> ... we’re looking at 2–3% growth from here on out. So, by this completely rational view of the "pie," it is, in fact, trending towards a zero sum game.
Not only does GDP not measure wealth, but as wealth increases you might actually expect GDP to decrease. E.g. when self-driving cars put 20M Americans out of work, wealth will have increased, but the GDP will decrease.
Well that only reinforces OP's argument... In this scenario you have a few powerful companies taking the pie away from taxi drivers, from small petrol station owners, from small car mechanics, etc... It is a zero-sum game because these people will have to beg on the streets. In this scenario, would the driverless car have helped improve life for humans? Yes it would improve the life of rich people; it will be very convenient for them to not have to drive... But what about regular humans?
An alternative scenario would be to tax driverless car companies and give the money back to the people whose livelihoods were taken.
I have no doubt that in a fully-automated world, society will either be socialist or communist. If wealthy people start thinking about inequality and actively work to improve things, then we will have socialism. If they don't, it will just spread misery and resentment among the lower class and will likely lead to a more dramatic change in the state of affairs.
Oppression leads to extremism. Just look at what happened after world war one when Germany was burried in insurmountable war reparation debt... It created a generation of resentful german extremists - And along came WW2.
That's not how it works. Automation doesn't put things in the hands of a few powerful companies. Those items become commodities. You don't get rich selling commodities. Corporations spend billions upon billions to make sure they aren't reduced to commodities.
Cheap access to driverless cars will be a huge boon for the poor. Can you imagine what it would be like to have cheap access to goods no matter where you live? To receive delivery of materials cheaply and quickly? That's not a wealth destroyer. That's wealth creation infrastructure.
Maybe, but what is the point of having all that wealth if only 10% of the population can access it?
If automation replaces 90% of jobs, then you're going to have a lot of unemployed people with no money.
I disagree about automation becoming a commodity. Automation is all about monopolies. You only need to write software once and only the company with the best technology will control the whole market... Why would a consumer use a piece of technology if it is less efficient than a competing piece of technology?
Just look at Intel vs AMD. Intel's CPUs became just a little bit faster, and as a result, in just a few years they decimated AMD financially.
The last few paragraphs where he laid out what PG's actual desire might be (for VC funding to maintain the same tax status), was immensely helpful to me in understanding the whole exchange.
Why PG chose to make a side on argument towards that leaves me a little bemused, however
>If a billionaire is taxed 80% on the year he or she earns that billion, they will still be worth $200 million. And they are still free to start businesses and pursue wealth. They are still rich. They have not been “hunted” or “killed.” The crux of your argument — that “Ending economic inequality would mean ending startups” — is both a straw man (no one’s advocating eliminating income inequality completely) and untrue (people can still pursue whatever they want — they just have to pay more taxes on it.)
It sounds simple, but as remote work becomes easier it becomes more tempting to do it in another country (a country that won't tax that person $800,000,000).
Pg addresses this issue in his essay "So if you made it impossible to get rich by creating wealth in your country, the ambitious people in your country would just leave and do it somewhere else."
>>Pg addresses this issue in his essay "So if you made it impossible to get rich by creating wealth in your country, the ambitious people in your country would just leave and do it somewhere else."
This is exactly what is happening, even now.
Why do you think ridiculously smart and hard working people in countries like China and India, graduating from the top universities in their countries come to the US and take great pains to stay and work in the US.
If you make it impossible to succeed people don't even try, or find loopholes or else go where the rules of the game are fair.
What is wrong with taxing 80% of the wealth is that then the return on the equity placed into the business to make it real just decreased 80%. At some point then many of those startups won't be created because there won't be enough return to pay for the risk. So then there will not be more of "those jobs" and there won't be any wealth created. Therefore no taxes will be paid. And we just reduced the pie to zero.
I am not sure what the number is, but when I hear 80% taxes, I think someone (maybe me) is not doing their math.
But I do agree that one must first make sure to understand the argument of the other side before articulating a counter-argument. I think in this case, there is also the problem that the message gets diluted because of the messenger: unfortunately PG does not have credibility in this area because (presumably) he has not been on the ground dealing with poverty issues as many others. Then again, many economists haven't either, even as they also postulate solutions.
You're assuming these companies create a lot of jobs, but in fact they create far fewer jobs than they did 30 years ago. As Intel founder Andy Grove said (of companies like Apple): "plowing capital into young companies that build their factories elsewhere will continue to yield a bad return in terms of American jobs."
Instagram (for another example) had 13 employees when sold for $1 billion.
It's a fair point. But I think that the issue is that we then are lumping all of these companies into one category and we should look into what they are doing. So if we think that "dating apps" or "photo apps" derive less social value then we would tax them more than startups that derive "more value" (say, fighting disease or providing solar power). There are systems already in place for this type of incentive, where government provides tax breaks in fields deemed "socially more valuable."
You have to be very careful with laws like this where a human has to sit and evaluate the societal benefit of one business over another. Tons of unintended, and potentially very negative, consequences to this.
Simplifying the tax system and increasing the top marginal tax rates back to something closer to where they were 40 years ago is preferable in my opinion.
You have an unsubstantiated argument with presuming that taxing billionaires or millionaires at 80% would be good for society.
Let's set aside arguments of individuality vs. socialism and whether government should operate for the hugely debatable, ephemeral term, "the greater good". I think that invites a separate essay on its own.
From a purely utilitarian perspective, the rich often leverage their capital to achieve things that would be impossible or difficult to do without access to the capital they created.
Case in point, is Elon Musk. If he didn't take home most of the money he earned from his involvement in Paypal, the odds of Space X, Tesla, and Solar City ever happening are decreased dramatically. When in the hands of an extraordinarily talented individual like Musk, capital can work to create long-lasting ripple effects that benefit society as a whole.
If you had taxed Musk at 80%, and he was left with a paltry $30 million or so, it's likely that one or more of the above companies never happen. The opportunity cost is that less jobs get created, unique and innovative technology never gets formed, and the ripple effects (such as spurring Chevrolet and others to make electric vehicles) never happen.
While not always the case, it is often the case that private capital investments do improve society in meaningful ways.
The economy is a very fungible thing and the idea that it is approaching "zero sum" is an unfounded one in the extreme.
I was thinking of Musk too. A person with $1bn in the bank is very rich. So is a person with $200m in the bank. But the first person still has a lot more freedom of action. When you rob people of their freedom of action, you get bad economies.
they own walmart equity, you know, one of the largest employers on the planet. they have foundations, you know, that help the less fortunate: http://www.waltonfamilyfoundation.org/
you guys have a lot of neat ideas for other people's money.
Actually they are the biggest welfare recipient on the planet. They pay workers so little and abuse them so that they must rely on government help, provided by the taxes they avoid paying. They are a parasite.
Isnt walmart pretty famous for paying low spectrum wages ?Foundations are based on avoiding a future tax contribution of your income,unless the inheritance tax is zero i.e unlike Joe public who dosnt have one so your definately spending a very decent amount of other peoples money
One that did. I don't know of any others that did.
Musk is driven in a way that no Gates, Jobs, Ellison or anybody else of such wealth is. I don't see him with a huge mansion or a yacht, just more projects.
musk is young, and gates is probably the great living human being. of all the people you gripe about, you've chosen a guy who gave, what, everything to humanity?
Actions speak louder than words. He facilitated great damage to the tech industry back then. Today, he uses his accumulated wealth to honestly try and fix several big problems on this planet, and he's very smart about doing it right. I say that if he deserved hate then, he deserves the praise now.
Unless your a doctor assistent in a undeveloped country using a old windows program ( which came with a dumped computer from a massive toxic rubbish tip curtosy from the 1st world) and about to loose all your life saving data because you cant upgrade and dont even know about having any upgrate.programmes ,apps arnt even available or being sold like Coca Cola everywhere at a relative price point.Plus some countries can use this copyright law very effectively against budding buisnesses and the programmes arnt actually sold legally in that poorer country anyway
Musk is just the Lebron James or Michael Jordan of entrepreneurs. It doesn't matter that others aren't as good as him or as driven as him to keep improving. There is an entire league of entrepreneurs out there doing things that aren't as well-publicized but still very fundamentally important to our society and how it works.
And your ignorance of the fact is probably that you never stop to talk to some of the business owners in your area, and see what they're planning.
You can only find so many stories at the height of public consciousness and Musk just happens to be one of them.
As for buying mansions and yachts, you can't tell me that that's any different than you buying the latest iPhone or car when you already have a perfectly usable phone.
Hell, we could all be getting by with Nokia 3350s if we really want to take that argument there. We don't really need color screens, or internet in our pockets. It's really just a convenience after all, and there are many less fortunate out there in 3rd world countries without phones at all.
Here's where we begin to argue about what poverty means and what 'filthy rich' means. They aren't clearly defined.
I'm for people who earn money, fairly and legally, using it however they see fit. If they want to build space ships, awesome. If they want to buy yachts, awesome.
Even the yachts employ people and produce net effects on the economy that could be argued as positive things. Many engineers and craftsmen are employed by the yacht industry.
I happen to live in one of the yacht capitals of the world, Fort Lauderdale, and there are over 100,000 people employed in that industry here alone.
> There is an entire league of entrepreneurs out there doing things that aren't as well-publicized but still very fundamentally important to our society and how it works.
I'll happily agree to that.
> And your ignorance of the fact is probably that you never stop to talk to some of the business owners in your area, and see what they're planning.
You're incredibly funny.
> As for buying mansions and yachts, you can't tell me that
> that's any different than you buying the latest iPhone or
> car when you already have a perfectly usable phone.
> Hell, we could all be getting by with Nokia 3350s if we really
> want to take that argument there.
> We don't really need color screens, or internet in our pockets.
> It's really just a convenience after all, and there are many less
> fortunate out there in 3rd world countries without phones at all.
I'd have bought another one if they let me but I'm still on the nokia dumb phone that I bought 5 years ago and I probably will be as long as it works. I have some smart phones lying around for development and testing (ubuntu, an android phone and an older iphone), but I have never felt the need to carry one with me when I go out the door.
> Here's where we begin to argue about what poverty means and what 'filthy rich' means. They aren't clearly defined.
We're all filthy rich.
> I'm for people who earn money, fairly and legally, using it however they see fit. If they want to build space ships, awesome. If they want to buy yachts, awesome.
Sure. But the space ships are a tad more impressive to me than the yachts.
While I agree with you for the most part, according to this[1] Musk does seem to have a mansion. It says the value is only $17 million though, so pretty far from Gates[2].
Yes, someone else already pointed this out. I wasn't aware of it, another commenter a few days ago wrote that he rented a place because he'd dumped all his money into his investments (in fact, that he had to borrow his rent money).
It seems that that has been fixed in the meantime.
I think I'll disagree about Gates. I know you remember him more from his Microsoft career - I was young enough then that for me he was just a boogeyman used by Linux fans to justify their self-perceived superiority, etc., so we have a difference in perspective. The Gates I know is mostly the Gates of today, and it seems to me that he's both incredibly driven and finally found the moral compass. From what I know, he and his wife are now doing great work for mankind, and they're incredibly smart at making it as effective as it can be. Does this offset his sins from the past? I don't know. But I applaud what he's doing today.
Musk is not an exception. History is absolutely filled with entrepreneurs in the same vein. Disney, Rockefeller, Ford, Jobs, Branson, just to name a few.
And those may be some of the more standout examples, but there are hundreds of thousands of entrepreneurs who have made similar reinvestments or expansions to some smaller effect.
The carpenter who invests his post-tax capital in buying better tools or increasing his skill is producing a net-positive effect for society by improving the quality of carpentry available to people in his area.
Our economy is in large part, the net effect of the sum of all those micro-improvements.
I don't think you get to compare those living the high life with Elon Musk. He gives me the impression that he'd rather re-invest every last cent he has into new projects than that he'd ever splurge 10's of millions on himself.
Branson and Jobs for instance own (and owned) huge boats that they had built especially for them and spend(t) lavish amount of money on themselves, their houses and so on.
Instead of building a boat for himself Elon Musk decided to back Tesla.
The Rockefellers and Ford are of a different era, hard to compare their wealth and what they did with it back when they made it with todays world. Disney doesn't even belong in that list (for me).
> He and his five sons had lived in the house for three years, which Musk rented before he felt financially secure enough to buy.
Is an interesting line in that article. The 'still rents a house' line stuck with me from somewhere, I didn't know what kind of a house it was. It's a bit larger than mine, that's for sure :), and I hope he enjoys it.
The vast majority of billionaires are people whose names and actions, entrepreneurial or not, none of us know. Just because you can name a handful of successful rich businessmen over the last century, doesn't even come close to proving that most billionaires are like Musk.
I think this argument is presuming that when someone is looking at an income of $1 billion per year, they will simply accept that fate and write a check to the US government. This sounds astoundingly unlikely, in my opinion.
This person who's making $1 billion will simply put their money someplace else, they will figure out a way so that they need not claim it as income. They may push some of this money back into their company, perhaps raising the wages of some (or all) of their employees. They may form a new company to shelter this income and this new company may do something fabulously exciting and, thus, generate another shockingly large sum for this individual. Both of these sound okay to me.
> They may push some of this money back into their company, perhaps raising the wages of some (or all) of their employees.
This is a good point that I've never seen brought up before. How much of increasing inequality (whatever your definition of that) can be attributed to stagnating wages at the bottom 4 quintiles, because the tax climate isn't sufficiently incentivizing reinvestment?
On the whole my first instinct is to oppose new or increased taxes if only on philosophical grounds, but this may be cause for a second look.
This seems like a good spot to go meta - what exactly does someone who has achieved a level of financial success owe the rest of us?
The Christian church has a well-known - at least among churchgoers - figure, which is 10% or a tithe.
Ask someone who favors government and they will probably say something like "as much as we need."
Ask someone who does not and they will probably say something like "as little as possible."
