This is a pretty neat response to a debate that has had a lot of strawmen and arguing against statements nobody said.
The longer an essay is, the further apart the main arguments are and the easier it is to forget parts of the essays. The ones we remember most saliently, of course, are the controversial claims that trigger an emotional response, not the paragraphs of simple history fact-stating that builds up to the conclusion. As a result, responses to the essay tend to strip out the context of claims and argue against them in a vacuum.
I am kind of surprised that PG insist on confusing extreme economic inequality (which is the one most people are talking about when they say it's bad) with normal economic inequality (which most people are totally fine with.)
This comment doesn't make any sense without defining "extreme" vs "normal" income equality.
The argument is over economic inequality which I believe most take to mean wealth inequality, not income inequality.
Do you think that technology alone can't produce extreme income inequality? Why?
Of course not. You need people using the technology as well. Extreme inequality results from the simple fact (as exhaustively supported by Piketty) that r > g. Capital, by definition, is technology.
For any other casual viewers unfamiliar with but interested in economics, the 'r' refers to return on capital and 'g' refers to the growth rate of the economy. This section of the wikipedia article on his book seems to give a quick and decent high level overview that puts this (and a few other comments) into perspective: https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce...
The whole book is great. It may be ~700 pages, but it's more of a story than a heavy economy book. If anyone is interested enough to comment on this issue, this book is definitely something you'd be interested to read.
Income (in)equality doesn't depend on the kind of work the company does. One of the basic trends you can find in Picketty's "Capital ..." is that instead of investing 1/3 of company income into workers ("reasonable" split), the owner/worker salary gap grows more than ever - and that's the extreme inequality. What the company does is irrelevant in a more general overview.
Market forces and legislation. Simple caps would defeat all attempts to do that. Realistically, the design of a system dictates how it will behave in many scenarios. Our system's properties lead to accumulation and concentration of extreme wealth. Even Citigroup's leaked docs describe it as a "plutonomy:" a system designed to shift most wealth to already rich. I like how they mentioned that voters were the greatest threat with the defense being to promote the illusion that everyone can get ahead.
Combine stuff like that with executives making 300x the average (not worst) employee to see system is clearly rigged against the many for a very few. Not even top 1%: a fraction of a percent.
What are you saying PG is confusing then? He is talking about economic inequality caused by technology.
Are you saying that technology can't cause extreme economic inequality? Comparing a Wal-mart worker vs. Bill Gates, Steve Jobs, or Paul Graham sounds like extreme economic inequality by your definition.
I think you are missing exactly the point of the post, while accusing him of being confused.
No I am not missing exactly what he is saying. He is claiming that people are critiquing startups for creating unfair economic inequality, they are not. Most people have nothing against the inequality created by most startups.
However they do have something against someone like Uber or Wallmart or the Koch brothers.
"PG insist on confusing extreme economic inequality with normal economic inequality"
Last post:
"Most people have nothing against the inequality created by most startups"
His point was that startups can produce extreme income inequality (without the system being rigged). The whole point of his essay was to not lump all the causes of income inequality together.
I haven't changed anything I am just adding more context to what I mean.
PG believes that people are against the inequality startups create. They are not because most startups don't become family dynasties. Thats the point. Only PG is talking about startups. Thats not what people talk about when they critique economic inequality and that's what he doesn't seem to understand.
Extreme income inequality is that which causes economic instability and has a deleterious effect on most people.
Determining an acceptable level of income inequality is a moving target requiring lots of analysis of data and whatever but there exists such a point at which you could say that income inequality is untenable, just the same as there exists a point at which inflation is untenable.
The "acceptable" level of inflation is around 3%, but even inflation in the low double digits isn't necessarily unworkable. It's somewhat arbitrary and a comoplex policy decision, but it's fair to say that such a level of income inequality exists at which it becomes untenable (even if we don't know what it is).
This is cool. One pet project that I want to do (one day...) is to generate what a wealth distribution graph based on answers to a questionnaire such as:
- How much more should a 50 year old earn more than a 20 year old on average ideally?
- How much should the lifetime earning of someone holding a PhD be over someone with only a high school degree - there should be at least some premium for going through extra years of school right?
- What's a reasonable amount of inequality due to people choosing a career in which they will be happier, at some cost to the paycheck?
- Should people be allowed to work more (e.g. 50h/week) if they wish? This will increase inequality.
