There is so much truth in this: "Quote the specific passages you disagree with. This forces you to calibrate your mental model of what someone said with what they actually said."
dang still deleted me as a troll, because god forbid somebody be moderately brusque towards the almighty always perfect pg. god forbid somebody even get near his bubble.
to me the worst part of pg's essay is that he never actually provided ANY evidence that startups increase income inequality. He noted that founders get rich, but he didn't go through who else wins and loses because of those startups. He didn't note that they shift power from the old guard.
The whole thing was just pg going 'oh god people hate rich people and i'm rich, FUCK THEM' It was dumb.
I'm glad he's brought this up and in a way sort of made it a challenge. I find PG's essays to be very precise in scope and to then try to back that point up with arguments. It's good writing. Seeing people "reply" to him and effectively just make a grand standing post against poverty with the occasional "and this rich guy thinks..." thrown in is imo disgusting.
There's no way people have missed that he doesn't think economic inequality and poverty are synonymous (I kind of feel sorry for him because he sort of has to give them the benefit of the doubt and keep going as if they're just mistaken), it's a core point in his original argument, which means they're apparently fine taking him and effectively throwing him under the bus by making it sound like he's pro poverty.
I'd love to see a reply to him that's intellectually honest and stays on point. Rebuts his arguments, doesn't put words in to his mouth, and acknowledges those that have already come out of it. Sadly amongst the pile I've read, none seem to have tried to do that and instead seem to just be aiming for audience approval with emotional statements.
I disagree. Much of rhetoric is about framing--choosing what to present, and how. An essay can be wrong because of what it omits or wrongly emphasizes.
Everyone is quoting pg's passage "So you could for example have no poverty and perfect social mobility, and still have great economic inequality." That's true, in the abstract--but it's so far from the reality of US society today that it makes the whole essay tone deaf: "let them eat cake." pg could have written an essay saying "poverty and poor social mobility are the real scourges, here's how we could fix them." Instead he wrote a defense of inequality, and wonders why there's blowback.
Too many people have tied "economic inequality" to "poverty and lack of social mobility", it is like there is some sort of constant preamble on the definition. And in my experience (and I've only tried this twice so take it for what its worth :-) talking about opportunity inequality gets you the social justice discussion, talking about financial inequality gets you the unicorn/startup discussion. But is economics simply finance + opportunity? Or is it the first derivative of that expected value over time ?
Then the whole conversation is sidetracked by aspirations of the whole population versus aspirations of the few.
So Paul Graham complains that Russell Okung seems to use a different definition of economic inequality. And leaves it at that instead of giving his definition. Nice try.
I think he did give his definition. He said "It means the variation between different quantiles' wealth or income." Last line of the first paragraph of point 2.
I feel like the grandparent post demonstrates a flaw in the method of quoting passages you disagree with: you can just as easily claim the absence of information in the initial post and set it up as a strawman.
Of course, my grandparent comment demonstrates how much easier it is to correct someone claiming a lack of addressing the point, rather than the tedious nature of getting into trying to match someones rebuttal to a claim that may have only been partially made.
Also, I don't think the claim that quoting the points your addressing solves all the problems in organizing a debate, just some of them.
Quoting from PG's first essay on inequality: "The great concentrations of wealth I see around me in Silicon Valley don't seem to be destroying democracy."
This is where I disagree. The risk of dynastic wealth is that the wealthy can pay to change the system, in effect pulling up the ladder and shutting down all future disruptive startups. So we not only need to fix the problems at the bottom of the economic ladder (which is where I agree with PG); we need to make sure that those at the top don't capture the government.
Cynical readers might suggest that this is already happening.
Google, one of the richest, most powerful companies in the world, can't get the city council of an 80,000-person town (where they own an eighth of the real estate) to let them build a small bridge: http://www.mv-voice.com/news/2013/12/12/council-deadlocks-on...
>So you could for example have no poverty and perfect social mobility, and still have great economic inequality.
How much of our "discussion" on this issue is tangled up with the fact are that some people are greatly concerned with relative poverty and other are more concerned with absolute poverty?
I'm surprised at how primitive the response to pg's essay has been. None of it seems to respond to the central point of the essay (which is that economic inequality has many causes, and we should specifically attack the bad causes, not inequality itself).
In spite of all the noise, I do disagree with the central point.
Economic inequality may be caused by good things, but it is still bad. Wealth is opportunity and political influence. Therefore economic inequality is inequality of opportunity and political influence. Persistent intergenerational economic inequality is pretty much bad by definition.
Inequality - a bad thing - can be caused as a byproduct of good activity. It's still bad. It's a negative externality, like environmental pollution. In fact, there's some striking parallels - a buildup of inequality, like a buildup of pollution, can trigger the collapse of the ecosystem.
We need to agree that inequality is categorically bad so we can have a real discussion of how to keep it under control. It would be crazy to argue that farming is good so farm-related pollution does not need to be controlled. Likewise with startups and inequality.
Larry Page, net worth $29 billion, and Sergey Brin, net worth $34 billion, have so little political influence that they can't get a small city's government to approve a new bridge over a creek:
Ironically I think smaller local issues are often harder for the wealthy to influence than bigger national issues. As a concerned resident I can probably actually talk face to face with my city representative, and share my concerns about a project like this. I have pretty much no chance of meeting face to face with my state representative without cash or some other means of influence. The councilor probably also has significantly less need for campaign donations from rich benefactors than a national representative. And finally, local representative are most likely making decisions that affect them pretty directly as a resident, whereas national representatives may often be making decisions that have widely dispersed or no direct personal impact.
These are all reasons regularly brought forth by Libertarians and Republicans who prefer that centralized government entities defer to local entities as much as possible.
The same things that make centralized government problematic - making decisions with widely dispersed impact with few personal consequences - are similar for very large organizations.