It's a long shot but it might help if we had some consensus of what constitutes an equitable "contribution."
That's why Effective Altruism movement settled on the 10% of income as a default "good enough" contribution. As Scott Alexander explained in [0],
"It’s ten percent because that is the standard decreed by Giving What We Can and the effective altruist community. Why should we believe their standard? I think we should believe it because if we reject it in favor of “No, you are a bad person unless you give all of it,” then everyone will just sit around feeling very guilty and doing nothing. But if we very clearly say “You have discharged your moral duty if you give ten percent or more,” then many people will give ten percent or more. The most important thing is having a Schelling point, and ten percent is nice, round, divinely ordained, and – crucially – the Schelling point upon which we have already settled. It is an active Schelling point."
It's still better to get a suboptimal outcome than to not get any outcome at all.
Those are all problems that can be solved with sufficient political will. Shocking that politicians who are owned by the wealthy do not have the will to write loophole-free tax policy.
I think the 80% thing you're discussing is a bit like the 'duplo economy' that PG mentions in his essay. Very large broad-brush taxation, with little specificity.
It would be trivial to make the taxation regime more high-resolution so that people who reinvest their cash into other ventures are taxed at a far lower rate, whereas those who wish to retire early and do nothing else are taxed a lot more.
Better to start from the society you want to see and work backwards from there to design a taxation system, rather that say yes or no to one or two one-size-fits-all options, I think.
If you reinvest money in a company, it's no longer your income, your AGI decreases, and your marginal and absolute tax rates both decrease. The current system is exactly as you describe.
> Case in point, is Elon Musk. If he didn't take home most of the money he earned from his involvement in Paypal, the odds of Space X, Tesla, and Solar City ever happening are decreased dramatically. When in the hands of an extraordinarily talented individual like Musk, capital can work to create long-lasting ripple effects that benefit society as a whole.
What you're claiming here is that Musk can allocate capital better than a government, right? That leaving the money in his hands was better than taxing it and spending it on government projects? (note that all three of SpaceX, Tesla and Solar City received substantial amounts of funding from the US government (directly or indirectly) and would likely not be viable without it, even leaving aside all the USG-funded basic research that was necessary to make them possible in the first place).
Even if that's true for Musk specifically (which I doubt), is it true on average? How efficient is the average billionaire at using their money for social good? You gloss over a lot with "While not always the case" - how does the average return to society on a private capital investment compare with a public capital investment?
On what basis are you claiming that the government could have equalled SpaceX's achievements? SpaceX has made several firsts that no company or government ever has before.
Receiving money from the government doesn't mean the government could have done the same thing.
Landing their first stage was huge, but what other firsts have they had? All the others seem to be of the form "first private X" which excludes government only by definition.
Indeed. They had a lot of "new and put into practice" things - a new engine design, a new way to manufacture rockets, a new way to manufacture engines (were any other operational engines 3D printed before?). They improved on quite a lot of things. But "firsts"? Not many indeed.
Are you on crack? In what respect does SpaceX's achievements equal large government pushes like the Apollo program, that got a man on the moon almost 50 years ago!! Or the Manhattan Project? With almost complete certainty I can say that government projects could have achieved everything SpaceX has... now wether as efficiently or quickly I'll grant is up for debate.
I think that it's SpaceX that is one of the few companies that can actually achieve something similar to Apollo or Manhattan Projects. Both the Moon Landings and the atomic bomb development had strong non-monetary motivations. People at all levels, from the lowest worker to the highest manager, cared very much about the project's success, and not just about their own pockets. Just like Elon cares about Tesla and SpaceX. Also, completely unlike most today's companies, and completely unlike today's government.
> SpaceX has made several firsts that no company or government ever has before.
Not meaningfully, not yet. They've landed the expensive part of a satellite launch system, which is very cool but the USG did it 30+ years ago. I don't think the difference between a vertical and a horizontal landing is that important.
And fundamentally there's no magic private industry pixie dust. A company is just a collection of people, as is a government; they both have to obey the same laws of physics. In some cases competition drives private industry to be more efficient. In some cases the government's long time horizons, trusted position, and ability to do things where the benefits are widely diffused make it more efficient. But it's only ever a matter of efficiency, not of can or can't.
> Receiving money from the government doesn't mean the government could have done the same thing.
It means that government money was a vital part of making it happen. SpaceX built their system on the back of $X from Musk and $Y from the USG (among other sources). If we took some money out of the X pile and put it in the Y pile, maybe the result would have been worse, maybe it would have been better.
Remember that most of SpaceX's core technology was literally given to them by NASA, and on top of that they're getting guaranteed contracts by the government (i.e. the dreaded government funding - they don't know how to allocate capital, right?).
Even the landing of the first stage was mostly based on NASA research. Which by the way, NASA had achieved long ago.
SpaceX innovated with their cost cutting, and maybe now their manufacturing processes, and by being lucky by benefitting from a period of cost cutting by NASA whereby they could hire a bunch of NASA engineers/scientists.
Well... one refrain I keep hearing from government is "Please, small businesses save us from ourselves because everything we do seems to accumulate a 20x overhead!"
A big reason is that governments have to be accountable to the public. We ourselves create quite a lot of pressure that creates the waste. That, and of course a lot of people inside and outside governments who try to steal something. See for example procurement and bids in public projects.
Totally agree. If you listen to the linked conversation, the major source of overhead they discuss is the layers and layers of requirements an assurances that have been accumulated into the procurement process. I get the impression that every time a govt project goes 4x over budget, someone adds a new requirement "To ensure this never happens again!" After a few decades of this, we end up with a guarantee of 20x overhead.
Who defines 'social good'? You assume an elite that can determine efficiency! This is the socialist conceit.
Milton Friedman:
“There are four ways in which you can spend money. You can spend your own money on yourself. When you do that, why then you really watch out what you’re doing, and you try to get the most for your money.
Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well, then I’m not so careful about the content of the present, but I’m very careful about the cost.
Then, I can spend somebody else’s money on myself. And if I spend somebody else’s money on myself, then I’m sure going to have a good lunch!
Finally, I can spend somebody else’s money on somebody else. And if I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get. And that’s government. ”
Spending somebody else's money on somebody else describes a large fraction of what many employees of a business do. It looks to me as if those employees generally do a decent enough job of buying useful things at a reasonable price.
How can that be, given what Milton Friedman says? Two reasons. First: there are incentives in place to encourage them to do it. If they buy useless things or spend too much money, someone may notice and they may lose their job. If they find a particularly good bargain, they may be rewarded. Second: most people are not perfectly selfish utility-maximizing homo economicus, and even when spending "somebody else's money on somebody else" they do in fact prefer to do so in a way that benefits the second somebody-else at not too much cost to the first one.
Guess what? Much the same applies in government. Suppose you're a doctor in a nationally-run health system like the UK's. You examine a patient and prescribe a drug. Does the fact that you're spending "somebody else's money on somebody else" really mean that you won't prefer to prescribe a drug that actually helps the patient's problem? Does it mean you won't prefer a cheaper drug over a more expensive one that performs no better? Of course not. And if in fact you are the way Milton Friedman professes to be -- if you prescribe with blithe indifference to whether your patients live or die and to whether your national health service goes bankrupt -- then there's a real risk that someone will notice and you'll be out of a job, or pilloried in the newspapers, or something similarly undesirable.
At least one person downvoted the above. If someone who did is reading this: I would be very interested to know why.
(I don't at all object to being downvoted. But if I'm thinking incompetently or writing badly or being obnoxious or something, I'd like to know what's wrong so that I can fix it. And I haven't been able to figure out what's downvote-worthy in the parent of this comment.)
The problem with government is that the bar to fire people is too high for it to work the way you describe. And it's that way for a reason.
The system used to be that, when a party won an election, they'd fire the existing government employees, and replace them with members of their party. "To the victor go the spoils", and this was called the "spoils system". But that meant that the knowledge of how the day-to-day government functioned got lost after every election, which was non-optimal. So laws were passed to eliminate that practice, but at the price of making it hard to fire government employees. (Add in public sector unions, and it gets even harder.)
At least in a democracy, you can vote people out, so in theory, the general public has a say in what 'public good' billions are spent on. The problem with relying on philanthropy to fund the public good is: How do I, as a member of the public, influence what the Koch brothers consider to be 'public good'?
Great point,never realised thats the reason,may i say it has a very negative effect when you have tolitarian type admin with no,age limit on appointments,cant admins be obliged to shift people to other sections or sack people after 12 years if results of department had a lacklustre performance ,when opposition wins?
On the VC thing i think it stifles compatition and tax paying and i dont want to have any taxes diverted for somebody to go into space its not making my life any easier .id prefer all companies pay full taxes in 1)the countries where the raw materials are sourced ,2) the credit
card payment,end user country ,rather than keepng money in convinient little tax places ,charity setups and all that stuff ,its getting very unrealistic feeding of other peoples hunger and poverty and thinking your doing good!
People voting define social good, obviously. That is the conceit of any 'proponent of Democracy'. Whoever has power decides where resources are spent. You're suggesting whoever currently happens to have money should have power (how convenient). I'm suggesting the people in a country should have power, which is incidentally not a new concept no matter how much you treat it as such.
If you don't let the voting populace define and work towards social good, wealthy and powerful elites define social good, or more likely, pretend the concept doesn't exist or that they don't understand it as you have.
Our shared brain architecture, and universal moral basics that come from it, are what defines both individual and social good. Whether you have a benevolent dictator or an utopian democracy, it doesn't matter - both can figure out and achieve social good perfectly well.
Of couse we don't live in a perfect world, and so the elite can be counted on to be and stay benevolent. But neither you can count on voters not being stupid, or entrepreneurs not being greedy.
It's not that we can't figure out what problems are to be solved. It's that we let huge amounts of bullshit take precedence.
Assuming a central elite of politicians is uniquely qualified to define and fund 'social good' through legislation is just like assuming a central elite of billionaires is uniquely qualified to define and fund 'social good' through philanthropy.
NASA's achievements have been impressive, to be sure. I don't want to discount that. However, it has accumulated some inefficiencies and some stagnation over the decades.
What NASA has achieved, they've done so with over $1 trillion in inflation-adjusted capital funds over the decades, that have been allocated to them.
What is debatable is whether or not they've made or always made efficient use of the capital they've been allocated.
Space X has innovated on a number of fronts with less than 1500 employees and only a fraction of the capital that NASA has been allocated. For one, the Space Shuttle program was costing the U.S. $450 million+ per launch. A Falcon 9 launch costs an average of $57 million. There is proof that he can allocate capital better than the government.
> Space X has innovated on a number of fronts with less than 1500 employees and only a fraction of the capital that NASA has been allocated. For one, the Space Shuttle program was costing the U.S. $450 million+ per launch. A Falcon 9 launch costs an average of $57 million. There is proof that he can allocate capital better than the government.
No it's not. The requirements on the two systems were not remotely the same, and it's not surprising that a system built 30+ years later with the lessons of the previous system in mind would be more efficient.
NASA is still around, you know. They could jump in at any time and make it happen, rather than pay some contractor cost-plus for it...but they don't. The red tape they have to deal with to get anything done is just too great.
An entrepreneur who lucked into a company that made him billions is not necessarily more qualified than anyone else to allocate society's resources. I'd also argue that a politician that managed to win a popularity contest is also not necessarily qualified to allocate society's resources. But at least the latter is, in theory at least, accountable to that society.
There are probably lots of smart people out there qualified to allocate society's resources, but they tend to not become billionaires or win elections.
He would have thought about futility of giving one's whole life to building something and then watch 80% of it taken away by someone else.
A few options remain for such people. Tax havens, countries with better respect for individual merit and contribution or plainly make money till a point and quit. All the three are equally damaging to any society for a long time.
Eg: See USSR, North Korea, Venezuela, Cuba etc.
You don't achieve anything by making the rich poor. Apart from the sadistic pleasure to soothe your flames of jealousy towards their wealth.
The end result is you scare almost any genuine contributor to the economy, and they learn they are better off in some other place.
>>anyone here seems to be proposing is to make the rich less rich but still rich.
This is backwards. Not sure why this should even be done. And why does this have to end at an individual? Why should some countries be so economically powerful and others not? Will it be ok if wealth from developed nations were transferred to poor nations, every year?
You make poor people rich, you make the sick and malnourished healthy, you make the illiterate literate. You don't make the rich less rich, or the healthy less healthy or the literate less read.
Progress happens in the forward direction, not by pulling people down to make your failure look good.
There is a irrational fear here somehow equating wealth and evil. Not sure why people even think that way.
I dare say there are people around who want to tax rich people just because they don't like wealth, but that's not what's being proposed by the OP and it's not what most people advocating higher taxation are calling for. E.g., from the OP: "So by taxing the wealthy and spending it on services, we can better ensure that the level playing field you allude to continues to exist." (In case it isn't clear from that quotation, the "level playing field" isn't about equalizing wealth or income, it's about providing public services to everyone.)
> equating wealth and evil
Who's doing that? Here's the OP again: "No one believes that there should not be rich people." "No one wants to take the money you have away." You may think the OP is insincere, but he is very plainly not equating wealth and evil. I don't see anyone here equating wealth and evil, implicitly or explicitly. I'm afraid I think you're just imagining it.
Here are arguments I see actually being made by people in this discussion advocating more tax. I have italicized the only one of these arguments that is on the same continent as the ballpark of "equating wealth and evil", and it's still a fair way away. Governments can allocate capital more effectively than most billionaires. Taxation may incentivize wealthy people to invest more. Taxes are low right now compared with what they have historically been, so raising them might be a good idea. Inequality itself causes social problems. No single person can really be so much more productive than others as to justify billions in wealth; so if someone is that wealthy, they got that way on account of others' work, so they don't deserve it. Economists are saying we need to reduce inequality to avoid disaster.