- etc
A lot of those questions would be very difficult to model, but I bet the graph would look a lot more inequal at the end than most people envision their "ideal" graph to look like (which is shown in this classic video on wealth distribution: https://www.youtube.com/watch?v=QPKKQnijnsM)
Only the last paragraph is original, but it is probably also wrong. So PG is saying that the major cause of inequality is technological advancement. But for example see that economic inequality decreased after WWII, but is it really that farfetched to imagine that technological power did not decrease during the war years? (E.g. Manhattan Project.) It is also not hard to imagine that wars would distribute technology more evenly.
There are multiple factors that affect inequality, so a short term decrease in inequality can certainly still occur while technology continues to advance. In his other recent essay[1], pg goes into more detail on why inequality decreased in the postwar years, despite advances in technology.
>But economic inequality per se is not bad. It has multiple causes. Many are bad, but some are good.
This shows the confusion of the original essay, and this response.
There is the thesis, "economic equality is not bad", and then the support for the thesis, "some drivers of inequality are bad, some are good" that doesn't actually support it.
Saying that some things that concentrate wealth are not bad overall does nothing to shed light on whether vast disparities of wealth between classes of people is beneficial for a society.
Most people I know that are concerned about economic inequality aren't super bothered by self-made billionaires (Jobs, Zuck, and Gates to a lesser degree.)
Mostly they are concerned about dynastic wealth (Waltons, Kochs) particularly when it's economic power intertwined with political power (Kennedys, Bushes, Clintons, Romneys).
Outside of San Francisco, where many people feel real downward economic pressure from tech, most of the US seems pretty happy with the self-made uber rich. In fact, I think people are downright fond of these people. The real discomfort comes when those oligarchs look to preserve dynastic wealth and power for generation after generation using trusts and other tax avoidance strategies.
You are obviously biased. Im sure those tech gods affect politics as much as the Kochs -- but it is the kind of political choices that you are ok with. Therefore, they are the good guys and the Kochs are the bad guys. Not so sure things are that simple. E.g. Bill Gates and patents.
Income inequality, unemployment etc. are necessities for that dynastic wealth as well.
If you're not going to make money by working and creating wealth, you have to make it as a rentier, expropriating wealth created during surplus labor time of those who do work.
It causes a struggle for where the money goes - the worker who created the wealth by their labor, or to the heir in the profit of that expropriated labor time.
Poverty and unemployment are backbones of pushing that wealth towards the heir and away from the worker creating the wealth. That's why his note on ending poverty etc. is so phony. Heirs aren't trying to lower unemployment or end poverty, they work hard to create it.
It's not a secret. It's said openly in Businessweek - http://www.businessweek.com/1999/99_44/b3653163.htm . The problem as they see it is when unemployment gets too low. It puts a crimp on their parasitism on those of us who work and create wealth.
Then they should stop saying they are concerned about "inequality" and start saying they are concerned with "dynastic wealth". This sloppy rhetoric makes it easy for opponents to attack. See, e.g.,
And she is absolutely right. Because if "inequality" is the problem then a solution is to shape society so that everyone has $1 rather than the rich having $3 and the poor having $2. If that's not a desirable solution then "inequality" is not the problem.
People are concerned about egregious opulence while others are barely middling along or are impoverished; there is currently no other configuration in which income inequality exists.
The other stuff is a distraction until that isn't the case.
> Americans and publics in Africa are less dissatisfied, but they are hardly happy about the way things are going. More than half of Americans (56%) say the U.S. economy is doing poorly. In the nine African nations surveyed, a median of 51% believe economic conditions are bad. Within Africa there is a particularly wide divergence of opinion. More than seven-in-ten Ghanaians (73%) judge their economy to be performing poorly, while nearly nine-in-ten Ethiopians (89%) believe their economy is in good condition.
> Down here at the pedestrian level, between 2010 and 2014 poverty increased in one third of America’s 3,000 counties, when compared to the 2005 to 2009 period, according to the U.S. Census’s American Community Survey. In fact, the “recovery,” that pastel-colored unicorn, was only seen in the 4 percent of the nation’s counties where poverty actually declined. The rest remained stagnant.
> It should come as no surprise. Millions of Americans lost their homes, and with them the foundation of their household wealth. During the “recovery,” census data documents that the median U.S. household income has actually declined for three years in a row and remains below its peak in 1999.
And the fact that the middle class has been hollowed out:
Disregarding the fact that it's more like $1M of wealth for rich vs $2 for poor: Why is $1 for everyone not desirable in that case? Of course it's pure speculation, but a complete wealth reset like this would have to result in either: inflation where new $1 means old $2.01, crazy taxation where country keeps most wealth (but has to then spend on social support), or complete economy collapse.