In so far as large companies are permitted to exist by the people for the benefit of stakeholders rather than shareholders (i.e. employees and their communities, suppliers, customers, as well as actual shareholders and bondholders), the executive leadership of a corporation is much like a government, and in a large company, it's a distant one, subject to autocratic rule and upward redistribution of the value created by the whole.
-) Sergey Brin is worth $35,000,000,000. Has he worked 35,000 times harder or smarter than the 40-year-old Doctor who earns well and has scrimped and saved to $1m in net worth?
-) Let's say you'd told Sergey - just as he was starting Google - in 20 years' time you'll have $10m in the bank from this. Do you think that would have encouraged or discouraged him?
Brin has arguably created significantly more value than the 40-year-old Doctor. A doctor who likely uses Google to research medical information on a daily basis (as well as uses it for looking up personal information), possibly using a Google device, who gets from place to place using Google Maps, and searches for information for his next published paper on Google Scholar. (and so on, even putting aside the recent expansion of Google into Medical technology).
I see your point, but it wouldn't have been possibly for him to build Google had it not been for people with MUCH more than $10M in their bank account to bankroll his growth.
As someone who's tried funding a company that way, I can tell you it doesn't work.
Companies like Google, Facebook, Dropbox and Airbnb all looked like crazy ideas to begin with. Ordinary people with limited funds shouldn't be investing in companies like these, as they fail far more often than not.
It's only due to the existence of high-net-worth individuals, who can afford to lose money on most of their investments and who have a "pay it forward" mentality, that these companies can get their start.
If the returns for people Page and Gates and Zuckerburg were capped at $10M, there's a good chance they wouldn't bother.
For people like this, the goal is not personal enrichment but rather the ability to better the world, not just via their products, but also through philanthropy.
Take away the blue sky returns, and you take the motive that is most beneficial to the rest of the world.
> Take away the blue sky returns, and you take the motive that is most beneficial to the rest of the world.
I feel this to be the primary reason we have the technology and infrastructure we do today. Take the Robber Barons, for example, their pursuit of endless returns gave us the railroads, electricity for the masses, and cars. I guess the point is there is good with bad in everything. Sometimes the good outweighs the bad. That's how I am interpreting PG's original wealth inequality essay.
Wealth is both created and distributed. No one in modern life creates value in a vacuum, it is always in concert with many other people, past and present. And aside from governments, no one makes their own money---they get it from other people, in proportion to the value that those people perceive they're getting in return. And this value exchange all rests on top of a system of laws and culture, none of which is in the direct control of the individual. On a day-to-day basis in modern society, wealth distribution is a much bigger force in an average person's life than is wealth creation.
It's dubious only if the potential return is much less than the alternatives. Assuming that the same inequality-reducing mechanism is operating across all the potential investments, their behavior would be unchanged. Investors are looking for the best available return on their investment, not some arbitrary fixed value.
There's a huge difference between 'significantly more value' and literally thousands of times more value. Had Brin been content to continue in academia after publishing his original research, and left the implementation and the riches to someone else, would we say that he had contributed virtually nothing? It's a myth that our economic system rewards people in direct proportion to the value they create.
I assume you also 'know' that the founders of Etsy are 75% less smart now that the market valuation of Etsy is 25% of its high.
Market valuation measures nothing but what someone will pay for something today. It doesn't measure how smart or hard you worked.
"I invented nothing new. I simply assembled the discoveries of other men behind whom were centuries of work. Had I worked fifty or ten or even five years before, I would have failed. So it is with every new thing. Progress happens when all the factors that make for it are ready and then it is inevitable. To teach that a comparatively few men are responsible for the greatest forward steps of mankind is the worst sort of nonsense." - Henry Ford
If one farmer works harder than the guy next door and becomes richer as a result, how is that bad?
It isn't. But if one farmer works harder than another, wealthier farmer, and the wealthier farmer makes 1000 times more than the harder working farmer, that is bad. And that is how the system currently works: we systematically reward people for being wealthy, regardless of any personal qualities or talents. And whereas there is a natural upper bound on how hard you can work, or how clever you can be (we're all human beings, after all), there is no upper bound on how wealthy you can be, and therefore no upper bound on the advantage you can be born with. It's tough to work 1000 times harder than someone else, but trivial to earn 1000 times more from investments if you have 1000 times more to begin with.
While the political influence of wealth is obviously bad, I think it is a small factor in comparison with economic influence.
The amount of industry attempting to satiate your desires is proportional to the amount of money you have. Hence the huge disparity between the number of BMW ads on primetime TV and the number of people watching primetime TV that could ever conceivably afford a BMW. The GDP of many countries could be repurposed entirely to serving the desires of the wealthiest few and still not exhaust their purchasing power. In theory, Bill Gates could purchase the entire output of any country smaller than Oman for a year. https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nomi...
This is a factor that globalization proponents don't deal with successfully I think. When a country is isolated, it is only the disparities of wealth within the country that distort the production of the country. Once a country enters global trade it is exposed to many orders of magnitude more of difference in purchasing power.
All of the optimality results in economics assume that the current distribution of wealth is optimal (or at least exogenous), hence pareto optima and not any other type. This factor deserves more thought and discussion.
"Persistent intergenerational economic inequality is pretty much bad by definition."
If you qualify it that way, sure. That doesn't mean all economic inequality is bad. You don't have to begrudge Sergey Brin his billions, or say the process in which he made those billions in any way is a bad thing, in order to say that people shouldn't be able to inherit billions.
> Economic inequality may be caused by good things, but it is still bad. Wealth is opportunity and political influence.
Paul directly addressed this in his reply to Klein (http://paulgraham.com/klein.html); Ctrl-F "the conversion of money into political power"; in brief, he says that if you're upset that economic inequalities leads to unequal political influence, attack that. Fight to remove the political influence that wealth currently has.