> Will it be ok if wealth from developed nations were transferred to poor nations, every year?
Yes, that would probably be a good thing. Is it supposed to be obviously not? Most developed nations do in fact transfer some of their wealth to poor nations every year. So do citizens of those developed nations. We call the first of those "aid" and the second "charity" and while it's possible to argue about how effective they are it's certainly not obvious that they're a bad idea.
Read this thread over again. There is a sad sentiment regarding Elon Musk's Mansion.
>>Governments can allocate capital more effectively than most billionaires.
Demonstrably wrong. See wars in history.
>>Inequality itself causes social problems.
Like what? Your USSR, North Koreas, Venezuelas of the world. In fact every failed communist nation in the past century falsifies this claim.
>>No single person can really be so much more productive than others as to justify billions in wealth; so if someone is that wealthy, they got that way on account of others' work, so they don't deserve it. Economists are saying we need to reduce inequality to avoid disaster.
Appreciable sentiment if you till the land with a shovel in your hand. Increase of productivity is not always measured through human effort alone. But also through tools which humans invent to amplify their productivity through automation of some kind. There are kinds of effort, one where you do all the work alone. One where you work to invent a tool that does that the job for you. Latter is also commonly known as 'progress'.
I don't see the "sad sentiment regarding Elon Musk's mansion" anywhere at all in this discussion. Someone said Musk seemed like the kind of person who would put every cent he owned into his businesses and not buy a big house or a yacht or anything. Someone else said: no, as it happens he's got a big house. No one has suggested that he shouldn't have a big house. No one has suggested that having one makes him a bad person. I think you're seeing things that aren't there.
On the rest: I wonder whether you misunderstood what I was doing in that paragraph. I am not endorsing any of the arguments I mentioned (though as it happens I agree with some of them). I was listing all the things that people in this discussion had (at the time) said in favour of higher taxes, and pointing out that none of them involved saying that wealth is evil or that rich people are evil.
So responding by countering a few of the arguments misses the point. I wasn't making those arguments myself. I was pointing out that none of them involves the idea that rich = evil.
> Will it be ok if wealth from developed nations were transferred to poor nations, every year?
It will, and it happens; think the rich Western European countries putting money into Europe, which they pay out to the economically less developed countries in the east and south. It's what allowed Greece to not go bankrupt. There's also basic relief coming from the UN, and of course taking in Syrian refugees.
> There is a irrational fear here somehow equating wealth and evil. Not sure why people even think that way.
Because money buys power, and if, say, someone wants to build a wall to keep Mexicans or Canadians out, enough money will buy enough power to do that. Corruption. Second, the rich in the US got rich at the expense of the now nearly non-existent middle class and the poor, and the relatively rich country isn't putting its money into basic services like decent, affordable health care, basic income, or decent jobs (something above a McJob that doesn't require a university degree).
It's not the rich that are the problem, it's the fact the middle class is going extinct because of them or their businesses. It's the companies like Amazon that offer low prices due to low-paid but hard-working employees (that will soon be replaced by robots), or the food companies with dollar menus (whose employees are also being replaced by robots / computer screens). There's no real higher-level jobs becoming available for those people - also because higher-level educations have to either be paid out of pocket, or paid out of various grants (like the ones that will pay your education if you happen to be good at sports or chess or whatever).
> Will it be ok if wealth from developed nations were transferred to poor nations, every year?
It will, and it happens; think the rich Western European countries putting money into Europe, which they pay out to the economically less developed countries in the east and south. It's what allowed Greece to not go bankrupt. There's also basic relief coming from the UN, and of course taking in Syrian refugees.
> There is a irrational fear here somehow equating wealth and evil. Not sure why people even think that way.
Because money buys power, and if, say, someone wants to build a wall to keep Mexicans or Canadians out, enough money will buy enough power to do that. Corruption. Second, the rich in the US got rich at the expense of the now nearly non-existent middle class and the poor, and the relatively rich country isn't putting its money into basic services like decent, affordable health care, basic income, or decent jobs (something above a McJob that doesn't require a university degree).
It's not the rich that are the problem, it's the fact the middle class is going extinct because of them or their businesses. It's the companies like Amazon that offer low prices due to low-paid but hard-working employees (that will soon be replaced by robots), or the food companies with dollar menus (whose employees are also being replaced by robots / computer screens). There's no real higher-level jobs becoming available for those people - also because higher-level educations have to either be paid out of pocket, or paid out of various grants (like the ones that will pay your education if you happen to be good at sports or chess or whatever).
You mean like what happened when we had >80% taxes on the highest bracket of income? Instead of leaving or whining they bought the government and changed the taxes to something they prefer.
Every cent they earned is off the back of the investment the US government and society has put into our infrastructure, workforce, culture, work ethic, etc. If the government that created the atmosphere which allows these people to exist chooses that they get to keep 20% of the obscene billions of dollars they are taking from the poor they should be delighted. If they try to evade taxes we should lock them in jail or confiscate all of it.
From a purely utilitarian perspective, the rich often leverage their capital to achieve things that would be impossible or difficult to do without access to the capital they created.
They also often waste their capital on complete failures. Whether the rate of wasted spending among the rich is greater or lesser than the rate of waste in government is open to debate. But "from a utilitarian perspective," you can't ignore the fact that there is also massive waste and fraud in the private sector.
Any argument for a policy that hasn't been tried under current conditions is 'unsubstantiated', so that isn't s valid attack.
But.. I think the idea that a government would allocate the money better than Elon Musk, is indeed suspect. The point here is that Elon Musk is an unusual person.
A more useful question might be - how can we optimize the number of people like Elon Musk who get to execute?
Moving capital to the government probably isn't going to help with that, but concentrating money in the hands of 'investors' is probably not optimal either. In many ways they are just a lesser version of government - a bit less bureaucratic, and a bit more open, but nevertheless not the people who create new wealth. They may have created wealth themselves in the past which is a better qualification than being a politician, but unlike Musk, who is executing himself, for the most part investors are not.
It seems to me that the real constraint is not on who gets to pick winners (govt vs investors), but enabling more people to take a shot.
From that point of view PG's piece is doubly weird, since YC was started from this very premise.
Does the current kind of increasing inequality reduce the pool of people who get to take a shot or increase it? If it reduces if then we need to change something.
If we leave the money with private wealthy capitalists, they might do something good for society on accident as a side effect of their ego-aggrandizing or wealth-concentration efforts.
If we tax it, we can actually do something good for society on purpose with it. We can give the business/tax subsidies that are required for all of Musk's ventures to succeed. We can educate Musk's workers. We can maintain and create and enhance the infrastructure required for Musk to continue to make his obscene profits, which we continue to tax and reinvest in the country.
Or we can just keep hoping that the rich and powerful class of billionaires have weird hobbies that tech people happen to think are cool.
Yeah. That's why I think Elon Musk is absolutely the least representative rich entrepreneur on the planet. He's one of the few 'rich and powerful billionaires' whose hobby happens to be fixing the world. It's a rare thing; your average billionaire is nothing like that. In fact, many laws that exist today were created to protect us from rich people whose hobbies did not include making things better for everyone.
An important warning: you can't draw generalized conclusion about rich entrepreneurs by looking at Elon Musk, because he is totally unlike a typical rich entrepreneur. He plays by a completely different book than almost everyone else. He is not in the game to make money, he is in it to fix a few big problems for the whole mankind. His companies are only the vehicles to achieve this goal. SpaceX wasn't created because he was looking for a way to make money and found that satellite launches are a market ripe for disruption. It was created because he wants humans to go to Mars, and (after failed attempts to buy ICBMs from Russia) starting a very innovative rocket company was the best way for him to make it happen.
I agree that what Elon did would not be possible if he was taxed at 80%. But he is an extreme case. He is an outlier in the outliers group. Most rich entrepreneurs, frankly, don't give a shit. The few that do have often tied hands (there's only so much you can do if your company has shareholders deciding about stuff). But most don't give a shit. Can you imagine, say, CEO of Oracle investing all his wealth to literally force an electric car into market viability because he believes that we need to do something about sustainable energy right fucking now? I can't.
So maybe that 80% tax would stop an occasional Elon Musk from saving the world. But if it also makes everyone much better off, then maybe it's worth it. Especially if it could relax the current economic pressures, so that we wouldn't need crazy millionaires going against the market to fix something on this planet.
Meh. I didn't write a follow up to PG's follow up because I assumed he wouldn't be receptive to my arguments and didn't want to start a war of words over a topic that has been rehashed a bajillion times. Even the economists are saying we need to reduce economic inequality if we want to avoid disaster. That's far more topical thought and information than anyone arguing on HN can bring to bear, I assume. (I really hope I am right.)
The OP article is definitely factual with its four main points-- I'd also like to add that the trick of putting yourself into the opposing position's shoes and reconstructing their argument is one of the best rhetorical techniques that exists.
Can you name three? In any case, a good economist typically just says what the state of the world is or will be given x, y, z, not what should be. I can think of one economist (Robin Hanson) who doesn't say "we should reduce financial inequality".
I see what you are saying, though-- the exact prescription may not be something any of these four have said, though they certainly detail the consequences of inequality.
Here are four - Era Dabla-Norris ; Kalpana Kochhar ; Nujin Suphaphiphat ; Frantisek Ricka ; Evridiki Tsounta.
They work at a little organization called the International Monetary Fund, and they conclude:
"We find that increasing the income share of the poor and the middle class actually increases growth while a rising income share of the top 20 percent results in lower growth—that is, when the rich get richer, benefits do not trickle down."
>> Literally no one in America, save for a very few on the fringe, is talking about “eliminating income inequality.”
I don't know about that; I've heard plenty of people talk about eliminating income inequality as an end goal (but I live in the SF Bay Area, so maybe a reflection of demographics out here?)
It's like saying no one but the fringe is going to vote for donald trump, and yet those poll numbers...
>> What people are talking about is a progressive income tax to reduce inequality.
Well, we have that. Taxes are historically low, so I'd be ok with raising them somewhat, but not too much.
>> So by taxing the wealthy and spending it on services, we can better ensure that the level playing field you allude to continues to exist.
This is really the crux of my argument: instead of increasing taxes first, we should hold the government more accountable over spending and look at programs and how they help or do not help the poor. Poverty is the metric that should be focused on, not inequality. If inequality is reduced as a side effect, all the better. But poverty is the problem. If government got more money from taxes, what makes you think they would use it to effectively reduce poverty?
The 80% sounds over the top to myself as well, but in the article they were using it in reference to someone with an income of 1 billion dollars per year. To my mind, 80% on 1 billion isn't so crazy. It sounds like the far end of the scaled tax curve. As far as I can tell, there are only a handful of people (like maybe five) that make in excess of 1 billion a year.
I work with government agencies and I am all for them being more accountable, I have no doubt that they could spend a lot less than they do. On the other hand, I am entirely unwilling to wait for them to become more efficient before deciding to severely tax the five people who make over 1 billion per year.
If this tax regime was put in place, people would find other ways to shelter their money; I don't think the government would end up with a significant windfall. Maybe they'd invest in their company or start a new company and invest in that. I'm sure that with such a large income, they would have many places to put that money.
I have no doubt that they could spend a lot less than they do. On the other hand, I am entirely unwilling to wait for them to become more efficient before deciding to severely tax
That sounds to me like, "We can't get our ship in order, so lets rob someone who can instead of fixing it and we'll fix it later (but we won't because note what we've done in the current example)."
The problem for government is less "not enough money" and more "we don't know how to spend it to accomplish specific and measurable goals"
80% is not over the top. The top marginal tax rate in the USA was over 60% for half of the last century, topping out at 94% in 1944. The tax rates imposed on the top incomes have only recently (Reagan era) come down to such ridiculously low levels as we have today.
The authors use two test-beds: a comparison of countries around the world and a comparison of states within the US. With these, they show that with overall wealth held constant, it's the larger inequality that causes more social problems.
For example, the UK and Japan have roughly equal GDP and similar average incomes, but Japan is less unequal. On almost any measure you might choose of how well a society is doing, Japan is better. Mental health, drug use, teen pregnancy, violence, divorce, abuse, the whole lot. The same goes across all of the states and countries they looked at.
The sheer scale of the evidence is overwhelming. It's very rare in the social sciences for literally hundreds of studies to point to the same broad trend across so many different parts of the world.
Their work is a revolution as it overturns the common assumption which you expressed that poverty is the problem.
This book presents the thesis that many ills of today's society (obesity, mental illness, rates of drug abuse, ...) can be attributed to large income inequality. The authors make this point using two-dimensional scatter plots, with income inequality on the x-axis, the prevalence of some form of social ill on the y-axis, and dots in the plot representing individual countries. These plots generally show a positive correlation between income inequality and various social ills.
As a statistician, I would like to comment on the soundness such argumentation: unfortunately virtually all graphs are plagued be a confusion of correlation with causation.
Reviewer then explains correlation and causation. I could claim "inequality is good" using the same methods. I'd argue inequality is immaterial but does tend to be correlated with poverty, which is what we should focus on.
Not to be outright dismissive (I should read the book), but this is a problem in social sciences in general. I think software simulations would be a lot more useful at this point than scatterplots comparing two variables used by so many economists today. I think I've read about people starting to do that in various areas, not sure about how prevalent it is in economic modelling. AFAIK not very.
Yeah that's a fair criticism, although as someone who has spent 10 years teaching social science, I have to say that was at the forefront pf my mind when reading it.
I was still mightily impressed with their data.
The range of studies is extremely broad (into the hundreds), and there is a very wide range of experimental procedures in use. Not all are correlations.
>inequality is immaterial but does tend to be correlated with poverty
This point, they explicitly refute with a vast array of data. In cases where there is both poverty an inequality, there is a problem. When poverty alone, the problems are massively reduced.
I read the book with a critical eye. I've taught social science for the best part of 10 years and this was not lacking in statistical rigour. Other academics in the field who I've discussed it with agree.