Two of those results may be quite desirable actually.
Well if those people are concerned about inherited wealth, I have good news for them; the wealthiest individuals are increasingly self-made.
> Over the past 30 years, the origin of the wealth of the richest people in the United States has shifted away from old, inherited money. Our new metric, the self-made scores developed for the Forbes 400, shows that increasingly we find self-made billionaires among the ranks of the richest people in the country. This has accompanied the incredible increase in wealth of the members of the Forbes 400, which has jumped 1,832% times since 1984, when the total net worth of our list was $125 billion, compared with $2.29 trillion today.[0]
The problem is that, with the exception of the very small minority who give it all away before they die, these self-made billionaires are the first generation in a dynasty.
I agree with the basic claim of this response: economic inequality itself it not a problem. I don't really think I would care too much about an extravagant billionare class if the lower classes had 100K household incomes in a robust democracy where the proletariat would have have fair representation. The problem of poverty, generalized, is a problem of access to essential resources. What counts as "essential" of course might be debatable, but the metric for improvement should be about reducing the fraction of the population that doesn't have access to essential resources. However...
>We will not do a good job of fixing the bad causes of economic inequality unless we attack them directly.
I would replace "will not" with "may not". If the "good" and "bad" forces at work are sufficiently correlated in their ultimate causes then a blunt metric of reducing overall inequality might turn out to be a nice strategy.
EDIT:
In particular if per capita income is known then the total variance and behavior in the tail may place strong constraints on the fraction of the population below a threshold.
A lot of research shows that high society-wide economic inequality causes many bad effects, economically, politically and socially. I believe that is the basis of many concerns. According to that research, high inequality is per se bad (I don't know enough to define "high", but many others have).
> [inequality due to startup founder success is good]
Generally I agree, but:
1) The question isn't whether all inequality is bad but whether current levels are bad. Nobody argues for perfect equality.
2) It overlooks the problem that many are denied the opportunity of such success because of their race, gender, social networks, or economic class,[1] which deny them access to the important resources such as education, financing, contacts, or jobs.
That's bad for the people who otherwise would succeed; it's bad for our society socially and politically to have people who are and feel excluded; and it's very bad for our economy to not utilize the >70% [2] of human resources that aren't middle-class or wealthier white males.
----
[1] AFAIK, plenty of research shows that education depends significatly on the economic class of your family
[2] Around 33% of the U.S. population is white male and some of them are poor; therefore 70% seems a safe estimate.
You still misunderstood the point of the essay, even when simplified.
> denied the opportunity of such success because of their race, gender, social networks, or economic class ... which deny them access to the important resources such as education, financing, contacts, or jobs.
This is not "economic inequality", reducing "economic inequality" might reduce this or it might not. Its a proximate cause, whereas we should be focusing on ultimate causes. You even list them here: access to education, access to financing, contacts, jobs.
Focus on "economic inequality" is less likely to fix these problems than focus on fixing these problems is (likely even more detailed versions of them).
Isn't he saying that the problem is that economic inequality is seen as the
cause, not the effect? I think that's in line with all of the points you brought
up.
> Isn't he saying that the problem is that economic inequality is seen as the cause, not the effect? I think that's in line with all of the points you brought up.
The distinction is helpful; thanks. My first point is that it's a cause, according to a lot of research.
great article. i know it was written to clarify earlier misinterpretations, but i really found i took away more from this one than from the prior article. it reminds me of the mark twain quote "If I had more time, I would have written you a shorter letter.”
Really the correctness of this argument hinges on what definition of inequality one uses. A single factor like standard deviation, for example, tells one much too little. Outliers have a disproportionate effect on this. On the other hand, the gap between what might be called "poor", and "middle-class" affects almost everybody, and the power imbalance that results from this difference leads to many negative effects for those who can't keep up. In summary: the disproportionate influence of the super-rich, and the relative condition of the lower classes are separate issues that are both sloppily discussed using the term "income inequality".
I wish we had a cliff notes version for every PG essay. It's a nice way to make good ideas and arguments more approachable when you have just a few minutes to read.
So let's grant that economic inequality is good in some cases.
Even if this is the case, reducing economic inequality may be the most efficient way to solve a wide variety of societal issues. E.g. how many societies are there with high inequality where the poor aren't discriminated against or pushed around by those with money?
