Is this proven anywhere? I don't believe high taxation reduces innovation, in fact perhaps the opposite is true overall.
The introduction further clarifies the author's definition of the type of innovation that gets disincentivized. "Basic research", i.e. innovations in our understanding of our world, are readily funded by the redistributed tax revenue. "Applied innovation", that which applies the outputs of basic research, includes the creation of Amazon.com or the latest improvements to Google search. This applied innovation is what gets disincentivized.
I personally agree with you that this is a shaky, unsubstantiated foundation for an argument about optimal tax policy.
People with drive don't do it to just be one of millions to reach a given milestone. People with real drive don't enjoy doing something that many before them have done.
Guys like Jeff clearly set out to be the best. Breaking the score bord could very well prevent something like Amazon, and we might have ended up knowing Jeff as the guy who has the largest POG collection.
There's a story about a society of peacocks who grew their tails so big and beautiful it started interfering with survival. They'd get it stuck in branches, be too slow to run from predators, etc. No one peacock was willing defect and shorten his tail because he'd lose out on the mating game. If they could all just get together and agree to shorten their tails by 25%, they could keep the relative pecking order and also be agile enough to survive.
While money is certainly an incentive to innovate, it's also not the only incentive (and probably far down the list if you're already rich), and creative, driven people will do what they do whether or not a chunk of their "earnings" gets given/taken back to the society that enables them to do it.
If anything, a lot of the megacorps just seem to kill smaller business while at the same time being better at not paying taxes.
>Hall and Woodward (2010) provide a different perspective. Using an extensive data set on venture capital funding from 1987 until 2008, they show that the returns to entrepreneurs are extremely skewed: nearly 3/4ths of entrepreneurs receive nothing at
exit, while a few receive more than a billion dollars. An entrepreneur with a coefficient
of relative risk aversion of two values this lottery with a certainty equivalent of only
slightly more than zero. An implication is that the tax rate that applies to the successful
outcome can have a substantial influence on entrepreneurial
I find it hard to see how taxation does not disincentivize applied innovation in the margin.
Also even if people work for a chance to be in "top" the probability of actually getting there might be irrelevant. People horribly overestimate probability of positive outcomes. Basiaclly 1 in a million and 1 in a billion is a the same for people. What's more they don't translate both to "impossible" but to "it's gonna be tough but I got a shot"
The whole reason the priesthood (and to an extent nobles too) was the core of education way back in medieval times was because they didn't have to worry about surviving. On the other hand, peasants could barely innovate at all because they spent most if not all of their time in labor.