I think you'll enjoy the book. It challenged a lot of my preconceptions to the point where I changed my mind, which is was unexpectedly refreshing.
Causation does not exist in science. Causation only exists in theories that reside in our head. If you want to rely on evidence, and you want the notion of causality, you're in trouble because you can't have both, see the entire history of western philosophy in particular David Hume.
This is so over-simplified it's wrong. If I drop a weight, what happens? Is there a causal chain there? Would an animal unable to perceive a causal chain be able to live very long?
Okay, show me an experiment that verifies our intuitive notion of causation. Cause is a philosophical principle that exists like I said only in our heads and it's a question about the future. If I do this, this will happen. Science is about evidence, experiments, and the past: we did this and this happened.
If you are going to be doing science, you will not prove causal links. You will develop a theory which explains some phenomenon and implies some predictive assertions and then provide evidence for that theory and test the assertions. Cause is much deeper than science can currently tread.
I ordered the book, but can you share a thumbnail of what they propose as the causal relationship between inequality and poor performance on societal indicators?
On first blush it seems too neat a solution. Just look at Texas—massively unequal, there are oil barons and illegals within the same zip code, but Texas is doing well because it's possible to live the life style of an upper middle class person in NY on a pair of civil servant salaries down south.
Their hypothesis is that as social animals, we are wired to respond neurologically to status Higher/lower status individuals experience dramatically different levels of certain neurotransmitters, which is something that they cite animal studies to support. Experimentally manipulating the social environment e.g. by placing a monkey in cage where it was surrounded by either smaller or larger peers caused observable changes in brain chemistry as the monkey moved from alpha male status to subordinate and back again.
There's a good argument for an evolutionary role here, as you can see that being on the bottom of a social hierarchy may be dangerous, so those who experienced it as stressful and were motivated to escape it somehow may have had higher chances of survival.
Being trapped in such a position appears to cause a deeply stressful state of mind, where people are literally unable to function normally. This doesn't happen when people are more equal as the perceived status differences are small, so the effect is lessened.
> The sheer scale of the evidence is overwhelming.
Really?
Because your description sounds very flimsy. Can you really compare Japan and the UK without correcting for a bunch of confounding cultural variables that have nothing to do with equality?
Is there no society that is "more equal" than Japan, and yet scores terribly on the metrics you suggest?
80% did not appear to be a legitimate policy proposal but just a way to say that even if taxes were insanely high, billionaires would still be unfathomably rich.
"Because poverty is not actually a bad thing that causes income inequality, it is a circumstance of it."
Poverty is a circumstance of living in a world with limited resources where trade offs have to be made in virtually all decisions. When I have lunch today, I am, in a twisted interpretation, depraving someone else of that food.
In a world where everything has a cost, whether hidden or real, poverty in some form will exist.
uh, money to the government doesn't end poverty, not even remotely. the question we should all ask is whether individuals, individually motivated, better allocate money than the government. the idea they don't give to charity or fight poverty with their billions is also preposterous.
What's wrong with that? The gap between the rich and the poor (and the problems this creates) is at the core of the economic inequality issue, in comparison with the poor, it is possible to be 'TOO rich'.
This is a rare situation / age we're in, because we haven't seen these levels of income inequality in a long time.
To the degree to which I would apply labels to myself, I'm a capitalist, and I'm a libertarian. I don't trust our corrupt political system anymore, and I certainly don't think the government has the ability to help society as much as it hurts it, at least most of the time. Because of this, I think that any extra taxation that the government levies will commensurately damage our society.
That said, I can't help but think that our entire economy has been swept out from under our feet by the financial sector. It's not tech companies and supposedly "rich" tech founders that capture our economy. It's VCs. A VC can give a company that would otherwise be insolvent the capital it needs to capture an entire market, and then raise the prices. We see it time and time again.
We're trained to believe that, without VC, the tech industry would somehow be stifled. This is simply untrue. Without VC, a lot of our "side" projects that create true innovation would have a chance at success. The reason many of them don't is because they're up against the same thing from a VC-backed competitor. Except, the VC-backed version is cheaper (or free), is backed by an unsustainable, large team of skilled developers, and doesn't care that it's hemorrhaging money, because once it creates a monopoly it will pay dividends for life to the very few who own it.
I'm very much on the other side of the political spectrum, but I would have a lot more appreciation for libertarianism if someone could come up with a credible, practical solution for making monopolies (or monopolistic behaviour) rare or impossible. With the proviso that it acknowledges the reality that monopolies form even in the absence of government influence.
With the proviso that it acknowledges the reality that monopolies form even in the absence of government influence.
If I remember back to my anarchist philosophy, that is ceding too much ground. Patents, access to cheap capital, "artificial" interest rates etc... are all government influence that large companies can take advantage of to become monopolistic. Without those the argument goes, that firms would never get so big because competition would sprout up immediately to cut into their market dominance.
If you look at Standard Oil or Bell System, the case studies for all monopolies, they all hinged on some government grated protection. In Bell's case it was initially a patent and then subsequently "legally sanctioned regulated monopoly." In the case of Standard Oil they utilized Trusts, which were legally recognized forms of distributing ownership to stay within the law.
So unfettered capitalism might not lead to long and enduring monopolies, but it would be much nastier and competition much more fierce because the systems on which business is built today would have to go away in total - to include regulated banking, infrastructure standards etc...
The question should instead be: Is the world in which there is no regulation one that you would actually want to live in? I would argue no.
edit: Note that I don't agree with this view, it is however the argument that is made.
> Without those the argument goes, that firms would never get so big because competition would sprout up immediately to cut into their market dominance.
That's how the argument goes, but this is neither a proof nor an observation--just a piece of economic theory, and there are others going against it.
Yes well, I don't think anyone would argue that success breeds competition. Just look at the "hoverboard" market, or any product for that matter, for proof of that.
In an unregulated market, just because you want to compete doesn't mean you'll succeed. Without the regulatory framework to protect upstarts, a monopolist can just allocate X% of its budget to the task of "killing competitors" (maybe even literally) and they will be much more effective at it than in the world where laws limit their options.
While government regulations provide a fertile ground for growing a monopoly, I do not believe they're a necessary condition. A for-profit business will seek the most effective ways to reach its goals. It happens that in our world, those often involve abusing the regulatory framework. But if you remove that framework, it won't make companies magically stop trying to monopolize markets. They'll simply grab the next most effective way to do it. Maybe some will band together, now that there is noone saying that they can't. Maybe some will start cutting more corners on the product, or ignore even more of what used to be environmental laws. Or maybe the few remaining competitors will enter a literal fight, involving guns and bombs and tanks.
And now that your monopolies have guns and tanks and can openly play dirty, good luck for the small upstarts trying to take them down. They won't be able to.
--
Anyway, I'm pretty sure that if all governments were to suddenly disappear tonight, by tomorrow morning many corporations would be already on their way to forming some new quasi-governments. I believe high-level executives are aware that a) social order is good for business, and b) having a working framework for establishing and enforcing contracts is vital to their operations.
I think that "Mad Max style business environment" will actually evolve back to the rule of law. That's how our present world came to be, after all. We moved from warlords to cities, then to regions, nation states and finally to international unions and trans-national government organizations. We moved, because at each step, grouping together and establishing some shared rules was good for people and good for business.
This is actually... a) very insightful, and b) something I don't recall ever encountering before. Thanks a lot for the reference!
(Increasingly, I'm starting to feel that a lot of things I figure out for myself - often while writing HN comments - is something that's been widely known for thousands of years. I guess I need to sit down and read some of those classic works.)
I'm glad I followed TemPORal's post to the "parent". I also have not heard of this.
This particular bit startled me for the reflection I see in current day politics:
>During ochlocracy, according to Polybius, the people of the state will become corrupted, and will develop a sense of entitlement and will be conditioned to accept the pandering of demagogues.
I think that, regardless of which side of the political spectrum most of us are on, we all want things to work better than they do. The problem is that taking the steps to make things work better reduces the opportunities for graft and corruption on the part of people who are in positions of power within our government.
It sounds like you're a libertarian somewhat "by default", as you say you don't trust the political system anymore. But, to be fair, shouldn't you compare "mediocre/bad government" vs "mediocre/bad libertarianism"? Both could be as bad, so that would not be a decisive reason to prefer one vs the other. Or the latter might even be worse than the former.
Soon or later, with the "appification" of economy, an anti-monopoly law must appear (maybe with the form of basic income?). On the long run, doesn't seem sustainable for society to have "monopoly creators" ruling under some form of oligarchy.
As someone who was born in Soviet Union, and (thankfully) escaped at a fairly early age, arguments like this just completely boggle my mind.
Why do people think it's ok to take other people's money? If a billionaire has money - regardless of whether they earned or inherited it - it's THEIR money. If they earned it lawfully, they should pay the same % of tax that everyone else pays - and keep the rest to do whatever they please. Who are YOU to tell them how to spend THEIR MONEY better?
If you're jealous of them having more money than you - this is a truly free country, nothing is stopping you from earning just as much as they have. Yes, life isn't fair, they may be born into wealth and you're not - but try being born in North Korea, then talk about it not being fair.
This is the principle that America was founded on, and what's allowed it to be successful.
And as someone who studied just a bit of history, it seems completely insane to me that people think taking money from the rich and distributing it to the poor think it will turn out OK. The same exact thing happened in dozens of socialist countries - those that are in charge of the distribution, somehow distribute the most of it to themselves, and then take away people's freedoms so they would stay in power. To think that something else is going to happen is just plain ignorance of basic human nature.
The situation is far more complex than you assume.
It is impossible for one person to make a billion dollar 747. One man simply doesn't have enough intelligence or strength to do construct such a sophisticated device. If a 747 is worth a billion dollars then creating a billion dollars of paper money or making the plane itself are both equivalent concepts.
Thus why is it possible for one man to make a billion dollars in paper money but it is not possible for one man to make a billion dollar 747? Why do billionaires exist?
Billionaires exist only because the paper money was taken from the wealth produced by other people. The Billionaire needs to employ workers to build a 747.
In short, for Billionaires to be Billionaires they must be an owner of some corporation where the wealth produced by the labor of employees is unfairly distributed to them. This is wealth inequality. This was the problem your old country attempted and somewhat failed to resolve with communism.
Whatever you think communism is, wealth inequality is a feature of capitalism and it is fundamentally unfair because it is taken from others.
>>It is impossible for one person to make a billion dollar 747. One man simply doesn't have enough intelligence or strength to do construct such a sophisticated device.
Yet its easily possibly possibly to start working towards and move in that direction. That's how anything big ever built, was built.
>>Thus why is it possible for one man to make a billion dollars in paper money but it is not possible for one man to make a billion dollar 747?
Because any big thing company, individual wealth or 747 is built on a concept that works similar to stamina. You don't run a marathon on day 1. It takes a good deal of work over years to make a billion dollars.
Ever wondered why some people are so good at saving money even in stifling financial conditions and then make smart investment decisions? Such people have already tried a lot, failed a lot and have a lot of mental stamina and cache of knowledge in their brains which helps them succeed above people who have far better sources of money but have a equally bad spending habits.
>>Billionaires exist only because the paper money was taken from the wealth produced by other people.
Its a symbiosis. But where you want to belong is really upto you. You now have two options a) to work 20 hours a day, be a god programmer, get a job at wall street, make a few millions and retire. b) take life as usual, work 9-5 and be a commoner.
People who take the option a) are not evil. They only have better priorities than you.
>>wealth inequality is a feature of capitalism
Capitalism offers freedom to chose priorities. And that independence is hard to handle for a lot of people.
>>it is fundamentally unfair because it is taken from others.
Nothing is taken from others. If you think about it very carefully, capitalism gives you what you want. Based on how you look at it and what kind of a person you are, it can be very good or terribly bad news.
>>Yet its easily possibly possibly to start working towards and move in that direction.
This is impossible. One man cannot build and design the 747. The total man hours required exceed several life times.
>>Its a symbiosis. But where you want to belong is really upto you. You now have two options a) to work 20 hours a day, be a god programmer, get a job at wall street, make a few millions and retire. b) take life as usual, work 9-5 and be a commoner.
It is not a symbiosis. Ask anyone who chose option b.
What a coincidence. Everyone who chose option a thinks it's a symbiosis, everyone who chose option b doesn't. Wonder why. Tell me, in your life, did you happen to choose option a?
Like I said, what ever choice you make you are right.
>>It is not a symbiosis. Ask anyone who chose option b.
A person makes the wrong choices in life, but expects all the right outcomes.
>>Tell me, in your life, did you happen to choose option a?
Yes, not the wall street part. Because I'm an Indian. That was just an example of what choices a person can make, and how those will actively shape their lives.
I've seen the socialism rot from quite close. Most Americans have no clue what they are talking about, very simply because the exposure is only through reading stories or anecdotes on internet or books.
In reality there is no such thing called as free. Or worst free in almost all cases is more expensive than the cost you would've other wise played. Socialism also has other problems which deeply stems from motivations human beings have towards doing anything in life. In reality, in a socialist society, the opportunities are always scanty, almost every one thinks everybody else who earns more apart from them owes them something, and they are entitled to endless free stuff. Corruption is common, because opportunities are scanty. People think one-off cheating is perfectly fair.
Good people are always leaving to greener pastures(other countries). In fact most of them are quite tired of the masses calling them greedy for working hard. There is endless glorification with poverty, and rich people hating which after a while looks like excuses to remain poor because the poor are entitled to free money anyway. The wealth generated is consistently on the decline largely because no sees any point in doing some thing big and watching the results of their work taken away, and the good people are constantly moving out. In all this in the constantly declining pool of wealth, people fight for whatever is left with whatever means they can.
Socialism/Communism has failed over the century because it works against the human nature and the way we perceive work-reward scenarios.