Sure, in theory inequality isn't the same as:
- Regulatory capture
- The political system being owned by the super wealthy
- Endless war
- Environmental atrocities
- The dismantling of public infrastructure
- The completely dysfunctional healthcare system
- The privatization of public resources
But 'not the same as' doesn't mean unrelated, since inequality is what enables these things to occur. E.g. the rich can bribe politicians to pass laws that make them richer by allowing them to poison low-income minorities or whatever. And while reducing inequality may not be the perfect solution for the reasons stated, it's not clear that a better solution exists. (Sort of like how democracy is the worst form of government, except for all others that have been tried or whatever.)
Even if economic inequality is intrinsically good, which I think it is, it doesn't follow that reducing inequality is bad.
Its almost certainly true that well-implemented policies of reducing income inequality would fix some of these problems, but that completely ignores negative side effects. The negative side effects are what makes that type of high level policy making bad.
What I'm saying is that if you take all the possible wealth distribution curves, the efficient frontier probably won't be at the extremes. That's not ignoring the negative side effects, rather it's cost-benefit analysis.
economic inequality is a mathematical fact referring to the idea that growth in outcomes in the US has diverged over the years between various income brackets. see this https://www.cbo.gov/publication/42729
when people say that inequality is bad, what they are talking about is that it is bad that, even though average incomes grew a lot, incomes for the lower brackets grew a lot less than incomes for the higher brackets. As you can see from my link, even taking out successful startup founders ( by not looking at 1%) shows the same trend.
It is a separate discussion whether or not startups increase income inequality ( just because startup founders get rich, it doesn't mean overall inequality has to increase because their products could raise average incomes in other brackets by raising productivity, for example ).
But, focusing on startups is just not terribly relevant for the inequality debate, again, as demonstrated by the fact, that there is a lot of inequality in the 60%th percentile vs 20th percentile, which has nothing to do with startups
A better last paragraph which would make sense is: if technology distribution lags behind technology advancement, economic inequality would increase. But that seems like a tautology.
Why do startups necessarily increase economic inequality? I agree that they do now, but is it impossible to have the good of startups without also increasing economic inequality?
Out of the usual reasons people encourage you to either found or work for a startup, "get rich" is not the primary motivator, and "get richer than other people" certainly isn't. (To claim that "get rich" implies "get richer than other people" is to invoke the pie fallacy, which Paul Graham debunked recently.) "Change the world," "have more freedom / creative control than a traditional job", etc. are, and those don't seem to require economic inequality.
"For nearly everyone, the opinion of one's peers is the most powerful motivator of all—more powerful even than the nominal goal of most startup founders, getting rich. [...] Even if you start a startup explicitly to get rich, the money you might get seems pretty theoretical most of the time. What drives you day to day is not wanting to look bad."
If you want to imagine startups not causing economic inequality, one approach is a radical restructuring of society, probably involving heavy taxes, as I suggested in a comment previously. But another simple one is to have more people do startups, and to explicitly invest primarily in people and communities that don't have other easy routes of getting rich.
I don't think that is correct. For example, a startup could make its founder a billion dollars, but if hundreds of millions of people are able to raise their incomes because they became more productive as a result of using that startup's product, then overall inequality would decrease. Does Coursera lower or increase inequality? I would argue it lowers it in the long run.
I just read "The Refragmentation" (I hadn't read it previously), and I had read the original essay on economic inequality previously.
Neither of these essays seems to discuss the good of startups in relation to economic inequality. All they discuss is the inevitability of startups, or really technology, increasing economic inequality. And "The Refragmentation" explicitly points out that a society can put a stop to this via high taxes.
(That said, it is late and maybe I didn't fully understand a sentence somewhere.)
Well, sure. But there's a couple of levels of "get rich": "make enough money to be self-sufficient," "get so much money that you have not yet envisioned what you might do with it," "get into a minority of rich people."
The first one seems like an extremely common motivator, yes. The second one sometimes; the third one unlikely. But the first one does not require economic inequality; the second one might, and only the third one does.
This is what I find puzzling about pg's claim to be in the business of creating economic inequality. Sure, he's in a business that happens to have that effect now, but that hardly seems like a core requirement of the business.
(And this doesn't even address the fact that "startups do X" is sort of circular. Could non-startups, e.g. small businesses that stay small, do X just as well? Or better, because they don't have the failure rate of startups? If we are no longer able to have them run by people motivated by getting rich, is the good done by startups less likely to happen?)
> And in the unlikely event I left no holes, some will say I'm backpedalling or doing "damage control."
There's nothing particularly wrong with doing damage control if you think people have misunderstood or misrepresented you. And PG is doing damage control here. Why else post such a "simplified version"?
