, and automation. It's not surprising inequality is
increasing. There's tradeoffs in everything.

For all the hulabaloo about income inequality, tax policy could easily reverse
the trend. It's not that complicated. It's a political, not an economic
challenge.

------
obrero
> For example, instead of attacking economic inequality, we should attack
> poverty.

The problem is the people on the rentier side of the economic inequality scale
are doing the opposite. They want poverty. The need poverty. It is the
cornerstone of the rentier system.

Here is a BusinessWeek article:
[http://www.businessweek.com/1999/99_44/b3653163.htm](http://www.businessweek.com/1999/99_44/b3653163.htm)

What does it see as the problem? Unemployment is too low. Too many people who
want to work are working. Businessweek sees this as a problem. CEOs and LP's
and rentiers see this as a problem.

Workers work. They create wealth. A carpentry shop has carpenters bang wood
and nails together to make tables. The workers labor creates wealth - wood and
nails becomes a table which costs more.

For the first six hours a day the worker keeps the wealth they create - their
wage. The rest of that revenue goes for replenishment of supplies - wood,
nails, 1/90th of a hammer cost etc.

For the last two hours a day, the worker is not paid the wealth they create.
It goes in profit to the heir who owns the manufacturing plant. The worker's
surplus labor time is being expropriated by the heir.

If unemployment was low, if poverty was lessened - then those who work could
demand to be paid for more of their time. Increasing unemployment, increasing
poverty lessens the chance of this happening.

The LP's, the heirs want poverty. It's an essential cornerstone of their
profit and expropriation.

Centuries ago, most of the world were farmers under feudalism (or
hunter/gatherers etc.) There was not structural unemployment then. Lords
wanted farmers working hard to sow during planting and reap during harvest.
Only in our modern age of capitalism do those who control production desire
poverty, unemployment etc. That Businessweek article lays out a portion of
that ideology, it's been spoken of elsewhere for a long time.

The idea that the heir LP's on the other end of the inequality divide want
poverty to end is absurd. The reserve army of labor is a foundational
necessity of the system.

------
grecy
> _But if we fix all the bad causes of economic inequality, we will still have
> increasing levels of it, due to the increasing power of technology._

Which is why so many people suggested changing other things that would reduce
or eliminate economic inequality. Suggestions included limiting the ratio
between highest paid employee and lowest paid, or changing tax structures,
etc.

~~~
UK-AL
And then your limiting the incentives for the potentially high paid employee
to do even better!

Is inequality really that bad if the low paid employee still lives an
excellent life, and is out poverty? What difference does this make?

------
sjg007
The argument is that technology creates income equality but you can't stop
texhnology. It does this because it acts as a multiplier for creating wealth.
Technology encapsulated in the form of a for profit company does this because
the metric that values the impact is stock and this stock can be exchanged for
dollars. Stock itself also allows another lever on top of actual revenues.
This is magnified by network effects.

Taxes may mitigate the conversion of wealth into currency. For example in the
US, this has a big negative impact on stock option holders when they buy their
options at a strike price lower than the current valuation. At this point you
have to pony up cash to the IRS even if they newly acquired stock is illiquid.
As such many people may not exercise because they can't afford them and the
taxes. this is a form on inequality as well... and the options return to the
company.

Raising taxes could mitigate inequality but various perks or bank guaranteed
loans could be arranged to circumvent the loss of benefits associated with
taxing wealth (as seen in the past).

In addition Stock ownership allows the public participation in wealth
generation so taxing theconversion to currency is likely negative and would be
a driver of increased inequality since only the rich would buy stock (more so
than now?).

So that's one side of the argument.

------
pknight
Just as you can't say startups create jobs without considering the jobs it
displaces, I think you can't hide behind the notion that startups are
generally a force of good. That way you sweep all the startups that have a net
negative effect under the rug.

Studies show FB can have a negative effect on happiness. In the tech startup
playbook is stated that you need to make your site/app addictive. Well we've
mastered that now and it must cost billions of dollars with people's time
being wasted on crap.

Even startups geared toward productivity aren't that impactful in the grand
scheme, they tend to make life more convenient and only when enough customers
can be found at the right pricepoint.

We're training people to be distracted by trivialities and stuff that doesn't
matter. Many venture backed startups are exposing the defects of the way
economy functions and just how poor we are at delivering the value that is
truly needed.

We don't really need another gadget or app, we need to fix the way society has
painted a growing number of people into a corner. Income inequality is just
one way to expose the symptoms of an increasing problem, a problem that isn't
really being focused on by startups because startups are born and survive by
exploiting leverage that can be turned into profit.

------
cryoshon
Ah, but we still disagree on the point that economic inequality inevitably
worsens a society, and a decrease in inequality does not correspond to a
decrease in the ability for people to make startups.

I think this is a philosophical disagreement that won't be solved by
clarification of ideas.

------
avz
I think the reason the original essay was so controversial is that it set out
to demonstrate that a society faces a binary choice:

* We allow both startups and inequality.

* We attack both startups and inequality.

This is perhaps most clearly articulated in this quote:

"You can't end economic inequality without preventing people from getting
rich, and you can't do that without preventing them from starting startups."

And here strikes the controversy: on average the hacker community has a
favorable view of startups while also opposing economic inequality (this is at
least my general impression).

Perhaps the optimal solution is a compromise that allows startups and
inequality while providing a system that eliminates the most undesirable
effects of inequality. There are already systems in place to prevent extreme
poverty, to ensure some minimum access to education and healthcare etc.

From the remaining issues the most pressing one is the problem of excessive
concentration of political power. A system that weakens the link between money
and political influence seems necessary.