But no man has ever built a 747 by himself whether you or i or anyone has believed it or not. Additionally no mountain was cleaved by any man. This man simply spent 22 years digging a hole. This is certainly a plausible feat.
The foundations of your argument rests on the fallacy that anything you believe can become reality. Well. I believe I am right and that you are wrong. Look. Now it's reality.
Of course, building the 747 by yourself is not possible. But it is possible to put together a team that has enough diverse skills to build it - that's the whole point of entrepreneurship.
The point that everyone who talks about how inequality is bad is missing is that without the billionaire in your example, there would be NO jobs. Pure labor doesn't produce - there needs to be a business idea, vision, strategy, organization, sales - all those things that the businessman in charge provides.
The reality of the situation is that workers can be replaced - that's why they get paid less. But the businessman creator can NOT be replaced - without him/her in charge, there would be nothing else.
Soviet Union and other socialist countries tried taking the businessman in charge away - and we know exactly what happened after that.
I know this system isn't "fair", but it's better than the alternatives.
Right and I agree with your main point. It's basically the point I'm trying to drive home. Communism isn't the solution, capitalism is better but has problems as well. We should all work to resolve those problems even if capitalism is currently the best possible solution. Extreme Wealth inequality is a problem of unfairness and we should strive to resolve the problem without giving up the benefits that come with capitalism.
I disagree with the fact the billionaire can't be replaced. The billionaire isn't some special human being. I would argue if you replace the current CEO of apple with a random apple SW engineer, the company wouldn't change much.
In fact I would argue that skilled work, the work of software engineers is by far much more irreplaceable. The person who coded the critical infrastructure for the apple operating system, he is by far harder to replace then the billionaire on top. Also note: Steve jobs died, Apple stock has gone up since his death.
I think your Apple example is helping to disprove your point.
> I would argue if you replace the current CEO of apple with a random apple SW engineer, the company wouldn't change much.
That's exactly what happened in the 80's - they forced Steve Jobs out, and the company lost all their market share and was on the verge on dying, before he came back.
> Steve jobs died, Apple stock has gone up since his death.
By that time, Steve Jobs knew he was going to die and picked his successor very carefully - Tim Cook is definitely a great choice. Some would argue, however, that Apple is still thriving because of Steve's ideas, and as soon as they run out of them, Apple will start to decline. The jury is still out on that one, however.
When a group of people get together to create something of value in a venture we call a 'business' who decides which person gets which proportion of the profits? The people who did the work? The person who provided much of the wealth as an investment and took risk? Why is 'risking money' worth so much more than hard work? Because people with money to risk have decided that it should be, and they make the rules. Currently whoever happens to be at the top of the business structure decides as a dictator who gets what, subject to some regulations libertarians would like to destroy like minimum wage which assure he does not steal everything his employees have created.
I think capitalism has been a zero-sum game for a very long time. Marketing just dominates everything now - 90% of the work people do is to figure out how to make the company that they work for gain market share over the companies that other people work for and the solution these days is usually marketing... Instead of focusing their energy on how to make their product cheaper.
The cost of RAM memory seems to have stagnated. The prices of vital drugs are going up. Property prices are going up.
The era of value-creation is over. The real winners are those who can make other people create all the value and just capture that value.
It's interesting to me that these types of arguments always boil down taxing the wealthy. That is a way to redistribute wealth, but what about working to do a more efficient job of redistributing wealth from government to the citizens?
Consider the author's idea of levying an 80% tax on people who earn $1 billion a year. Chances are that anyone who is smart enough to earn $1 billion a year is smart enough to hire a small army of accountants/tax attorneys to reduce her tax load. The relevant tax authority thus has to counter by hiring their own army of auditors/tax accountants to enforce these sorts of tax laws.
In the end, the tax authority may collect more money, but they also have to spend significantly more. In the end, will such a scheme really result in more money in the government's coffers??
And then, what happens to money once it reaches the G?? How much of the money is wasted on poorly planned/executed programs? How much is wasted by massive, overstaffed organizations? How much of the money designated for 'social services' ends up in the hands of lower income people versus how much ends up paying for bureaucracy?
Please tax the wealthy, but first, it's a better idea to run government in the most efficient way possible.
"Please tax the wealthy, but first, it's a better idea to run government in the most efficient way possible."
Yeah, if someone tells me that they can spend Elon Musk's money more productively than he can, I'd kind of like them to be able to point to some track record of having done that in the past with all the other money they've had their hands on.
Many people think Musk is in the top percentiles of "using money well." While I think it is always appropriate to want the government to run better, it's probably not fair to set such a high bar for it.
One might just as easily say "no VC should invest money in any company whose founder has a poorer track record than Elon Musk" which is of course a ridiculous posture.
> Consider the author's idea of levying an 80% tax on people who earn $1 billion a year. Chances are that anyone who is smart enough to earn $1 billion a year is smart enough to hire a small army of accountants/tax attorneys to reduce her tax load. The relevant tax authority thus has to counter by hiring their own army of auditors/tax accountants to enforce these sorts of tax laws.
If there was ever political will to tax the wealthy at such a rate, there would also be the political will to end the loopholes allowing people to avoid that rate, otherwise it would be pointless.
I don't think that I agree with you. If the G got rid of all write offs for higher income people, people who earn extremely high incomes would move to locales with friendlier tax schemes. Taxing the highest incomes is very complex.
Anyone who thinks that an 80% tax on the rich is going to yield spectacular results should take a look at the whole host of countries following the communist economic model as well as the countries that adopted the non-explicit communist model (these include most of the countries in the 'Non-Aligned Movement') to see how heavily taxing the rich as well as trusting that the government is more efficient with capital allocation is working out.
One thing that is often ignored when considering a progressive income tax is that years of income are often sacrificed in order to achieve higher earnings. Consider an entrepreneur who earns <$30,000 for for 5+ years while re-investing in a breakthrough technology, or a doctor who spends 10+ years studying and living on a minimal income who one year earn $250,000+ and fall into the highest tax bracket. Those individuals have basically concentrated all of their earnings into a shorter time period, at (in the entrepreneur's case) significant personal risk/expense. This can make the net lifetime earnings of these supposedly 'rich' individuals actually less, and taxed at a higher rate, than those who don't ever achieve this level of income.
Every response post I've read is terrible. Frustratingly so.
Inequality is bad. People want to reduce inequality. Startups strive to strictly increase inequality. Now what? An extreme progressive tax plus startups will STILL increase inequality. Not decrease.
To be honest I want to increase inequality even more. Because I want to allow more immigrants and refugees. You can't let in hundreds of thousands of refugees without increasing inequality. It's not possible.
What some of these posts say, without actually saying it, is that oh some types of inequality are bad and some are good. A small local business that earns it's owner a 6 figure salary? Well that's obviously good. When people say inequality is bad they meant those filthy point-oh-one percenters on Wall Street. Not the plumber who has 10 employees and made $350,000 last year. Obviously.
Inequality is at most a 2nd order derivative. It doesn't actually matter much. Things can be good with high inequality or they can be bad with low inequality. It gets far more attention than it should, imo.
logical arguments are often inspired by individual motivations despite efforts of everyone to remain rational. I ask you: Are you poor or are you rich? When inequality increases, do you benefite? or do you become worse off? This answer would indeed be very interesting if you were a poor person.
If you are a rich person, then you're answer is expected. Normal. People concoct very articulate and valid logic to fit their own biases and situation. The logic is so sound that it's often hard to find bias. What can always be observed however is... does the logic benefit the individual who introduced said logic.
I feel people need to introduce their background before they introduce their arguments. Like PG did, one should always announce whether or not they are a manufacturer of wealth inequality or not before they spill their arguments.
I like your line of thinking. Particularly your sound logic line.
To answer, that depends entirely on how you depend poor or rich. And to who you are comparing.
Within the United States the median household income is $50,000. Average household income is $69,000. If someone makes more than mean/median and they receive a raise than is an increase in inequality.
There's hardly a US based programmer on HN that doesn't qualify as rich and strive to increase inequality by seeking career growth and raises. I don't think that's a bad thing. I would be such a programmer.
The current consensus among economists is that increasing inequality will lead to disaster for the entire economy, while decreasing inequality actually increases growth.
Sure, you're right that nothing is set in stone, and you could have a country that has low inequality but it's still a terrible place to live by other metrics, but this is useless hypothesizing and speculation. What evidence do you have to support the statement that "An extreme progressive tax plus startups will STILL increase inequality. Not decrease." Seems to me, in the years when the top marginal tax rates were higher, those were some of the years with the least income inequality in American history.
Why not look at what people who study our current economies are saying instead of speculating?
From the IMF:
"We find that increasing the income share of the poor and the middle class actually increases growth while a rising income share of the top 20 percent results in lower growth—that is, when the rich get richer, benefits do not trickle down."
It's not that simple. Bringing in more refugees increases inequality. Bringing in more refugees is also good for the economy. Therefore an increase in inequality does mean economic disaster.
Not all increases in inequality are equal. They can not be treated as such.
In living (for some), 80%+ tax rates have been used and tax was very high for about 5 decades:
- the top marginal rate of tax was 62% in 1932 (up from 25% in 1931)
- rising to 91% in 1963 (income over $200k)
- It was at 70% in 1981 (before dropping to 50% in 1982)
The 80%+ tax rate were used to pay for WWII debts. Also, tax loopholes were absolutely rampant prior to the 1986 tax reform act. Because tax rates and deductions are so fungible, and vary from country to country and even state to state (if we factor state and local taxes) the only objective measure is to look at tax revenue as a percentage of GDP: https://en.wikipedia.org/wiki/List_of_countries_by_tax_reven...
I read PG as saying, "You can't fix exponential forces with linear solutions." Furthermore I got the impression PG's essay is in favor of progressive reform such as reduced incarceration rates and even something like basic income but is going out of the way to make the point it still won't get rid of in equality because it cannot as long as we embrace technology. He's trying to say instead of going after the impossible bogeyman (inequality) let's go after the very real bogeyman (poverty).
I feel like the author of this post reads PG totally different. He seems to think PG is saying, "Inequality isn't a big problem and it can't be fixed and screw these dumb poor people."
Also the talk of GDP growth slowing down is so off-putting. It just goes to show that the author has no understanding of economics. GDP growth tends to slow down as the base increases. The entire article sounded like an adult making the case that if he ate more, he'd grow taller.
So, by this completely rational view of the “pie,” it is, in fact, trending towards a zero sum game.
It doesn't even matter how growth is trending. Graham's misguided criticism of the 'myth' misses a simple mathematical fact: that the growth in income among the top 1% dramatically outpaces overall economic growth. Consequently, contrary to his assertion, the rich are increasing their income at the expense of the poor. There is no where else the money can be coming from. You can argue (wrongly, in my opinion) that this is solely because the rich are smarter and harder-working than the poor. But you cannot rationally argue that such a shift is not happening in a broad sense.
I really don't like the word "progressive" being used in a context like this, and it seems more like a cognitive anchor for associating actual progress with this proposal.
It seems really backward and regressive if anything.
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[ 2.7 ms ] story [ 183 ms ] threadNot only does GDP not measure wealth, but as wealth increases you might actually expect GDP to decrease. E.g. when self-driving cars put 20M Americans out of work, wealth will have increased, but the GDP will decrease.
An alternative scenario would be to tax driverless car companies and give the money back to the people whose livelihoods were taken.
I have no doubt that in a fully-automated world, society will either be socialist or communist. If wealthy people start thinking about inequality and actively work to improve things, then we will have socialism. If they don't, it will just spread misery and resentment among the lower class and will likely lead to a more dramatic change in the state of affairs.
Oppression leads to extremism. Just look at what happened after world war one when Germany was burried in insurmountable war reparation debt... It created a generation of resentful german extremists - And along came WW2.
Cheap access to driverless cars will be a huge boon for the poor. Can you imagine what it would be like to have cheap access to goods no matter where you live? To receive delivery of materials cheaply and quickly? That's not a wealth destroyer. That's wealth creation infrastructure.
If automation replaces 90% of jobs, then you're going to have a lot of unemployed people with no money.
I disagree about automation becoming a commodity. Automation is all about monopolies. You only need to write software once and only the company with the best technology will control the whole market... Why would a consumer use a piece of technology if it is less efficient than a competing piece of technology?
Just look at Intel vs AMD. Intel's CPUs became just a little bit faster, and as a result, in just a few years they decimated AMD financially.
Technology is a winner-takes-it-all game.
Why PG chose to make a side on argument towards that leaves me a little bemused, however
It sounds simple, but as remote work becomes easier it becomes more tempting to do it in another country (a country that won't tax that person $800,000,000).
Pg addresses this issue in his essay "So if you made it impossible to get rich by creating wealth in your country, the ambitious people in your country would just leave and do it somewhere else."
This is exactly what is happening, even now.
Why do you think ridiculously smart and hard working people in countries like China and India, graduating from the top universities in their countries come to the US and take great pains to stay and work in the US.
If you make it impossible to succeed people don't even try, or find loopholes or else go where the rules of the game are fair.
I am not sure what the number is, but when I hear 80% taxes, I think someone (maybe me) is not doing their math.
But I do agree that one must first make sure to understand the argument of the other side before articulating a counter-argument. I think in this case, there is also the problem that the message gets diluted because of the messenger: unfortunately PG does not have credibility in this area because (presumably) he has not been on the ground dealing with poverty issues as many others. Then again, many economists haven't either, even as they also postulate solutions.
Instagram (for another example) had 13 employees when sold for $1 billion.
Simplifying the tax system and increasing the top marginal tax rates back to something closer to where they were 40 years ago is preferable in my opinion.
Let's set aside arguments of individuality vs. socialism and whether government should operate for the hugely debatable, ephemeral term, "the greater good". I think that invites a separate essay on its own.
From a purely utilitarian perspective, the rich often leverage their capital to achieve things that would be impossible or difficult to do without access to the capital they created.