Economic inequality is bad because it has a profound negative effect on most people's self-esteem and ability to enjoy life.
With high inequality, money becomes more valuable and people start to think of everything in terms of money. Even romantic relationships become money-oriented. It's not uncommon for marriages to break up because of financial reasons. Wealth inequality causes more human suffering than moderate poverty.
People who lived in communist Russia will often tell you that people were happier under communism, even though they didn't have much - Often, they had to farm vegetables from their own gardens to supplement their diets. But they were happy because they knew that they had the same as everyone else. Also, people had no ulterior motives to do anything - When people liked you, they liked you because of who you were. When people did something nice, they did it because of purely altruistic reasons.
In capitalist society, money underlies the behaviour of everything done by everyone. You can never know if a person is good or bad because you never know their true intentions.
I think the media coverage of wealthy people is itself a bigger problem than inequality itself.
The media motivates people to work harder and acquire more wealth. Without media, only innately passionate people would launch startups. Today, most people who start a company do it because they want financial rewards.
It is human nature to want equality. It reminds me of a Russian joke about a man who finds a genie in a bottle. The genie tells the man that he can get anything he wishes but that his neighbour will get twice as much of whatever he gets. The man pauses to think for a moment and then says: "Take out one of my eyes."
Much of that "people were happy under communism" BS is just that: BS. As anyone past the age of about 30 would tell you, you tend to forget the shitty stuff a lot faster than the good stuff. As a result we often hold these romanticized notions of how things used to be. Yet if you actually go ahead and look at some videos from 20-30 years ago from those parts of the world, you see North Korea. No one seriously wants to go back to that, except for US "progressives" who believe rich people should not exist.
A lot of what we (the west) believe about communism is shaped by western propaganda (though western propaganda is more about exaggerations and omission of facts than outright lies so you could argue that it's not as bad). If you ask old Russian people who were around at the time, they will often tell you that things were good.
I've done just that, in fact. That lasts exactly until they start remembering in greater detail how things _actually_ were, without all the unfounded nostalgia. And things were pretty fucking harsh even by the modest standards of today's Russia, both economically and politically.
I'm an American who has lived in Russia for a few years. I speak Russian fluently as second language. I've discussed this topic in depth with Russians from various backgrounds.
I think that your point ("People who lived in communist Russia will often tell you that people were happier under communism") is unsubstantiated. I've heard this a FEW times, but mostly from older (60+) unskilled laborers (like taxi drivers) who are simply unable to adjust to the new world.
Almost all Russians realize that their country is better until capitalism. (If you want to call what they have here 'capitalism', it's more like 'crony capitalism').
Nor do I agree with "It is human nature to want equality". Humans will always jockey for status and power. That is human nature. If it can't be done with money, then they will use whatever other kind of social 'currency' exists to try to rise in the hierarchy of status... just like the pigs in 'Animal Farm'... or communist party leaders in the Soviet Union.
Mostly, people are who complaining about inequality are really complaining that they ended up at the bottom of the hierarchy and have how no clue how to or no willingness to climb it.
117 comments
[ 3.3 ms ] story [ 90.4 ms ] threadThe longer an essay is, the further apart the main arguments are and the easier it is to forget parts of the essays. The ones we remember most saliently, of course, are the controversial claims that trigger an emotional response, not the paragraphs of simple history fact-stating that builds up to the conclusion. As a result, responses to the essay tend to strip out the context of claims and argue against them in a vacuum.
Edited to clear up confusion
Do you think that technology alone can't produce extreme income inequality? Why?
The argument is over economic inequality which I believe most take to mean wealth inequality, not income inequality.
Do you think that technology alone can't produce extreme income inequality? Why?
Of course not. You need people using the technology as well. Extreme inequality results from the simple fact (as exhaustively supported by Piketty) that r > g. Capital, by definition, is technology.
Combine stuff like that with executives making 300x the average (not worst) employee to see system is clearly rigged against the many for a very few. Not even top 1%: a fraction of a percent.
What is extreme economic inequality vs normal economic inequality? Honest question -- I literally have no idea.
Extreme Economic inequality example. People working in Walmart for less than a working living v.s. the Walmart family or the Koch family.
Are you saying that technology can't cause extreme economic inequality? Comparing a Wal-mart worker vs. Bill Gates, Steve Jobs, or Paul Graham sounds like extreme economic inequality by your definition.
I think you are missing exactly the point of the post, while accusing him of being confused.
However they do have something against someone like Uber or Wallmart or the Koch brothers.