If we lived in a world where everyone has the same opportunities for social mobility (i.e., universal free education from daycare to PhD, unbiased hiring processes) and the same political influence (no SuperPACs, no lobbyists, mandate that no citizen spends more than $100 / year on political donations, and perhaps give every citizen that $100 / year, as a use-it-or-lose-it source of funding for whatever political causes they wanted to support)... if we lived in such a world, would you still be upset that Mark Zuckerberg had a lot more money than you? Why?
This whole thing is about taxes and yet neither side is honest enough to acknowledge that fact. No one will begrudge PG, Zuckerberg or any of the other high earners continuing to amass considerable wealth so long as they're paying significantly more taxes than they are now.
When that happens, even though there are very rich people, there's also a healthy middle class and the social support systems (safety nets, education, etc) for poor people to reach the middle class. But what we have now is rich people hiding behind capital gains tax rates to actually pay less than people who earn significantly less that they do. And PG, as someone who earns his living primarily through investing, is no doubt taking advantage of this situation.
When PG says "don't address income inequality directly," it's the equivalent of saying "don't raise my taxes" since raising taxes on the wealthy is the method for addressing income inequality directly. IMHO, the reason he's gotten so much flack is that there is a very large proportion of the population that believes that we need to close the loopholes that the uber-wealthy use to avoid paying the right amount of taxes and increase the top marginal tax brackets to above 50%. And yet he wants to talk about addressing income inequality directly as if his critics want to keep people from earning that much in the first place.
I can't tell if he's being deliberately disingenuous or if he actually believes that's what people are suggesting, but the net result is a back and forth conversation at two different contextual levels.
Wait, did you read the essay? He talks about closing tax loopholes and even calls that 'stealing' (search for it in the essay). He also argues:
> For example, let's attack poverty, and if necessary damage wealth in the process. That's much more likely to work than attacking wealth in the hope that you will thereby fix poverty.
I believe, though I may well be wrong, that PG isn't against taxing the rich in order to provide social services and increased education, healthcare, what-have-you.
I think you're right, but this is indeed a large misinterpretation hazard. When he writes about this in the future, he should probably explicitly say, "Tax the 1% far more heavily to pay for the social mobility and equal-access-to-politics programs; that's the only realistic way to fund them."
Perhaps you can enlighten me then...if he's arguing that we close loopholes (and the lower capital gains rate is a loophole) and increase taxes on the wealthy to an over 50% marginal rate, what direct attacks on income inequality is he arguing against? How are people attacking income inequality in any concrete way that isn't about taxation?
Because if there isn't some concrete attack on income inequality, then we're arguing about an abstract concept, which is just pointless.
You could tax big incomes in excess of 50%. Give them low inflation, no inheritance tax and pour all that extra money to defense. Congrats, you have fixed the position of a rich caste.
>... if we lived in such a world, would you still be upset that Mark Zuckerberg had a lot more money than you? Why?
That's a really good question. Theoretically, I would be fine with that kind of world, but I dont think that kind of world has ever existed or will ever exist. It is more realistic to attack the problem on both fronts - maximize social mobility and minimize the influence of wealth on politics, but also recognize that you will never completely succeed. Wealth will always equal opportunity and influence to some extent, so inequality will always be a bad thing to some extent.
For what it's worth, I'm not upset that Zuck has a lot more money than me. I just think that entrepreneurially generated inequality should not be a sacred cow, and I'm speaking as someone who has created a good deal of inequality with entrepreneurship.
> Paul directly addressed this in his reply to Klein (http://paulgraham.com/klein.html); Ctrl-F "the conversion of money into political power"; in brief, he says that if you're upset that economic inequalities leads to unequal political influence, attack that. Fight to remove the political influence that wealth currently has.
It simply isn't possible at this point. The Supreme Court has seen to that quite thoroughly.
A constitutional amendment to "fix" the problem is beyond the realm of possibility.
The reason we find ourselves so helpless in this fight is because our society's money has shackled us. Think about it: the rich only have power because people submit to their power. People accept their money to do harmful things because they can use that money to get whatever they want from almost anyone. This is the flaw in our money that makes our political system degrade from democracy to capitalism. Votes can be bought, so counting votes is a charade that disguises the fact that the tally of money on each side of an issue matters most.
To fix this, we must fix our money. When someone spends money they got from wealthy people for manipulating our politics, the person who accepts it is fulfilling the promise the money held in the first place. We must refuse to empower money used in this way. As individuals, we must reject money in our own lives when it came from political manipulation so we can remove the incentive to participate in political manipulation.
This is merit capitalism. The technology to make it work exists today, and it doesn't require the impossible task of winning votes in a Congress we can't afford to buy back from the rich. It requires tools to make it easy to reject dirty money and spreading the knowledge that rejecting dirty money is even possible. These are things that we can do. These are things that you can do.
I think you could make a strong case that would still be problamatic. Let me explain this by attempting to uncover what I think is the underlying problem.
Firstly economic inequality may or may not be a problem, so it is probably not worth talking about. It is only when the inequality manifests itself in terms of power between people. Were some people have to work for a wage in bad working conditions (even here in the US) because they have no other options. They may have kids. All the way up to: having to work for Google or Facebook et al. and hating it because you know on your free time you would rather explore your own creative ideas. But people who work at menial labor jobs are just as creative and should be given paths to allow them to pursue their creative interests too.
Language makes us creative beings, and if power constrains that in any way and it can not make itself legitimate (which the burden is on it to do so) than it is wrong for it to be there.
Thus because economic inequality illegimitately constrains the human capacity to express itself creatively it is therefore problamatic and should be dismantled.
PS I realize in theory this sounds all good, but I am more convinced that humans can organize themselves into these freer societies. And those future denizens will think of us as savage as we think of american colonialism and slavery and genocide (native americans) a few hundred years back.