Case in point, is Elon Musk. If he didn't take home most of the money he earned from his involvement in Paypal, the odds of Space X, Tesla, and Solar City ever happening are decreased dramatically. When in the hands of an extraordinarily talented individual like Musk, capital can work to create long-lasting ripple effects that benefit society as a whole.
If you had taxed Musk at 80%, and he was left with a paltry $30 million or so, it's likely that one or more of the above companies never happen. The opportunity cost is that less jobs get created, unique and innovative technology never gets formed, and the ripple effects (such as spurring Chevrolet and others to make electric vehicles) never happen.
While not always the case, it is often the case that private capital investments do improve society in meaningful ways.
The economy is a very fungible thing and the idea that it is approaching "zero sum" is an unfounded one in the extreme.
Most people that somehow made a lot of money would not do this.
billionaires don't sit on their capital.
you guys have a lot of neat ideas for other people's money.
One that did. I don't know of any others that did.
Musk is driven in a way that no Gates, Jobs, Ellison or anybody else of such wealth is. I don't see him with a huge mansion or a yacht, just more projects.
I'm sorry, I remember a totally different Bill Gates all too well. I'd definitely not list him as 'the greatest living human being'.
Why?
> it's a product of age and aggression.
Should I wonder about your age now?
Amazing how a person can go from most hated in tech to most revered in the space of few years.
And your ignorance of the fact is probably that you never stop to talk to some of the business owners in your area, and see what they're planning.
You can only find so many stories at the height of public consciousness and Musk just happens to be one of them.
As for buying mansions and yachts, you can't tell me that that's any different than you buying the latest iPhone or car when you already have a perfectly usable phone.
Hell, we could all be getting by with Nokia 3350s if we really want to take that argument there. We don't really need color screens, or internet in our pockets. It's really just a convenience after all, and there are many less fortunate out there in 3rd world countries without phones at all.
Here's where we begin to argue about what poverty means and what 'filthy rich' means. They aren't clearly defined.
I'm for people who earn money, fairly and legally, using it however they see fit. If they want to build space ships, awesome. If they want to buy yachts, awesome.
Even the yachts employ people and produce net effects on the economy that could be argued as positive things. Many engineers and craftsmen are employed by the yacht industry.
I happen to live in one of the yacht capitals of the world, Fort Lauderdale, and there are over 100,000 people employed in that industry here alone.
I'll happily agree to that.
> And your ignorance of the fact is probably that you never stop to talk to some of the business owners in your area, and see what they're planning.
You're incredibly funny.
> As for buying mansions and yachts, you can't tell me that > that's any different than you buying the latest iPhone or > car when you already have a perfectly usable phone.
> Hell, we could all be getting by with Nokia 3350s if we really > want to take that argument there. > We don't really need color screens, or internet in our pockets. > It's really just a convenience after all, and there are many less > fortunate out there in 3rd world countries without phones at all.
I'd have bought another one if they let me but I'm still on the nokia dumb phone that I bought 5 years ago and I probably will be as long as it works. I have some smart phones lying around for development and testing (ubuntu, an android phone and an older iphone), but I have never felt the need to carry one with me when I go out the door.
> Here's where we begin to argue about what poverty means and what 'filthy rich' means. They aren't clearly defined.
We're all filthy rich.
> I'm for people who earn money, fairly and legally, using it however they see fit. If they want to build space ships, awesome. If they want to buy yachts, awesome.
Sure. But the space ships are a tad more impressive to me than the yachts.
[1]: http://www.bloomberg.com/news/videos/b/6e27fcba-309d-494e-b8...
[2]: https://en.wikipedia.org/wiki/Bill_Gates'_house
It seems that that has been fixed in the meantime.
https://en.wikipedia.org/wiki/SCO%E2%80%93Linux_controversie...
Note that Gates was still very much involved in Microsoft at that time.
And those may be some of the more standout examples, but there are hundreds of thousands of entrepreneurs who have made similar reinvestments or expansions to some smaller effect.
The carpenter who invests his post-tax capital in buying better tools or increasing his skill is producing a net-positive effect for society by improving the quality of carpentry available to people in his area.
Our economy is in large part, the net effect of the sum of all those micro-improvements.
Branson and Jobs for instance own (and owned) huge boats that they had built especially for them and spend(t) lavish amount of money on themselves, their houses and so on.
Instead of building a boat for himself Elon Musk decided to back Tesla.
The Rockefellers and Ford are of a different era, hard to compare their wealth and what they did with it back when they made it with todays world. Disney doesn't even belong in that list (for me).
Take A Tour Of Elon Musk's $17 Million Bel Air Mansion[1]
[1] http://www.businessinsider.com/photo-tour-of-elon-musks-hous...
I don't own my apartment, but if I did, it would be approximately 100% of my net worth.
> He and his five sons had lived in the house for three years, which Musk rented before he felt financially secure enough to buy.
Is an interesting line in that article. The 'still rents a house' line stuck with me from somewhere, I didn't know what kind of a house it was. It's a bit larger than mine, that's for sure :), and I hope he enjoys it.
And why exactly is that wrong?
This person who's making $1 billion will simply put their money someplace else, they will figure out a way so that they need not claim it as income. They may push some of this money back into their company, perhaps raising the wages of some (or all) of their employees. They may form a new company to shelter this income and this new company may do something fabulously exciting and, thus, generate another shockingly large sum for this individual. Both of these sound okay to me.
This is a good point that I've never seen brought up before. How much of increasing inequality (whatever your definition of that) can be attributed to stagnating wages at the bottom 4 quintiles, because the tax climate isn't sufficiently incentivizing reinvestment?
On the whole my first instinct is to oppose new or increased taxes if only on philosophical grounds, but this may be cause for a second look.
"It’s ten percent because that is the standard decreed by Giving What We Can and the effective altruist community. Why should we believe their standard? I think we should believe it because if we reject it in favor of “No, you are a bad person unless you give all of it,” then everyone will just sit around feeling very guilty and doing nothing. But if we very clearly say “You have discharged your moral duty if you give ten percent or more,” then many people will give ten percent or more. The most important thing is having a Schelling point, and ten percent is nice, round, divinely ordained, and – crucially – the Schelling point upon which we have already settled. It is an active Schelling point."
It's still better to get a suboptimal outcome than to not get any outcome at all.
[0] - http://slatestarcodex.com/2014/12/19/nobody-is-perfect-every...
It would be trivial to make the taxation regime more high-resolution so that people who reinvest their cash into other ventures are taxed at a far lower rate, whereas those who wish to retire early and do nothing else are taxed a lot more.
Better to start from the society you want to see and work backwards from there to design a taxation system, rather that say yes or no to one or two one-size-fits-all options, I think.
What you're claiming here is that Musk can allocate capital better than a government, right? That leaving the money in his hands was better than taxing it and spending it on government projects? (note that all three of SpaceX, Tesla and Solar City received substantial amounts of funding from the US government (directly or indirectly) and would likely not be viable without it, even leaving aside all the USG-funded basic research that was necessary to make them possible in the first place).
Even if that's true for Musk specifically (which I doubt), is it true on average? How efficient is the average billionaire at using their money for social good? You gloss over a lot with "While not always the case" - how does the average return to society on a private capital investment compare with a public capital investment?
Receiving money from the government doesn't mean the government could have done the same thing.
Not meaningfully, not yet. They've landed the expensive part of a satellite launch system, which is very cool but the USG did it 30+ years ago. I don't think the difference between a vertical and a horizontal landing is that important.
And fundamentally there's no magic private industry pixie dust. A company is just a collection of people, as is a government; they both have to obey the same laws of physics. In some cases competition drives private industry to be more efficient. In some cases the government's long time horizons, trusted position, and ability to do things where the benefits are widely diffused make it more efficient. But it's only ever a matter of efficiency, not of can or can't.
> Receiving money from the government doesn't mean the government could have done the same thing.
It means that government money was a vital part of making it happen. SpaceX built their system on the back of $X from Musk and $Y from the USG (among other sources). If we took some money out of the X pile and put it in the Y pile, maybe the result would have been worse, maybe it would have been better.
Even the landing of the first stage was mostly based on NASA research. Which by the way, NASA had achieved long ago.
SpaceX innovated with their cost cutting, and maybe now their manufacturing processes, and by being lucky by benefitting from a period of cost cutting by NASA whereby they could hire a bunch of NASA engineers/scientists.
http://ecorner.stanford.edu/material_mobile.html?material=34...
Milton Friedman:
“There are four ways in which you can spend money. You can spend your own money on yourself. When you do that, why then you really watch out what you’re doing, and you try to get the most for your money.
Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well, then I’m not so careful about the content of the present, but I’m very careful about the cost.
Then, I can spend somebody else’s money on myself. And if I spend somebody else’s money on myself, then I’m sure going to have a good lunch!
Finally, I can spend somebody else’s money on somebody else. And if I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get. And that’s government. ”
How can that be, given what Milton Friedman says? Two reasons. First: there are incentives in place to encourage them to do it. If they buy useless things or spend too much money, someone may notice and they may lose their job. If they find a particularly good bargain, they may be rewarded. Second: most people are not perfectly selfish utility-maximizing homo economicus, and even when spending "somebody else's money on somebody else" they do in fact prefer to do so in a way that benefits the second somebody-else at not too much cost to the first one.
Guess what? Much the same applies in government. Suppose you're a doctor in a nationally-run health system like the UK's. You examine a patient and prescribe a drug. Does the fact that you're spending "somebody else's money on somebody else" really mean that you won't prefer to prescribe a drug that actually helps the patient's problem? Does it mean you won't prefer a cheaper drug over a more expensive one that performs no better? Of course not. And if in fact you are the way Milton Friedman professes to be -- if you prescribe with blithe indifference to whether your patients live or die and to whether your national health service goes bankrupt -- then there's a real risk that someone will notice and you'll be out of a job, or pilloried in the newspapers, or something similarly undesirable.
(I don't at all object to being downvoted. But if I'm thinking incompetently or writing badly or being obnoxious or something, I'd like to know what's wrong so that I can fix it. And I haven't been able to figure out what's downvote-worthy in the parent of this comment.)
The system used to be that, when a party won an election, they'd fire the existing government employees, and replace them with members of their party. "To the victor go the spoils", and this was called the "spoils system". But that meant that the knowledge of how the day-to-day government functioned got lost after every election, which was non-optimal. So laws were passed to eliminate that practice, but at the price of making it hard to fire government employees. (Add in public sector unions, and it gets even harder.)
Er, no, democracy defines it.
If you don't let the voting populace define and work towards social good, wealthy and powerful elites define social good, or more likely, pretend the concept doesn't exist or that they don't understand it as you have.
Of couse we don't live in a perfect world, and so the elite can be counted on to be and stay benevolent. But neither you can count on voters not being stupid, or entrepreneurs not being greedy.
It's not that we can't figure out what problems are to be solved. It's that we let huge amounts of bullshit take precedence.
What NASA has achieved, they've done so with over $1 trillion in inflation-adjusted capital funds over the decades, that have been allocated to them.
What is debatable is whether or not they've made or always made efficient use of the capital they've been allocated.
Space X has innovated on a number of fronts with less than 1500 employees and only a fraction of the capital that NASA has been allocated. For one, the Space Shuttle program was costing the U.S. $450 million+ per launch. A Falcon 9 launch costs an average of $57 million. There is proof that he can allocate capital better than the government.
No it's not. The requirements on the two systems were not remotely the same, and it's not surprising that a system built 30+ years later with the lessons of the previous system in mind would be more efficient.
There are probably lots of smart people out there qualified to allocate society's resources, but they tend to not become billionaires or win elections.
http://www.lrb.co.uk/v28/n07/slavoj-zizek/nobody-has-to-be-v...
He would have thought about futility of giving one's whole life to building something and then watch 80% of it taken away by someone else.
A few options remain for such people. Tax havens, countries with better respect for individual merit and contribution or plainly make money till a point and quit. All the three are equally damaging to any society for a long time.
Eg: See USSR, North Korea, Venezuela, Cuba etc.
You don't achieve anything by making the rich poor. Apart from the sadistic pleasure to soothe your flames of jealousy towards their wealth.
The end result is you scare almost any genuine contributor to the economy, and they learn they are better off in some other place.
Who is proposing to make the rich poor?
The most anyone here seems to be proposing is to make the rich less rich but still rich.
This is backwards. Not sure why this should even be done. And why does this have to end at an individual? Why should some countries be so economically powerful and others not? Will it be ok if wealth from developed nations were transferred to poor nations, every year?
You make poor people rich, you make the sick and malnourished healthy, you make the illiterate literate. You don't make the rich less rich, or the healthy less healthy or the literate less read.
Progress happens in the forward direction, not by pulling people down to make your failure look good.
There is a irrational fear here somehow equating wealth and evil. Not sure why people even think that way.
Only because I copied your phrasing.
I dare say there are people around who want to tax rich people just because they don't like wealth, but that's not what's being proposed by the OP and it's not what most people advocating higher taxation are calling for. E.g., from the OP: "So by taxing the wealthy and spending it on services, we can better ensure that the level playing field you allude to continues to exist." (In case it isn't clear from that quotation, the "level playing field" isn't about equalizing wealth or income, it's about providing public services to everyone.)
> equating wealth and evil
Who's doing that? Here's the OP again: "No one believes that there should not be rich people." "No one wants to take the money you have away." You may think the OP is insincere, but he is very plainly not equating wealth and evil. I don't see anyone here equating wealth and evil, implicitly or explicitly. I'm afraid I think you're just imagining it.
Here are arguments I see actually being made by people in this discussion advocating more tax. I have italicized the only one of these arguments that is on the same continent as the ballpark of "equating wealth and evil", and it's still a fair way away. Governments can allocate capital more effectively than most billionaires. Taxation may incentivize wealthy people to invest more. Taxes are low right now compared with what they have historically been, so raising them might be a good idea. Inequality itself causes social problems. No single person can really be so much more productive than others as to justify billions in wealth; so if someone is that wealthy, they got that way on account of others' work, so they don't deserve it. Economists are saying we need to reduce inequality to avoid disaster.