"PG insist on confusing extreme economic inequality with normal economic inequality"
Last post:
"Most people have nothing against the inequality created by most startups"
His point was that startups can produce extreme income inequality (without the system being rigged). The whole point of his essay was to not lump all the causes of income inequality together.
PG believes that people are against the inequality startups create. They are not because most startups don't become family dynasties. Thats the point. Only PG is talking about startups. Thats not what people talk about when they critique economic inequality and that's what he doesn't seem to understand.
Determining an acceptable level of income inequality is a moving target requiring lots of analysis of data and whatever but there exists such a point at which you could say that income inequality is untenable, just the same as there exists a point at which inflation is untenable.
The "acceptable" level of inflation is around 3%, but even inflation in the low double digits isn't necessarily unworkable. It's somewhat arbitrary and a comoplex policy decision, but it's fair to say that such a level of income inequality exists at which it becomes untenable (even if we don't know what it is).
http://nbviewer.ipython.org/url/norvig.com/ipython/Economics...
"Many have preconceptions about how economies work that will be challenged by the results shown here"
- How much more should a 50 year old earn more than a 20 year old on average ideally? - How much should the lifetime earning of someone holding a PhD be over someone with only a high school degree - there should be at least some premium for going through extra years of school right? - What's a reasonable amount of inequality due to people choosing a career in which they will be happier, at some cost to the paycheck? - Should people be allowed to work more (e.g. 50h/week) if they wish? This will increase inequality. - etc
A lot of those questions would be very difficult to model, but I bet the graph would look a lot more inequal at the end than most people envision their "ideal" graph to look like (which is shown in this classic video on wealth distribution: https://www.youtube.com/watch?v=QPKKQnijnsM)
[1]: http://www.paulgraham.com/re.html
This shows the confusion of the original essay, and this response.
There is the thesis, "economic equality is not bad", and then the support for the thesis, "some drivers of inequality are bad, some are good" that doesn't actually support it.
Saying that some things that concentrate wealth are not bad overall does nothing to shed light on whether vast disparities of wealth between classes of people is beneficial for a society.
Mostly they are concerned about dynastic wealth (Waltons, Kochs) particularly when it's economic power intertwined with political power (Kennedys, Bushes, Clintons, Romneys).
Outside of San Francisco, where many people feel real downward economic pressure from tech, most of the US seems pretty happy with the self-made uber rich. In fact, I think people are downright fond of these people. The real discomfort comes when those oligarchs look to preserve dynastic wealth and power for generation after generation using trusts and other tax avoidance strategies.
Haha, I cannot believe I defended the Kochs.
If you're not going to make money by working and creating wealth, you have to make it as a rentier, expropriating wealth created during surplus labor time of those who do work.
It causes a struggle for where the money goes - the worker who created the wealth by their labor, or to the heir in the profit of that expropriated labor time.
Poverty and unemployment are backbones of pushing that wealth towards the heir and away from the worker creating the wealth. That's why his note on ending poverty etc. is so phony. Heirs aren't trying to lower unemployment or end poverty, they work hard to create it.
It's not a secret. It's said openly in Businessweek - http://www.businessweek.com/1999/99_44/b3653163.htm . The problem as they see it is when unemployment gets too low. It puts a crimp on their parasitism on those of us who work and create wealth.
https://m.youtube.com/watch?v=okHGCz6xxiw
And she is absolutely right. Because if "inequality" is the problem then a solution is to shape society so that everyone has $1 rather than the rich having $3 and the poor having $2. If that's not a desirable solution then "inequality" is not the problem.
The other stuff is a distraction until that isn't the case.
http://www.pewresearch.org/fact-tank/2015/07/23/around-the-w...
> Americans and publics in Africa are less dissatisfied, but they are hardly happy about the way things are going. More than half of Americans (56%) say the U.S. economy is doing poorly. In the nine African nations surveyed, a median of 51% believe economic conditions are bad. Within Africa there is a particularly wide divergence of opinion. More than seven-in-ten Ghanaians (73%) judge their economy to be performing poorly, while nearly nine-in-ten Ethiopians (89%) believe their economy is in good condition.
https://www.salon.com/2016/01/03/the_middle_class_is_just_th...
> Down here at the pedestrian level, between 2010 and 2014 poverty increased in one third of America’s 3,000 counties, when compared to the 2005 to 2009 period, according to the U.S. Census’s American Community Survey. In fact, the “recovery,” that pastel-colored unicorn, was only seen in the 4 percent of the nation’s counties where poverty actually declined. The rest remained stagnant.