I think you need to step back even farther: what is the point of money? If you don't have a good answer to that question, how can you reason about the benefits and drawbacks of different ways to distribute that money?
I'm going to out on a limb and suggest that the point of money is economic growth. This may seem like a circular argument, so let me expand on that a little. Imagine you have a farmer. This farmer wants to grow food and he has plenty of land. However, he does not have enough seed to plant all of his land. He has nothing to barter with until after his food is grown, so he ends up "wasting" part of his land (letting it go unplanted) because he could not get enough seed.
In this scenario, everybody is a loser. The farmer grows less plants and will not be able to barter for things he needs in the future. Society also gets less plants. So it makes sense to give the farmer more seeds so that he can plant his whole field. In fact, because he can do that, he can repay the favour in the future by giving up some of his fully grown plants.
Money is a kind of token that can be used to trade for things. It is very useful for society to give people money if they will use it to trade for things that they need, which will in turn produce things that will improve the quality of living for everyone.
Money that is piled up and not spent is not helpful to the economy or society. If there were a limited amount of money (and in some ways there is), then we could say that people who hoard money are a burden on society because they stop people from making use of that money to improve society. Ideally we would split up all the money in the world and give whatever amount is needed to the people who would be able to use it. In a really ideal world, each person would be motivated and able enough to spend the money in a way that would produce benefit for society.
Of course this is not the case. There are many people who hoard money (bad). We can also see that there are people who would spend money improving the beer brewing industry (maybe not so bad) at the expense of investing in life saving medical research (arguably seems better than beer in some ways). In fact, quite a lot of people simply want to consume goods and distribute money around, as opposed to trying to improve things. Those people are at best neutral to the system, though better than the hoarders.
From a societal point of view, it is best to distribute money in a way that maximises people's ability to use it beneficially, while minimizing people's ability to hoard it or distribute it arbitrarily (buying shiny useless toys or food/shelter that they don't need). So already we can see that depending on what people want to do with money, it is beneficial for society that there is an inequality.
Having said all that, I think that the inequality that we have reached at the moment is far from ideal. Now the really interesting bit is that what I wrote so far seems to favour a fascist economic system. I suspect we can do better, though ;-)
If you think there are things people should not be able to buy (political sway) then would it not make sense to focus on those who are both selling this service they shouldn't be and also the ones that are actually buying it? There are plenty of things the average person could afford if we let them, the answer to that wasn't "no one gets any money".
> Economic inequality may be caused by good things, but it is still bad
Let's correct this into: "excessive economic inequality may be caused by good things, but it is still bad". Then I wholeheartedly agree, and probably PG would agree too. Or, at least, I hope he would agree, and not consider only poverty a bad thing.
I can't think of a bigger complement to a writer than to explain something clearly and yet that somehow turn into a controversy.
Because if the writing is clear, which in this case it is, it means the problem is the audience. It means the writer found a genuinely confusing and probably undervalued topic.
It's interesting to note how the styles of Russell Okung's article and PG's response are so different. Okung draws analogies to sports, men on hills, uses rhetorical questions, and talks about dreams and compassion. It's impassioned. PG's response is a cold deconstruction. A implies B implies C, but B is not true hence the argument is false.
Personally I love this style of argument and wish more people would argue in this way, but, anecdotally, people often think you're an asshole when you do. Maybe it's because you miss out on nuances that you find irrelevant to the central question, but that others feel are very important. Maybe it's just a generally unappealing way to be convinced of something.
> If you attack economic inequality, you're indiscriminately attacking both the good and bad causes.
Graham keeps returning to this point, which is a little silly. His class owns and controls the corporate media, which decided to frame this general issue as one of economic inequality. Then Graham castigates the strawman his class put up as being not focused on the right thing.
There are those of us who work, and then there are the heirs who parasitically expropriate the surplus labor time of those of us who do work. It's as simple as that. Workers periodically fix the problem - as they did with Charles I, Louis XVI and Marie Antoinette, and Nicholas II and his family. As there are still classes, the workers and the parasite heirs, this problem still exists, but I'm confident the problem will eventually be fixed permanently and the parasites will be eliminated as a class.
"Workers periodically fix the problem - as they did with Charles I, Louis XVI and Marie Antoinette, and Nicholas II and his family. As there are still classes, the workers and the parasite heirs, this problem still exists, but I'm confident the problem will eventually be fixed permanently and the parasites will be eliminated as a class."
This sounds like you're advocating for a literal genocide. Is that really what you mean?
I think the confusion is around whether "like Larry Page and Sergey Brin starting the company you use to find things online" is a good thing. It's easy to read this as not just "[starting this company]", but "[starting this company] [and growing it into a huge success with mixed benefits for everyone]." I.e., Russell Okung or others might read that in terms of what it implies; but Google by itself neither furthers nor reduces global income inequality to my knowledge. That's not one of its priorities or missions.
But starting it! Starting it was key. And "income equality" was key to starting it as it is to starting most companies. Is the original wording wrong in PG's essay wrong? No, but it's easy to misread unless it's emphasized. E.g., the desire for "economic inequality" as a catalyst for starting companies is great. It can be hugely successful and useful in many ways.
But as soon as a large company has shareholders etc. one of its primary goals is to maintain capital for itself, which is generally speaking in favor of income inequality in more negative ways for the general public, one could argue.
Russell Okung's point at the end is I think actually built on teasing apart this conflation: "I urge you, Graham, along with the rest of the community, to return to your first love. Build people up."
I think the core of the issue isn't whether economic inequality is good or bad. I think most reasonable people can agree that some economic inequality is good and healthy and incentivizes innovation and productivity. I think we can also agree that absolute inequality (one person with everything, and everyone else with nothing) is also a bad thing. This means that the right answer is somewhere in between, and where we draw that line is where people disagree. Holding up either side as saying "inequality is bad" or "inequality is good" is, therefore, a straw-man. No reasonable person is saying either of those things.