~~~
UK-AL
A large chunk of the hacker community is probably close to libertarian, and
that was well known and well criticised.
([https://en.wikipedia.org/wiki/The_Californian_Ideology](https://en.wikipedia.org/wiki/The_Californian_Ideology))

Well back in the day it was, I don't think an article like this would have
been that controversial on hackernews many years ago. A lot of pauls earlier
writing has similar stances.

As more people have joined, it moved quite heavily to the left.

------
givan
We need to lower economic inequality so that more people have a chance to
start startups, now you need savings and a lot of hard work only to convince
an incubator or an investor and most people don't even have that chance.

Maybe we should start taxing corporations the same way we tax the average
person, no more tax heavens and special tax laws, everyone pays the same
unique percentage from earnings/profits and from the extra cash the government
can provide a social service to allow everyone who meets certain requirements
to start a startup.

Unfortunately governments are bought by corporations and they get special
treatment, they get bigger and not only we all pay higher taxes because they
pay less but it's also harder to start a company because of oligopolies and
government special treatment for the 1%

~~~
joelrunyon
> now you need savings and a lot of hard work only to convince an incubator or
> an investor and most people don't even have that chance.

Or you could bootstrap it.

------
aliston
I think most of the backlash came from the way that startup wealth was
definitively placed in the "good" bucket in the prior essay.

Yes, on the whole startups create wealth and that's generally a good thing.
BUT... there is a still an open question as to whether the current SV culture
and associated wealth inequality is entirely "good." In other words, it's not
a binary question.

There is all sorts of financial chicanery associated with startup wealth that
make it decidedly unmeritocratic. I've known a number of founders make
millions with unprofitable companies that hardly contributed millions of
dollars worth of value to the world. As far as I'm concerned, its a virtual
certainty that the current startup allocation of capital is not efficient in a
utilitarian sense.

------
bootload
_" For example, instead of attacking economic inequality, we should attack
poverty."_

This is such an anemic statement in the face of the reality of corporate fraud
such as, _" HSBC escapes action by City regulator following Swiss tax
scandal"_ [0]

The biggest fault in the essay, in my view is not acknowledging and exploring
the externalities in economics described. While the big end of town scams its
way to profit, what hope has an individual?

Creating tech startups is one way to profit from this imbalance.

[0] [http://www.theguardian.com/business/2016/jan/04/hsbc-
escapes...](http://www.theguardian.com/business/2016/jan/04/hsbc-escapes-
regulatory-action-swiss-tax-scandal)

------
teachingaway
but can PG write again using only the ten hundred most common words?

[https://xkcd.com/1133/](https://xkcd.com/1133/)

------
rdiddly
Better in being much more concise, but unfortunately, and for the same reason,
even more revealing of the central emptiness of the argument.

I don't know why we're even talking about such overbroad themes, even in the
longer version. Whether you believe you can "create wealth" or not, poverty is
quite simply a central facet of inequality; it is part of the DEFINITION of
inequality. Poverty IS inequality, along with riches. All it means, is there's
an income or wealth distribution curve whose slope is nonzero.

There is no conceptual definition of inequality that doesn't include poverty.
If everyone had the same wealth, that, by definition, is a situation of 1) no
inequality 2) no poverty

Whereas as soon as some people have more, and others have less (which is
quaintly known as a little thing we call "inequality") there is a phenomenon
crying out to be described, and that phenomenon is: A poorer group exists.
There is poverty. Even if the poorer group is only just slightly poorer. Which
interestingly indicates that poverty is inherently comparative. Equality is
absolute; inequality is always relative. Just like in math.

You probably think you happen to have a lot, and people in the Third World
happen to not have a lot. No. You have a lot, BECAUSE the people in the Third
World don't have a lot. And they have less BECAUSE you have more. The
corporations working on your behalf extracted that wealth from them, and
conveyed it to you. (And to themselves of course.) And when those people try
to immigrate to your country they are just trying to follow their own money to
your doorstep.

Anyway the thing everybody hates and wants to fight is not that "some people
make money" but that "the Paul Graham class" can buy themselves a Congressman.
They can emit ridiculous brain-farts over and over (Musk) and the media
fawningly fellates. They can invest in a thing and slavish people infer
directly from that, "Wow, must be real valuable!" Inequality confers unfair
political advantage which leads to disproportionate opportunity which leads to
further inequality in the same direction. It is not a self-stabilizing system
inherently. It is prone to excesses and failure, and a shity quality of life
for the majority on its way to getting there. Go ahead and push that as far as
you can, see what happens.