> It should come as no surprise. Millions of Americans lost their homes, and with them the foundation of their household wealth. During the “recovery,” census data documents that the median U.S. household income has actually declined for three years in a row and remains below its peak in 1999.
And the fact that the middle class has been hollowed out:
http://www.npr.org/sections/thetwo-way/2015/12/09/459087477/...
Two of those results may be quite desirable actually.
> Over the past 30 years, the origin of the wealth of the richest people in the United States has shifted away from old, inherited money. Our new metric, the self-made scores developed for the Forbes 400, shows that increasingly we find self-made billionaires among the ranks of the richest people in the country. This has accompanied the incredible increase in wealth of the members of the Forbes 400, which has jumped 1,832% times since 1984, when the total net worth of our list was $125 billion, compared with $2.29 trillion today.[0]
[0] http://www.forbes.com/sites/afontevecchia/2014/10/03/there-a...
>We will not do a good job of fixing the bad causes of economic inequality unless we attack them directly.
I would replace "will not" with "may not". If the "good" and "bad" forces at work are sufficiently correlated in their ultimate causes then a blunt metric of reducing overall inequality might turn out to be a nice strategy.
EDIT: In particular if per capita income is known then the total variance and behavior in the tail may place strong constraints on the fraction of the population below a threshold.
A lot of research shows that high society-wide economic inequality causes many bad effects, economically, politically and socially. I believe that is the basis of many concerns. According to that research, high inequality is per se bad (I don't know enough to define "high", but many others have).
> [inequality due to startup founder success is good]
Generally I agree, but:
1) The question isn't whether all inequality is bad but whether current levels are bad. Nobody argues for perfect equality.
2) It overlooks the problem that many are denied the opportunity of such success because of their race, gender, social networks, or economic class,[1] which deny them access to the important resources such as education, financing, contacts, or jobs.
That's bad for the people who otherwise would succeed; it's bad for our society socially and politically to have people who are and feel excluded; and it's very bad for our economy to not utilize the >70% [2] of human resources that aren't middle-class or wealthier white males.
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[1] AFAIK, plenty of research shows that education depends significatly on the economic class of your family
[2] Around 33% of the U.S. population is white male and some of them are poor; therefore 70% seems a safe estimate.
> denied the opportunity of such success because of their race, gender, social networks, or economic class ... which deny them access to the important resources such as education, financing, contacts, or jobs.
This is not "economic inequality", reducing "economic inequality" might reduce this or it might not. Its a proximate cause, whereas we should be focusing on ultimate causes. You even list them here: access to education, access to financing, contacts, jobs.
Focus on "economic inequality" is less likely to fix these problems than focus on fixing these problems is (likely even more detailed versions of them).
The distinction is helpful; thanks. My first point is that it's a cause, according to a lot of research.
So let's grant that economic inequality is good in some cases.
Even if this is the case, reducing economic inequality may be the most efficient way to solve a wide variety of societal issues. E.g. how many societies are there with high inequality where the poor aren't discriminated against or pushed around by those with money?
Sure, in theory inequality isn't the same as:
- Regulatory capture
- The political system being owned by the super wealthy
- Endless war
- Environmental atrocities
- The dismantling of public infrastructure
- The completely dysfunctional healthcare system
- The privatization of public resources
But 'not the same as' doesn't mean unrelated, since inequality is what enables these things to occur. E.g. the rich can bribe politicians to pass laws that make them richer by allowing them to poison low-income minorities or whatever. And while reducing inequality may not be the perfect solution for the reasons stated, it's not clear that a better solution exists. (Sort of like how democracy is the worst form of government, except for all others that have been tried or whatever.)
Even if economic inequality is intrinsically good, which I think it is, it doesn't follow that reducing inequality is bad.
What I'm saying is that if you take all the possible wealth distribution curves, the efficient frontier probably won't be at the extremes. That's not ignoring the negative side effects, rather it's cost-benefit analysis.
when people say that inequality is bad, what they are talking about is that it is bad that, even though average incomes grew a lot, incomes for the lower brackets grew a lot less than incomes for the higher brackets. As you can see from my link, even taking out successful startup founders ( by not looking at 1%) shows the same trend.
It is a separate discussion whether or not startups increase income inequality ( just because startup founders get rich, it doesn't mean overall inequality has to increase because their products could raise average incomes in other brackets by raising productivity, for example ).