What we do have to ask ourselves is how much inequality should we tolerate in the name of progress? Would Larry and Sergei not have created Google had they made only 1/10th of the fortunes they have today? What about 1/100th, or 1/5th?
My personal view on the subject is that that multiplier is set too high at the moment, and that society would churn out innovators just fine if there were extreme taxes at the ultra-high end of the income spectrum. I would be very surprised indeed if Larry and Sergei would have chosen to abandon their little search engine project if they only had the potential to make $100 million each.
I think any positions taken on this subject that don't discuss it as a question of where to place this multiplier are disingenuous nonsense, to be perfectly frank. And this is my, and I think many people's issue with PG's essay: he seems to be taking the position that some types of economic inequality are good and some are bad. But it's not how someone made the money that's good or bad, it's whether or not it's really necessary that they have that much.
Very, very well put. This is was what I've been thinking while watching this back-and-forth unfold (both this one involving PG and in general over the last few years).
In my mind, whether wealth is zero sum or not is irrelevant. The discussion around income inequality is about the area under the curve. If that area increases again and again and again but the bottom, say, 90% remain in the same state, that's not progress.
> "I think any positions taken on this subject that don't discuss it as a question of where to place this multiplier are disingenuous nonsense"
Personally, I think "where to place this multiplier" is not anywhere close to the most relevant question.
What matters isn't how big the multiplier is. What matters is what's causing it, and what problems it causes. If a big multiplier is caused by an atmosphere that promotes innovation, that's better than a small multiplier caused by a stagnant environment, which is better than a big multiplier caused by massive corruption and oppression. Norway, Sweden, and Finland have some of the lowest Gini coefficients in the world, way "better" than the US or the UK -- but so do Pakistan and Afghanistan. "Where to put the multiplier" is, at best, a secondary question after fixing all of the primary problems, and possibly a completely irrelevant question.
Where to place the multiplier only becomes irrelevant when the bottom is acceptably high. If you think that the bottom is acceptably high, then you may accept an unlimited multiplier.
I agree with you that a big multiplier caused by innovation is better than one caused by stagnation and rent seeking, but I don't think that we would be willing to accept any multiplier just because it promoted innovation. So the question remains: how much inequality is worth how much innovation?
Assuming you accept PG's premise that more inequality equals more innovation
> "only becomes irrelevant when the bottom is acceptably high"
or, put another way, only becomes relevant when the bottom is unacceptably low.
I'm much more interested in worrying about where the bottom is than worrying about the multiplier. It's a proxy measure -- perhaps a good proxy measure, but still a proxy measure. Instead of focusing efforts on the proxy measure as a whole, focus on specific issues that matter at the low end. If it happens that some specific issue is best resolved by closing tax loopholes or steepening the tax progression curve, OK -- but don't do it just to "lower inequality", do it to solve a specific problem.
I mostly agree. However, I think it's a little more than a proxy measure. I think people often conflate the notion of capitalism the resource allocation algorithm with capitalism the moral philosophy.
The former says that assigning people directly the fruits of their labors leads to an efficient marketplace and ultimately greater welfare for all. The latter says that the efficacy of the former grants those people a moral right to those fruits.
The former is almost certainly true - capitalism is much more effective at accelerating efficiency and innovation than anything else we've tried. But the moral corollary doesn't necessarily follow. And if you accept the former but deny the latter, you're faced with a question: Do we really need extreme outliers of wealth in order to achieve the benefits of capitalism? And if the answer is no, then does it really make sense to let those outliers keep all those resources?
+1 for being well put, but I find the talk of "how much inequality should we tolerate", or "where the multiplier should be", or if it's "necessary that they have that much" to be much more bothersome than inequality itself, as though we should have a right to decide how much someone can earn.
I don't think we do (and by "we", I include government).
Russell Okung suffered a dislocated shoulder today and the whole team seemed distracted. They lost. So, PG for next year, just to be on the safe side, can you please choose another player to debate with. Maybe Brady? Thanks. A Seahawks fan.
The problem, as I see it, is that when wealth becomes too concentrated it in fact destroys opportunities and therefore social mobility.
Some people want to believe that you can create a solution that fixes the opportunity/social-mobility problem without eroding the concentrations of wealth. Others believe that you have to attack those concentrations of wealth in order to bring back opportunity/social-mobility. I sit in the latter camp.
To give an example. When house prices expand out of reach for the much of the local population many will object to any additional taxation that targets excessive ownership (landlords) or even foreign ownership. They all have the same argument, that it will cause house prices to go down and harm the economy. Instead they promote low income housing programs which are just handouts that only slightly offsets this gigantic problem. These people really don't seem to understand that house prices are abnormal and need to go down to sane levels that will on average align with normal incomes in order for the gentrification process to reverse course.
In other words you can't really fix the problems that both Paul and Russell agree on without directly attacking the concentration of wealth problem. Everything else is just bullshit.
The world is not the USA. The world is 7 billion people, in countries and cities of varying economic outcomes. While income inequality is rising between inhabitants of the first world, global income inequality is shrinking. Specifically, the gap between Brooklyn, Beijing and Botswana is shrinking, even as the gap between individual citizens is rising.
And the biggest gap of all - the gap between 21 meals a week and < 21, is shrinking rapidly. As much as we bemoan great wealth compared to middle-classness, this gap - the gap between the never-hungry and the sometimes hungry - is IMHO the single biggest gap of all.
It was an example. An example that was on topic towards economic inequality.
Just because you can find some examples where economic normalization is occurring doesn't mean that excessive wealth concentration isn't killing more opportunities than it creates.
I don't really get what all this rebuttal targets. The original essay is poorly thought and full fallacies. Despite that none points them out. So, let see some of them.