> Will it be ok if wealth from developed nations were transferred to poor nations, every year?
Yes, that would probably be a good thing. Is it supposed to be obviously not? Most developed nations do in fact transfer some of their wealth to poor nations every year. So do citizens of those developed nations. We call the first of those "aid" and the second "charity" and while it's possible to argue about how effective they are it's certainly not obvious that they're a bad idea.
Read this thread over again. There is a sad sentiment regarding Elon Musk's Mansion.
>>Governments can allocate capital more effectively than most billionaires.
Demonstrably wrong. See wars in history.
>>Inequality itself causes social problems.
Like what? Your USSR, North Koreas, Venezuelas of the world. In fact every failed communist nation in the past century falsifies this claim.
>>No single person can really be so much more productive than others as to justify billions in wealth; so if someone is that wealthy, they got that way on account of others' work, so they don't deserve it. Economists are saying we need to reduce inequality to avoid disaster.
Appreciable sentiment if you till the land with a shovel in your hand. Increase of productivity is not always measured through human effort alone. But also through tools which humans invent to amplify their productivity through automation of some kind. There are kinds of effort, one where you do all the work alone. One where you work to invent a tool that does that the job for you. Latter is also commonly known as 'progress'.
On the rest: I wonder whether you misunderstood what I was doing in that paragraph. I am not endorsing any of the arguments I mentioned (though as it happens I agree with some of them). I was listing all the things that people in this discussion had (at the time) said in favour of higher taxes, and pointing out that none of them involved saying that wealth is evil or that rich people are evil.
So responding by countering a few of the arguments misses the point. I wasn't making those arguments myself. I was pointing out that none of them involves the idea that rich = evil.
It will, and it happens; think the rich Western European countries putting money into Europe, which they pay out to the economically less developed countries in the east and south. It's what allowed Greece to not go bankrupt. There's also basic relief coming from the UN, and of course taking in Syrian refugees.
> There is a irrational fear here somehow equating wealth and evil. Not sure why people even think that way.
Because money buys power, and if, say, someone wants to build a wall to keep Mexicans or Canadians out, enough money will buy enough power to do that. Corruption. Second, the rich in the US got rich at the expense of the now nearly non-existent middle class and the poor, and the relatively rich country isn't putting its money into basic services like decent, affordable health care, basic income, or decent jobs (something above a McJob that doesn't require a university degree).
It's not the rich that are the problem, it's the fact the middle class is going extinct because of them or their businesses. It's the companies like Amazon that offer low prices due to low-paid but hard-working employees (that will soon be replaced by robots), or the food companies with dollar menus (whose employees are also being replaced by robots / computer screens). There's no real higher-level jobs becoming available for those people - also because higher-level educations have to either be paid out of pocket, or paid out of various grants (like the ones that will pay your education if you happen to be good at sports or chess or whatever).
[/rant. Probably wrong. But, perceptions]
It will, and it happens; think the rich Western European countries putting money into Europe, which they pay out to the economically less developed countries in the east and south. It's what allowed Greece to not go bankrupt. There's also basic relief coming from the UN, and of course taking in Syrian refugees.
> There is a irrational fear here somehow equating wealth and evil. Not sure why people even think that way.
Because money buys power, and if, say, someone wants to build a wall to keep Mexicans or Canadians out, enough money will buy enough power to do that. Corruption. Second, the rich in the US got rich at the expense of the now nearly non-existent middle class and the poor, and the relatively rich country isn't putting its money into basic services like decent, affordable health care, basic income, or decent jobs (something above a McJob that doesn't require a university degree).
It's not the rich that are the problem, it's the fact the middle class is going extinct because of them or their businesses. It's the companies like Amazon that offer low prices due to low-paid but hard-working employees (that will soon be replaced by robots), or the food companies with dollar menus (whose employees are also being replaced by robots / computer screens). There's no real higher-level jobs becoming available for those people - also because higher-level educations have to either be paid out of pocket, or paid out of various grants (like the ones that will pay your education if you happen to be good at sports or chess or whatever).
[/rant. Probably wrong. But, perceptions]
Every cent they earned is off the back of the investment the US government and society has put into our infrastructure, workforce, culture, work ethic, etc. If the government that created the atmosphere which allows these people to exist chooses that they get to keep 20% of the obscene billions of dollars they are taking from the poor they should be delighted. If they try to evade taxes we should lock them in jail or confiscate all of it.
They also often waste their capital on complete failures. Whether the rate of wasted spending among the rich is greater or lesser than the rate of waste in government is open to debate. But "from a utilitarian perspective," you can't ignore the fact that there is also massive waste and fraud in the private sector.
But.. I think the idea that a government would allocate the money better than Elon Musk, is indeed suspect. The point here is that Elon Musk is an unusual person.
A more useful question might be - how can we optimize the number of people like Elon Musk who get to execute?
Moving capital to the government probably isn't going to help with that, but concentrating money in the hands of 'investors' is probably not optimal either. In many ways they are just a lesser version of government - a bit less bureaucratic, and a bit more open, but nevertheless not the people who create new wealth. They may have created wealth themselves in the past which is a better qualification than being a politician, but unlike Musk, who is executing himself, for the most part investors are not.
It seems to me that the real constraint is not on who gets to pick winners (govt vs investors), but enabling more people to take a shot.
From that point of view PG's piece is doubly weird, since YC was started from this very premise.
Does the current kind of increasing inequality reduce the pool of people who get to take a shot or increase it? If it reduces if then we need to change something.
If we tax it, we can actually do something good for society on purpose with it. We can give the business/tax subsidies that are required for all of Musk's ventures to succeed. We can educate Musk's workers. We can maintain and create and enhance the infrastructure required for Musk to continue to make his obscene profits, which we continue to tax and reinvest in the country.
Or we can just keep hoping that the rich and powerful class of billionaires have weird hobbies that tech people happen to think are cool.
I agree that what Elon did would not be possible if he was taxed at 80%. But he is an extreme case. He is an outlier in the outliers group. Most rich entrepreneurs, frankly, don't give a shit. The few that do have often tied hands (there's only so much you can do if your company has shareholders deciding about stuff). But most don't give a shit. Can you imagine, say, CEO of Oracle investing all his wealth to literally force an electric car into market viability because he believes that we need to do something about sustainable energy right fucking now? I can't.
So maybe that 80% tax would stop an occasional Elon Musk from saving the world. But if it also makes everyone much better off, then maybe it's worth it. Especially if it could relax the current economic pressures, so that we wouldn't need crazy millionaires going against the market to fix something on this planet.
The OP article is definitely factual with its four main points-- I'd also like to add that the trick of putting yourself into the opposing position's shoes and reconstructing their argument is one of the best rhetorical techniques that exists.
I see what you are saying, though-- the exact prescription may not be something any of these four have said, though they certainly detail the consequences of inequality.
They work at a little organization called the International Monetary Fund, and they conclude:
"We find that increasing the income share of the poor and the middle class actually increases growth while a rising income share of the top 20 percent results in lower growth—that is, when the rich get richer, benefits do not trickle down."
https://www.imf.org/external/pubs/cat/longres.aspx?sk=42986....
I don't know about that; I've heard plenty of people talk about eliminating income inequality as an end goal (but I live in the SF Bay Area, so maybe a reflection of demographics out here?)
It's like saying no one but the fringe is going to vote for donald trump, and yet those poll numbers...
>> What people are talking about is a progressive income tax to reduce inequality.
Well, we have that. Taxes are historically low, so I'd be ok with raising them somewhat, but not too much.
>> So by taxing the wealthy and spending it on services, we can better ensure that the level playing field you allude to continues to exist.
This is really the crux of my argument: instead of increasing taxes first, we should hold the government more accountable over spending and look at programs and how they help or do not help the poor. Poverty is the metric that should be focused on, not inequality. If inequality is reduced as a side effect, all the better. But poverty is the problem. If government got more money from taxes, what makes you think they would use it to effectively reduce poverty?
I work with government agencies and I am all for them being more accountable, I have no doubt that they could spend a lot less than they do. On the other hand, I am entirely unwilling to wait for them to become more efficient before deciding to severely tax the five people who make over 1 billion per year.
Wiser management of federal resources would go a lot further than throwing more money down the hole.
That sounds to me like, "We can't get our ship in order, so lets rob someone who can instead of fixing it and we'll fix it later (but we won't because note what we've done in the current example)."
The problem for government is less "not enough money" and more "we don't know how to spend it to accomplish specific and measurable goals"
No. Inequality is the problem. Poverty has nowhere near the same damaging effect.
This book is essential reading on the topic:
http://www.amazon.com/Spirit-Level-Equality-Societies-Strong...
The authors use two test-beds: a comparison of countries around the world and a comparison of states within the US. With these, they show that with overall wealth held constant, it's the larger inequality that causes more social problems.
For example, the UK and Japan have roughly equal GDP and similar average incomes, but Japan is less unequal. On almost any measure you might choose of how well a society is doing, Japan is better. Mental health, drug use, teen pregnancy, violence, divorce, abuse, the whole lot. The same goes across all of the states and countries they looked at.
The sheer scale of the evidence is overwhelming. It's very rare in the social sciences for literally hundreds of studies to point to the same broad trend across so many different parts of the world.
Their work is a revolution as it overturns the common assumption which you expressed that poverty is the problem.
This book presents the thesis that many ills of today's society (obesity, mental illness, rates of drug abuse, ...) can be attributed to large income inequality. The authors make this point using two-dimensional scatter plots, with income inequality on the x-axis, the prevalence of some form of social ill on the y-axis, and dots in the plot representing individual countries. These plots generally show a positive correlation between income inequality and various social ills.
As a statistician, I would like to comment on the soundness such argumentation: unfortunately virtually all graphs are plagued be a confusion of correlation with causation.
Reviewer then explains correlation and causation. I could claim "inequality is good" using the same methods. I'd argue inequality is immaterial but does tend to be correlated with poverty, which is what we should focus on.
Not to be outright dismissive (I should read the book), but this is a problem in social sciences in general. I think software simulations would be a lot more useful at this point than scatterplots comparing two variables used by so many economists today. I think I've read about people starting to do that in various areas, not sure about how prevalent it is in economic modelling. AFAIK not very.
I was still mightily impressed with their data.
The range of studies is extremely broad (into the hundreds), and there is a very wide range of experimental procedures in use. Not all are correlations.
>inequality is immaterial but does tend to be correlated with poverty
This point, they explicitly refute with a vast array of data. In cases where there is both poverty an inequality, there is a problem. When poverty alone, the problems are massively reduced.
I read the book with a critical eye. I've taught social science for the best part of 10 years and this was not lacking in statistical rigour. Other academics in the field who I've discussed it with agree.
I think you'll enjoy the book. It challenged a lot of my preconceptions to the point where I changed my mind, which is was unexpectedly refreshing.
This is so over-simplified it's wrong. If I drop a weight, what happens? Is there a causal chain there? Would an animal unable to perceive a causal chain be able to live very long?
If you are going to be doing science, you will not prove causal links. You will develop a theory which explains some phenomenon and implies some predictive assertions and then provide evidence for that theory and test the assertions. Cause is much deeper than science can currently tread.
On first blush it seems too neat a solution. Just look at Texas—massively unequal, there are oil barons and illegals within the same zip code, but Texas is doing well because it's possible to live the life style of an upper middle class person in NY on a pair of civil servant salaries down south.
Their hypothesis is that as social animals, we are wired to respond neurologically to status Higher/lower status individuals experience dramatically different levels of certain neurotransmitters, which is something that they cite animal studies to support. Experimentally manipulating the social environment e.g. by placing a monkey in cage where it was surrounded by either smaller or larger peers caused observable changes in brain chemistry as the monkey moved from alpha male status to subordinate and back again.
There's a good argument for an evolutionary role here, as you can see that being on the bottom of a social hierarchy may be dangerous, so those who experienced it as stressful and were motivated to escape it somehow may have had higher chances of survival.
Being trapped in such a position appears to cause a deeply stressful state of mind, where people are literally unable to function normally. This doesn't happen when people are more equal as the perceived status differences are small, so the effect is lessened.
Really?
Because your description sounds very flimsy. Can you really compare Japan and the UK without correcting for a bunch of confounding cultural variables that have nothing to do with equality?
Is there no society that is "more equal" than Japan, and yet scores terribly on the metrics you suggest?
Poverty is a circumstance of living in a world with limited resources where trade offs have to be made in virtually all decisions. When I have lunch today, I am, in a twisted interpretation, depraving someone else of that food.
In a world where everything has a cost, whether hidden or real, poverty in some form will exist.
Ah, yes. One can be rich, but don't you dare be TOO rich!
To the degree to which I would apply labels to myself, I'm a capitalist, and I'm a libertarian. I don't trust our corrupt political system anymore, and I certainly don't think the government has the ability to help society as much as it hurts it, at least most of the time. Because of this, I think that any extra taxation that the government levies will commensurately damage our society.
That said, I can't help but think that our entire economy has been swept out from under our feet by the financial sector. It's not tech companies and supposedly "rich" tech founders that capture our economy. It's VCs. A VC can give a company that would otherwise be insolvent the capital it needs to capture an entire market, and then raise the prices. We see it time and time again.
We're trained to believe that, without VC, the tech industry would somehow be stifled. This is simply untrue. Without VC, a lot of our "side" projects that create true innovation would have a chance at success. The reason many of them don't is because they're up against the same thing from a VC-backed competitor. Except, the VC-backed version is cheaper (or free), is backed by an unsustainable, large team of skilled developers, and doesn't care that it's hemorrhaging money, because once it creates a monopoly it will pay dividends for life to the very few who own it.