~~~
lostsock
There will always be a "poor" if there is a "rich" but I have always thought
poverty was about being impoverished, and was a separate issue. My
understanding was that poverty was about lacking food, shelter and security,
and I can easily imagine a society in which everyone has those things while
there are still richer and poorer people

------
jheriko
Wealthy people talking about economic inequality - no matter how valid your
points - is going to stir trouble.

Its like men talking to women about sexism in the workplace, or able-bodied
people talking about the abundance of disabled access everywhere, white people
talking about racism against black people etc.

You don't have to be wrong, or have flaws in your reasoning, to make a
socially naive commentary that is easily perceived as insensitive (regardless
as to meaningful content).

~~~
golemotron
This is the legacy of political correctness and identity politics. We made
this bed now we have to lay in it.

~~~
jheriko
I refuse to lay in it!

There is one type of correctness, it is called 'correctness' everything else,
'political correctness' included is a flavour of 'wrong'.

Its also easy to overreact when you consider yourself to have been misjudged
for poorly conveying a point. :)

------
JamesBarney
No billionaires created a billion dollars by themselves. How much Mark
Zuckerberg keeps of the multi-billion dollar company he created with his
employees is not decided by the value he adds. It is decided by value he keeps
from negotiating with his employees.

------
c23gooey
"Billionaire thinks current levels of income inequality are a good thing"

More NEWS at 11

------
cromwellian
There appears to be an either-or fallacy here, that somehow addressing
economic inequality means people are trying to eliminate it and will only
accept perfection.

Like most things in politics, action happens in the grey area,and I don't
think trying to argue against extremes poses much benefit.

Technology is increasing returns to capital vs labor. One day, robots, 3d
printing, and AI services (e.g. self driving everything), may put the majority
of human beings out of a job. How can entrepreneurs or capitalists even get
rich if the majority of people's work has no surplus value?

In such an end state, the concept of regular folks working is practically
extinct and there should be a basic income, so that the massive returns to
automation continue to benefit everyone and provide income for people to
spend. Think of it as an extreme version of social security: Instead of 1
worker supporting 10 retirees, you have 1 robot, or 1 AI supporting hundreds
of "retirees" (from birth) using "wages" that are no longer paid to the robot
(labor), but to the capitalist.

Hans Moravec in _Mind Children_ outlined a version of this 20 years in how
increasing productivity from automation will gradually produce a society that
looks more like a hunter gather society and less than an industrial one, in
that the basic needs of the population will literally "grow" on trees (robotic
manufacturing bush robots)

My point is, if you want to look at extremes, then extreme unchecked
technology and inequality will produce a degenerate broken economy in the long
run, so quite clearly, there must be mitigating factors to keep the capitalist
system going.

I like PG's framing of the issues, but dislike his conclusions, which are
unsubstantiated and basically fall to a kind of nativist/natural fallacy, that
because something is a natural driving force, it should not be opposed, or
else bad things will happen.

History is replete with humans changing their natural physical or economic
environment, and we will continue to do so.

I think one can address economic inequality and it would not prevent startups
or "big winners". Moreover, I'd argue that living in a society where failure
doesn't mean abject poverty, possibly a life long impact, encourages people to
take more risks, and that overall, if we have in place a safety net, and fix
issues with racial inequality especially, it'll be a boon for the startup
economy, not a negative one. That's an unsubstantiated claim as well, but if
you comparatively look at other countries, you can't really find a tight
correspondence between the level of social welfare and failure of startup
culture. But you can see improved social mobility, and having superior
mobility and racial/cultural diversity I'd argue helps in building companies
which scale globally.

~~~
ZenoArrow
Well put.

------
sly_foxx
How about fixing dating/sexual inequality? You know, one guy sleeping with 20
girls is not fair to all the losers/ugly_guys like me who can't get a date. We
have to redistribute partners and make sure that even the unattractive guys
can get a date. We'll have to kidnap women who are into attractive/successful
guys and then take them to losers like me. You think this is rape? It's not,
just like taxes on goods are not theft, because the only reason attractive
people can get partners is because a lot of unattractive people like me
contribute by building roads, bridges, apps, infrastructure, schools, which
enables attractive people to arrange dates and then use roads to get there. We
are also in the friend zone all the time, while the attractive guys are
getting deep inside our female friend. They have to give something back. I am
proposing a 'sexual tax'.

ALSO, since pretty people inherited good genes and didn't work for it, I also
propose taxing physical beauty by making pretty people look uglier by
30-40%(call it 'inheritance sexual tax'). That way, already ugly people will
look great in comparison.

~~~
Balgair
News Years resolutions of 'dating more' aren't going so well for you either.
eh?

------
vemy
> And unlike high incarceration rates and tax loopholes, startups are on the
> whole good.

That's a highly debatable assertion. I really wish he would explain why he
thinks startups are "good".

~~~
UK-AL
Does this have to be explained?

Startups provide service/product that people are willing to pay for.

You must be providing some value to those people for people use or pay for
your product. Maybe because it's convenient, quicker or better.

And startups add that value for millions of users.