Ok, we shouldn't look at indicators of inequalities (the Gini Index for example), but we should look at inequality effects. Well, there's a lot of literature looking at it and finding that the Gini index is an acceptable proxy for the other measures (acceptable is kind of fuzzy here, bear with me). We also know that a Gini index of 1 doesn't mean perfect equality. This because it depends on the definition of equality and on what you measure. Also, we know that a little bit of inequality is not only acceptable but required to foster social mobility (and it is probably part of PG's argument). How much is the problem! But saying we shouldn't look at inequality index but at the underlying issues and the individual cases is as much a misguided suggestion as suggesting a startup to stop looking at DAU/MAU.
But even if we discount this critique as futile. Do we really think that reducing a little bit the inequality will stop startups? If we setup the system in a way that Page make just 10 billion dollars instead of 15 billion out of Google (I'm making numbers up) he would have decided for a clerk work instead? Is he seriously saying that? And then, wasn't him (to be honest, could have been Sam Altman) that said that you shouldn't start a company to become reach but because you think you are the only one able to solve this issue? I know it sounds like a straw man argument. It is a sort of. But I believe in the law of diminishing return. I believe that I started a startup because I was determined to solve a hard problem, not for the upside (although it was important, but I was smart enough to know that the probability of making big money were really small and other investment had better returns).
Then there's the point of variation in productivity that is so fuzzy my head exploded. What does he mean by that? Which his the definition of productivity he is using? Seriously, that's a problem. Because if he defines productivity by the ratio value individually produced/hours, I wonder how he estimates the value produced in the last week by Larry Page. By Google's value? And how he approportionate the value produced between Page and the thousands of people working for Google. Even for a simple example, how do you compare a productivity of a woodworker making chairs and a steelworker making swords? You could count the unit produced per day, but they are different products. You could assess the market values of their output, but I'm pretty sure the value of their output changes between peace time and war time without their productivity actually changing.
Finally, it comes the last issue. He acknowledges that there's a small number of startup founders coming from poor backgrounds. I don't have data about that, so I believe him. Yet, I don't think determination is something lacking from poor people; it is the opposite! So, which is the problem here? Well, my little anecdotal experience tells me that when your parents could help you, you could go for the long shot, but if you need to eat, it is better to find something that give you the food quickly. It doesn't go against his argument, actually, kind of make it. But I wonder why it didn't make it explicit.
I think it's time for pg to review the idea that there should be only one SV.
Having only one startup center in the country contributes to limiting social mobility (how many can afford to move to and live in SV; amazingly, some don't want to live in SV; what about people with an "n-body problem"?) and deprives other areas of the country of the tax base in SV. It could be transformative for, say Detroit, to get even a fraction of the attention of SV. "Spreading the love" is also beneficial with respect to diversity, finding problems to solve, and to robustness (e.g., natural disasters).
PG's point is so obvious it is almost tautological. Of course we should get rid of negative causes + negative effects, while keeping the positive. That applies to literally anything (gambling, friendship, work, etc). Maybe people are interpreting this w/ the most controversy because PG has a history of controversial statements (remember his article on immigration which caused an uproar on HN?).
A more interesting argument that PG could have made is that it is theoretically possible to have inherent wealth inequality in the system without negative results. At this point, I see very few believe that it is even possible.
> you could for example have no poverty and perfect social mobility, and still have great economic inequality.
I get the impression, reading a lot of the responses to pg's essays on this topic that this is like dividing by zero according to most people's model of the world.
1. He says I say economic inequality is "a good thing." I didn't say that. What I said is that it has multiple causes, some bad (lack of social mobility) and some good (Larry and Sergey starting Google).
It's interesting and probably important that he doesn't actually come out and say whether or not he believes economic inequality to be a bad thing, either.
There is significant evidence that a high level or economic inequality has bad consequences for people - it can literally be bad for your health, via psychological mechanisms. This is important since if inequality is bad in itself, then you might want to eliminate some of the ostensibly good reasons as well, after having eliminated the bad reasons.
So instead of taking a stance on the badness of economic inequality (yay or nay), he bangs on the drum that one should first go after the bad causes of economic inequality. I doubt anybody else in the discussion would disagree with that, which makes the whole first point rather pointless.
On point 2, "So you could for example have no poverty and perfect social mobility, and still have great economic inequality."
Does pg realize that perhaps somebody might not agree with that? This seeming lack of understanding makes the second point rather pointless as well.
On point 3, "I called out lack of social mobility as one of the worst problems contributing to economic inequality"
Is he aware of the argument that economic inequality can reduce social mobility?
Since I doubt that pg is wilfully ignorant of the potential subtext that goes on in the heads of the people he responds to, I can't help but have the impression that people are talking past each other. I guess part of the problem is that the people he responds to aren't making their arguments very well (at least from the perspective of a highly technical mind), and another part of the problem is that pg seems to be insufficiently aware of the large body of work on the topic in disciplines outside his "home turf".
> In fact I suspect much if not most of the angry reaction to it was a result of people not understanding what the term "economic inequality" means.
Like "global warming", the term "economic inequality" has become something people use to refer to all of the related issues. PG's essay was controversial because he used a narrow definition. He says other people are confused, but in this case, I think he is. The fact that his essay necessarily strayed outside of his own definition proves the point.
> ... and talked about how I had personally seen the effects of it in the relative scarcity of successful startup founders who grew up poor.
And yet PG has never made any effort to help founders from poor backgrounds. In fact, YC has chosen to provide the majority of their help to people from the same elite backgrounds as themselves. Literally turning away thousands of people from poor backgrounds. It truly is "the Harvard of startup accelerators".
It sure would be amazing if the most powerful person in Silicon Valley decided to help more poor people do startups. Nothing has the same potential to increase social mobility in the U.S. like thousands of new startups run by poor people solving problems they care about, like maybe helping more poor people do startups.