But, focusing on startups is just not terribly relevant for the inequality debate, again, as demonstrated by the fact, that there is a lot of inequality in the 60%th percentile vs 20th percentile, which has nothing to do with startups
Edit: to those downvoting, here is some more data
http://www.motherjones.com/mojo/2011/10/one-percent-income-i...
does it look like income growth of the 1% has much to do with startups from this data ?
Out of the usual reasons people encourage you to either found or work for a startup, "get rich" is not the primary motivator, and "get richer than other people" certainly isn't. (To claim that "get rich" implies "get richer than other people" is to invoke the pie fallacy, which Paul Graham debunked recently.) "Change the world," "have more freedom / creative control than a traditional job", etc. are, and those don't seem to require economic inequality.
For instance, Paul Graham writes in http://paulgraham.com/mit.html :
"For nearly everyone, the opinion of one's peers is the most powerful motivator of all—more powerful even than the nominal goal of most startup founders, getting rich. [...] Even if you start a startup explicitly to get rich, the money you might get seems pretty theoretical most of the time. What drives you day to day is not wanting to look bad."
If you want to imagine startups not causing economic inequality, one approach is a radical restructuring of society, probably involving heavy taxes, as I suggested in a comment previously. But another simple one is to have more people do startups, and to explicitly invest primarily in people and communities that don't have other easy routes of getting rich.
Yes.
This is discussed in detail in the original essay and in The Refragmentation essay here: http://paulgraham.com/re.html
Neither of these essays seems to discuss the good of startups in relation to economic inequality. All they discuss is the inevitability of startups, or really technology, increasing economic inequality. And "The Refragmentation" explicitly points out that a society can put a stop to this via high taxes.
(That said, it is late and maybe I didn't fully understand a sentence somewhere.)
in my experience with startups and founders, that is the absolute central motivator, to the point that it is utterly laughable to deny it.
The first one seems like an extremely common motivator, yes. The second one sometimes; the third one unlikely. But the first one does not require economic inequality; the second one might, and only the third one does.
This is what I find puzzling about pg's claim to be in the business of creating economic inequality. Sure, he's in a business that happens to have that effect now, but that hardly seems like a core requirement of the business.
(And this doesn't even address the fact that "startups do X" is sort of circular. Could non-startups, e.g. small businesses that stay small, do X just as well? Or better, because they don't have the failure rate of startups? If we are no longer able to have them run by people motivated by getting rich, is the good done by startups less likely to happen?)
Are they? Seems to me that question is far from settled.
There's nothing particularly wrong with doing damage control if you think people have misunderstood or misrepresented you. And PG is doing damage control here. Why else post such a "simplified version"?
With high inequality, money becomes more valuable and people start to think of everything in terms of money. Even romantic relationships become money-oriented. It's not uncommon for marriages to break up because of financial reasons. Wealth inequality causes more human suffering than moderate poverty.
People who lived in communist Russia will often tell you that people were happier under communism, even though they didn't have much - Often, they had to farm vegetables from their own gardens to supplement their diets. But they were happy because they knew that they had the same as everyone else. Also, people had no ulterior motives to do anything - When people liked you, they liked you because of who you were. When people did something nice, they did it because of purely altruistic reasons.
In capitalist society, money underlies the behaviour of everything done by everyone. You can never know if a person is good or bad because you never know their true intentions.
I think the media coverage of wealthy people is itself a bigger problem than inequality itself.
The media motivates people to work harder and acquire more wealth. Without media, only innately passionate people would launch startups. Today, most people who start a company do it because they want financial rewards.
It is human nature to want equality. It reminds me of a Russian joke about a man who finds a genie in a bottle. The genie tells the man that he can get anything he wishes but that his neighbour will get twice as much of whatever he gets. The man pauses to think for a moment and then says: "Take out one of my eyes."
I think that your point ("People who lived in communist Russia will often tell you that people were happier under communism") is unsubstantiated. I've heard this a FEW times, but mostly from older (60+) unskilled laborers (like taxi drivers) who are simply unable to adjust to the new world.
Almost all Russians realize that their country is better until capitalism. (If you want to call what they have here 'capitalism', it's more like 'crony capitalism').
Nor do I agree with "It is human nature to want equality". Humans will always jockey for status and power. That is human nature. If it can't be done with money, then they will use whatever other kind of social 'currency' exists to try to rise in the hierarchy of status... just like the pigs in 'Animal Farm'... or communist party leaders in the Soviet Union.
Mostly, people are who complaining about inequality are really complaining that they ended up at the bottom of the hierarchy and have how no clue how to or no willingness to climb it.