I would upvote this with all my karma if I could. Very well said.
If I remember back to my anarchist philosophy, that is ceding too much ground. Patents, access to cheap capital, "artificial" interest rates etc... are all government influence that large companies can take advantage of to become monopolistic. Without those the argument goes, that firms would never get so big because competition would sprout up immediately to cut into their market dominance.
If you look at Standard Oil or Bell System, the case studies for all monopolies, they all hinged on some government grated protection. In Bell's case it was initially a patent and then subsequently "legally sanctioned regulated monopoly." In the case of Standard Oil they utilized Trusts, which were legally recognized forms of distributing ownership to stay within the law.
So unfettered capitalism might not lead to long and enduring monopolies, but it would be much nastier and competition much more fierce because the systems on which business is built today would have to go away in total - to include regulated banking, infrastructure standards etc...
The question should instead be: Is the world in which there is no regulation one that you would actually want to live in? I would argue no.
edit: Note that I don't agree with this view, it is however the argument that is made.
That's how the argument goes, but this is neither a proof nor an observation--just a piece of economic theory, and there are others going against it.
Note that anti-trust actions, like what happened with MSFT, typically are executed long before a monopoly is established.
And now that your monopolies have guns and tanks and can openly play dirty, good luck for the small upstarts trying to take them down. They won't be able to.
--
Anyway, I'm pretty sure that if all governments were to suddenly disappear tonight, by tomorrow morning many corporations would be already on their way to forming some new quasi-governments. I believe high-level executives are aware that a) social order is good for business, and b) having a working framework for establishing and enforcing contracts is vital to their operations.
Well exactly. That was my point. In the absence of regulation, there might not be monopolies but it would be a Mad Max style business environment.
The Greek philosopher Polybius referred to this cycle between anarchy and totalitarian state as the anakyklosis
[1]https://en.wikipedia.org/wiki/Anacyclosis
(Increasingly, I'm starting to feel that a lot of things I figure out for myself - often while writing HN comments - is something that's been widely known for thousands of years. I guess I need to sit down and read some of those classic works.)
This particular bit startled me for the reflection I see in current day politics:
>During ochlocracy, according to Polybius, the people of the state will become corrupted, and will develop a sense of entitlement and will be conditioned to accept the pandering of demagogues.
Why do people think it's ok to take other people's money? If a billionaire has money - regardless of whether they earned or inherited it - it's THEIR money. If they earned it lawfully, they should pay the same % of tax that everyone else pays - and keep the rest to do whatever they please. Who are YOU to tell them how to spend THEIR MONEY better?
If you're jealous of them having more money than you - this is a truly free country, nothing is stopping you from earning just as much as they have. Yes, life isn't fair, they may be born into wealth and you're not - but try being born in North Korea, then talk about it not being fair.
This is the principle that America was founded on, and what's allowed it to be successful.
And as someone who studied just a bit of history, it seems completely insane to me that people think taking money from the rich and distributing it to the poor think it will turn out OK. The same exact thing happened in dozens of socialist countries - those that are in charge of the distribution, somehow distribute the most of it to themselves, and then take away people's freedoms so they would stay in power. To think that something else is going to happen is just plain ignorance of basic human nature.
It is impossible for one person to make a billion dollar 747. One man simply doesn't have enough intelligence or strength to do construct such a sophisticated device. If a 747 is worth a billion dollars then creating a billion dollars of paper money or making the plane itself are both equivalent concepts.
Thus why is it possible for one man to make a billion dollars in paper money but it is not possible for one man to make a billion dollar 747? Why do billionaires exist?
Billionaires exist only because the paper money was taken from the wealth produced by other people. The Billionaire needs to employ workers to build a 747.
In short, for Billionaires to be Billionaires they must be an owner of some corporation where the wealth produced by the labor of employees is unfairly distributed to them. This is wealth inequality. This was the problem your old country attempted and somewhat failed to resolve with communism.
Whatever you think communism is, wealth inequality is a feature of capitalism and it is fundamentally unfair because it is taken from others.
Yet its easily possibly possibly to start working towards and move in that direction. That's how anything big ever built, was built.
>>Thus why is it possible for one man to make a billion dollars in paper money but it is not possible for one man to make a billion dollar 747?
Because any big thing company, individual wealth or 747 is built on a concept that works similar to stamina. You don't run a marathon on day 1. It takes a good deal of work over years to make a billion dollars.
Ever wondered why some people are so good at saving money even in stifling financial conditions and then make smart investment decisions? Such people have already tried a lot, failed a lot and have a lot of mental stamina and cache of knowledge in their brains which helps them succeed above people who have far better sources of money but have a equally bad spending habits.
>>Billionaires exist only because the paper money was taken from the wealth produced by other people.
Its a symbiosis. But where you want to belong is really upto you. You now have two options a) to work 20 hours a day, be a god programmer, get a job at wall street, make a few millions and retire. b) take life as usual, work 9-5 and be a commoner.
People who take the option a) are not evil. They only have better priorities than you.
>>wealth inequality is a feature of capitalism
Capitalism offers freedom to chose priorities. And that independence is hard to handle for a lot of people.
>>it is fundamentally unfair because it is taken from others.
Nothing is taken from others. If you think about it very carefully, capitalism gives you what you want. Based on how you look at it and what kind of a person you are, it can be very good or terribly bad news.
This is impossible. One man cannot build and design the 747. The total man hours required exceed several life times.
>>Its a symbiosis. But where you want to belong is really upto you. You now have two options a) to work 20 hours a day, be a god programmer, get a job at wall street, make a few millions and retire. b) take life as usual, work 9-5 and be a commoner.
It is not a symbiosis. Ask anyone who chose option b.
What a coincidence. Everyone who chose option a thinks it's a symbiosis, everyone who chose option b doesn't. Wonder why. Tell me, in your life, did you happen to choose option a?
You are right regardless of whatever you think. If you thinks its possible, its possible. If you think its impossible, its impossible.
>>One man cannot build and design the 747. The total man hours required exceed several life times.
There are men on this earth who have cleaved an entire mountain. https://en.wikipedia.org/wiki/Dashrath_Manjhi
Like I said, what ever choice you make you are right.
>>It is not a symbiosis. Ask anyone who chose option b.
A person makes the wrong choices in life, but expects all the right outcomes.
>>Tell me, in your life, did you happen to choose option a?
Yes, not the wall street part. Because I'm an Indian. That was just an example of what choices a person can make, and how those will actively shape their lives.
I've seen the socialism rot from quite close. Most Americans have no clue what they are talking about, very simply because the exposure is only through reading stories or anecdotes on internet or books.
In reality there is no such thing called as free. Or worst free in almost all cases is more expensive than the cost you would've other wise played. Socialism also has other problems which deeply stems from motivations human beings have towards doing anything in life. In reality, in a socialist society, the opportunities are always scanty, almost every one thinks everybody else who earns more apart from them owes them something, and they are entitled to endless free stuff. Corruption is common, because opportunities are scanty. People think one-off cheating is perfectly fair.
Good people are always leaving to greener pastures(other countries). In fact most of them are quite tired of the masses calling them greedy for working hard. There is endless glorification with poverty, and rich people hating which after a while looks like excuses to remain poor because the poor are entitled to free money anyway. The wealth generated is consistently on the decline largely because no sees any point in doing some thing big and watching the results of their work taken away, and the good people are constantly moving out. In all this in the constantly declining pool of wealth, people fight for whatever is left with whatever means they can.
Socialism/Communism has failed over the century because it works against the human nature and the way we perceive work-reward scenarios.
But no man has ever built a 747 by himself whether you or i or anyone has believed it or not. Additionally no mountain was cleaved by any man. This man simply spent 22 years digging a hole. This is certainly a plausible feat.
The foundations of your argument rests on the fallacy that anything you believe can become reality. Well. I believe I am right and that you are wrong. Look. Now it's reality.
The point that everyone who talks about how inequality is bad is missing is that without the billionaire in your example, there would be NO jobs. Pure labor doesn't produce - there needs to be a business idea, vision, strategy, organization, sales - all those things that the businessman in charge provides.
The reality of the situation is that workers can be replaced - that's why they get paid less. But the businessman creator can NOT be replaced - without him/her in charge, there would be nothing else.
Soviet Union and other socialist countries tried taking the businessman in charge away - and we know exactly what happened after that.
I know this system isn't "fair", but it's better than the alternatives.
I disagree with the fact the billionaire can't be replaced. The billionaire isn't some special human being. I would argue if you replace the current CEO of apple with a random apple SW engineer, the company wouldn't change much.
In fact I would argue that skilled work, the work of software engineers is by far much more irreplaceable. The person who coded the critical infrastructure for the apple operating system, he is by far harder to replace then the billionaire on top. Also note: Steve jobs died, Apple stock has gone up since his death.
> I would argue if you replace the current CEO of apple with a random apple SW engineer, the company wouldn't change much.
That's exactly what happened in the 80's - they forced Steve Jobs out, and the company lost all their market share and was on the verge on dying, before he came back.
> Steve jobs died, Apple stock has gone up since his death.
By that time, Steve Jobs knew he was going to die and picked his successor very carefully - Tim Cook is definitely a great choice. Some would argue, however, that Apple is still thriving because of Steve's ideas, and as soon as they run out of them, Apple will start to decline. The jury is still out on that one, however.
The cost of RAM memory seems to have stagnated. The prices of vital drugs are going up. Property prices are going up.
The era of value-creation is over. The real winners are those who can make other people create all the value and just capture that value.
Consider the author's idea of levying an 80% tax on people who earn $1 billion a year. Chances are that anyone who is smart enough to earn $1 billion a year is smart enough to hire a small army of accountants/tax attorneys to reduce her tax load. The relevant tax authority thus has to counter by hiring their own army of auditors/tax accountants to enforce these sorts of tax laws.
In the end, the tax authority may collect more money, but they also have to spend significantly more. In the end, will such a scheme really result in more money in the government's coffers??
And then, what happens to money once it reaches the G?? How much of the money is wasted on poorly planned/executed programs? How much is wasted by massive, overstaffed organizations? How much of the money designated for 'social services' ends up in the hands of lower income people versus how much ends up paying for bureaucracy?
Please tax the wealthy, but first, it's a better idea to run government in the most efficient way possible.
Yeah, if someone tells me that they can spend Elon Musk's money more productively than he can, I'd kind of like them to be able to point to some track record of having done that in the past with all the other money they've had their hands on.
One might just as easily say "no VC should invest money in any company whose founder has a poorer track record than Elon Musk" which is of course a ridiculous posture.
If there was ever political will to tax the wealthy at such a rate, there would also be the political will to end the loopholes allowing people to avoid that rate, otherwise it would be pointless.
It's not.
Inequality is bad. People want to reduce inequality. Startups strive to strictly increase inequality. Now what? An extreme progressive tax plus startups will STILL increase inequality. Not decrease.
To be honest I want to increase inequality even more. Because I want to allow more immigrants and refugees. You can't let in hundreds of thousands of refugees without increasing inequality. It's not possible.
What some of these posts say, without actually saying it, is that oh some types of inequality are bad and some are good. A small local business that earns it's owner a 6 figure salary? Well that's obviously good. When people say inequality is bad they meant those filthy point-oh-one percenters on Wall Street. Not the plumber who has 10 employees and made $350,000 last year. Obviously.
Inequality is at most a 2nd order derivative. It doesn't actually matter much. Things can be good with high inequality or they can be bad with low inequality. It gets far more attention than it should, imo.
If you are a rich person, then you're answer is expected. Normal. People concoct very articulate and valid logic to fit their own biases and situation. The logic is so sound that it's often hard to find bias. What can always be observed however is... does the logic benefit the individual who introduced said logic.
I feel people need to introduce their background before they introduce their arguments. Like PG did, one should always announce whether or not they are a manufacturer of wealth inequality or not before they spill their arguments.
To answer, that depends entirely on how you depend poor or rich. And to who you are comparing.
Within the United States the median household income is $50,000. Average household income is $69,000. If someone makes more than mean/median and they receive a raise than is an increase in inequality.
There's hardly a US based programmer on HN that doesn't qualify as rich and strive to increase inequality by seeking career growth and raises. I don't think that's a bad thing. I would be such a programmer.
Sure, you're right that nothing is set in stone, and you could have a country that has low inequality but it's still a terrible place to live by other metrics, but this is useless hypothesizing and speculation. What evidence do you have to support the statement that "An extreme progressive tax plus startups will STILL increase inequality. Not decrease." Seems to me, in the years when the top marginal tax rates were higher, those were some of the years with the least income inequality in American history.
Why not look at what people who study our current economies are saying instead of speculating?
From the IMF:
"We find that increasing the income share of the poor and the middle class actually increases growth while a rising income share of the top 20 percent results in lower growth—that is, when the rich get richer, benefits do not trickle down."
https://www.imf.org/external/pubs/cat/longres.aspx?sk=42986....
Not all increases in inequality are equal. They can not be treated as such.
and a graph here: http://visualizingeconomics.com/blog/2010/02/04/historical-m...
Though I can find very little that talks about the affects of this taxation on society.
I feel like the author of this post reads PG totally different. He seems to think PG is saying, "Inequality isn't a big problem and it can't be fixed and screw these dumb poor people."
So, by this completely rational view of the “pie,” it is, in fact, trending towards a zero sum game.
It doesn't even matter how growth is trending. Graham's misguided criticism of the 'myth' misses a simple mathematical fact: that the growth in income among the top 1% dramatically outpaces overall economic growth. Consequently, contrary to his assertion, the rich are increasing their income at the expense of the poor. There is no where else the money can be coming from. You can argue (wrongly, in my opinion) that this is solely because the rich are smarter and harder-working than the poor. But you cannot rationally argue that such a shift is not happening in a broad sense.
It seems really backward and regressive if anything.
Am I banned now?