To be blunt, if people are misunderstanding pg's essay, what it means is that his writing skills were not good enough to tackle a topic as complex as economic inequality.
I read his essay and came across with a bad taste in my mouth as well. I think he has surrounded himself with too many yes-people that told him this was a great article to post, without being honest to him about the repercussions.
It's fine because everyone makes mistakes. This is a life lesson that he needs to internalize.
This was my biggest takeaway. Who does he have review these? No one told him how bad this was academically and optics wise? He needs to broaden the inner circle.
> "it means is that his writing skills were not good enough"
or, possibly, their listening/comprehension skills were not good enough. Communication requires solid effort and methodology by both the speaker and the listener. Either or both sides can be responsible for a breakdown.
There were a lot of people that burned him online for his essay, not just a football player. If a bunch of people accuse you of the same thing, at some point you have to start blaming yourself instead of blaming others.
pick any controversial topic in which people are emotionally invested, and any well-written argument made about that topic, and you'll find "a lot of people" who "burned" whoever wrote the argument -- some of which might even be good responses, but many of which are some variation of "heard what I wanted to hear".
No. I read a lot of the replies. They attributed viewpoints to PG that he didn't come close to saying.
Example:
> [PG] thinks that those concerned with income inequality want communist style income equality.
Nope - none of what PG said in his essay comes anywhere close to making that characterization of his opposition, and yet many people have attacked PG as if his view was this view, and other equally outlandish, baseless interpretations of what he actually said. They've said things like, "PG is blaming the poor for being lazy", which is not anything remotely like what he said.
The people who wish to criticize PG's essay or otherwise respond to it would do well to simply quote his words directly and respond to the quote. What's actually happening is that people are projecting emotionally charged beliefs onto PG, and claiming that he said things or believes things he doesn't and that weren't in the essay, and then attacking those made up, straw-man ideas instead. It's really disappointing and frustrating for me to watch.
Wealth inequality is such a hot topic that if anyone dares to call any part of it good, it receives a similar angry mob response that denying anthropogenic climate change does.
Thus, this has nothing to do with pg's actual words. This is all based on the current groupthink about inequality.
Assuming one wants to tread into challenging waters, do you think it is possible to write a bulletproof, beyond-criticism essay?
I think it's impossible to write a bulletproof article, even something longer form, unless it says something trivial like "the sky is blue on some days". Even then, someone form Beijing would argue ;)
PG chose a really difficult subject, tried like a developer to break it down into constituent parts, and got criticized as if he was saying the problem didn't exist, rather than it is more than one thing. I think that is criticism that he can build dialogue on (a positive), rather than a flaw in the original article.
Either side can be responsible. Communication is a mutual process, and if your goal is to communicate, you have to do what you can do---if you're writing, try various tactics to find which one can penetrate the reader's precognition. The reader, otoh, try various way to interpret what's written to make sense.
If communication fails, then it's a loss for both side. You can blame another side but that doesn't make things better...
It's interesting that pg has already written how difficult a nonconventional idea to be heard. This can be another instance. It might take 10 more essays. Not the direct rebuttal like this, but tackling the issue from different angle and/or different abstraction level; e.g. ok, how could we attack wealth influencing politics?
I disagree with pg all the time. I don't think I'm too dumb to understand, so why would I argue that?
I didn't even agree with pg in the above post. Instead, I made an abstract point -- that communication breakdowns can be the fault of either party, and that they're not necessarily related to someone being "dumb" but can be due to problems in effort or methodology.
I'm sure you never say something that hits an emotional trigger in others and renders any further conversation difficult.
Imagine a world where everyone thinks the world is flat and somebody comes out saying it isn't. Now imagine what the folks believing in a flat world are thinking. Outrageous? Writing skills not good enough? Bad taste in the mouth? Crazy scientist surrounded by yes-people?
Thank you, PG, for your responses. They help remind me that "enlightened capitalism isn't perfect, but it's better than every other system that's been tried."
pg's central argument is that economic inequality in itself is not bad, but it has good causes and bad causes and those should be attacked instead of economic inequality.
I think he's right: it's probably more productive in the near term to attack bad causes of economic inequality. [1]
But his first assertion (that inequality is not bad) could still be wrong.
I think his essay is built on the assumption that people care more about absolute values of wealth and not relative ones. Psychology indicates that relative measures of wealth more directly map to levels of happiness and unhappiness. People do care about relative levels of income as opposed to absolute levels of income, and social cohesion is affected directly by such resentment, even if there isn't extreme poverty and incomes are rising across the board!
In Singapore, where I live, there is relatively strong meritocracy and little extreme poverty. GDP per capita is high, and rising; the government is directly incentivised to create economic growth (their bonuses are pegged to national GDP increases). But ostentatious displays of wealth - made easier, IMO, by social media - have led to rising resentment of the government's policies, as well as resentment against the globalised rich who chose to make Singapore their home.
I also think economic literature and history is rich with the negative social effects of economic inequality (even if some of it is conflated with bad causes, as pg describes). Elsewhere in this thread tkiley talks about how economic inequality can be seen as a negative externality, which is a good way of describing it, and is, I think, the attitude economists seem to take.
While pg's essay contains a fascinating call: to imagine a world where we have to chose to live with increasing economic inequality, I do not believe such a world would be easy to live in.
[1] To paraphrase his argument, progressive taxation might bring down the Gini coefficient but not necessarily do anything to alleviate poverty if the systemic causes of poverty aren't attacked. Better to 'attack poverty and destroy wealth in the process, as opposed to attacking wealth and hoping it destroys poverty as a side effect'.
>While pg's essay contains a fascinating call: to imagine a world where we have to chose to live with increasing economic inequality, I do not believe such a world would be easy to live in.
It's almost as if people will always find something to complain about.
Looking at it - I can't help but feel like he simply said everything he said in the original essay, except with quotes from that other guy sprinkled in.
That is to say, the position hasn't changed at all.
This is simply a reiteration, a response to the number of people filling HN with emotional comments on the topic.
The potential problem that hasn't garnered much attention is that the issue of having a lifestyle you are not satisfied with goes far beyond the distribution of dollars.
If we agree on that, then there can be room to discuss what's really bothering people.
From an individualistic point of view, it is easy to say 'he has more than he knows what to do with, I'm struggling, I want some of that, just give it to me!' and anyone who says otherwise, is clearly not cool.
It makes sense too. That point of view makes total sense - if someone has a billion, giving me personally a million would be real good right?
Too bad there are just not enough billionaire people to make that work, not even close. So then what are we talking arguing about? The solution is elsewhere.
That is to say, we have to pick our battles, we only have so much time and energy in a lifetime. Arguing about 'if we distribute it differently, I think it'd be better' back and forth if you are an economist, philosopher, or someone in a place where you can actually affect these things is totally fine. That's not the people here, so then maybe all that's happening is people venting their frustrations out on PG and if that's the case, no amount of responses is going to fix that. It's like arguing with a dude who believes the root of his problems is witchcraft.
That's something each person has to fix for him/herself.
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[ 2.8 ms ] story [ 199 ms ] threaddang still deleted me as a troll, because god forbid somebody be moderately brusque towards the almighty always perfect pg. god forbid somebody even get near his bubble.
to me the worst part of pg's essay is that he never actually provided ANY evidence that startups increase income inequality. He noted that founders get rich, but he didn't go through who else wins and loses because of those startups. He didn't note that they shift power from the old guard.
The whole thing was just pg going 'oh god people hate rich people and i'm rich, FUCK THEM' It was dumb.
There's no way people have missed that he doesn't think economic inequality and poverty are synonymous (I kind of feel sorry for him because he sort of has to give them the benefit of the doubt and keep going as if they're just mistaken), it's a core point in his original argument, which means they're apparently fine taking him and effectively throwing him under the bus by making it sound like he's pro poverty.
I'd love to see a reply to him that's intellectually honest and stays on point. Rebuts his arguments, doesn't put words in to his mouth, and acknowledges those that have already come out of it. Sadly amongst the pile I've read, none seem to have tried to do that and instead seem to just be aiming for audience approval with emotional statements.
Everyone is quoting pg's passage "So you could for example have no poverty and perfect social mobility, and still have great economic inequality." That's true, in the abstract--but it's so far from the reality of US society today that it makes the whole essay tone deaf: "let them eat cake." pg could have written an essay saying "poverty and poor social mobility are the real scourges, here's how we could fix them." Instead he wrote a defense of inequality, and wonders why there's blowback.
pg has a bit of a blind spot about this "quote a specific passage" business. idlewords wrote a brutal evisceration of "Hackers and Painters" called "Dabblers and Blowhards": http://www.idlewords.com/2005/04/dabblers_and_blowhards.htm And here is pg, 8 years ago, demanding someone point out which specific passage was refuted: https://news.ycombinator.com/item?id=238325
Then the whole conversation is sidetracked by aspirations of the whole population versus aspirations of the few.
Also, I don't think the claim that quoting the points your addressing solves all the problems in organizing a debate, just some of them.
He also says this.
This is where I disagree. The risk of dynastic wealth is that the wealthy can pay to change the system, in effect pulling up the ladder and shutting down all future disruptive startups. So we not only need to fix the problems at the bottom of the economic ladder (which is where I agree with PG); we need to make sure that those at the top don't capture the government.
Cynical readers might suggest that this is already happening.
We should do this by reforming (limiting and distributing) the government, not by destroying wealth.
How much of our "discussion" on this issue is tangled up with the fact are that some people are greatly concerned with relative poverty and other are more concerned with absolute poverty?
In spite of all the noise, I do disagree with the central point.
Economic inequality may be caused by good things, but it is still bad. Wealth is opportunity and political influence. Therefore economic inequality is inequality of opportunity and political influence. Persistent intergenerational economic inequality is pretty much bad by definition.
Inequality - a bad thing - can be caused as a byproduct of good activity. It's still bad. It's a negative externality, like environmental pollution. In fact, there's some striking parallels - a buildup of inequality, like a buildup of pollution, can trigger the collapse of the ecosystem.
We need to agree that inequality is categorically bad so we can have a real discussion of how to keep it under control. It would be crazy to argue that farming is good so farm-related pollution does not need to be controlled. Likewise with startups and inequality.
Larry Page, net worth $29 billion, and Sergey Brin, net worth $34 billion, have so little political influence that they can't get a small city's government to approve a new bridge over a creek:
http://www.mv-voice.com/news/2013/12/12/council-deadlocks-on...
These are all reasons regularly brought forth by Libertarians and Republicans who prefer that centralized government entities defer to local entities as much as possible.
In so far as large companies are permitted to exist by the people for the benefit of stakeholders rather than shareholders (i.e. employees and their communities, suppliers, customers, as well as actual shareholders and bondholders), the executive leadership of a corporation is much like a government, and in a large company, it's a distant one, subject to autocratic rule and upward redistribution of the value created by the whole.
I think you're still making the same error as those primitive responses, because you're making that statement without qualification.
I suspect you don't realise how extreme your statement is percieved with the lack of qualification.
If one farmer works harder than the guy next door and becomes richer as a result, how is that bad?
If someone earning more than the median gets a payrise, they're contributing to poverty as defined in some countries.
See also https://en.wikipedia.org/wiki/Harrison_Bergeron
-) Sergey Brin is worth $35,000,000,000. Has he worked 35,000 times harder or smarter than the 40-year-old Doctor who earns well and has scrimped and saved to $1m in net worth?
-) Let's say you'd told Sergey - just as he was starting Google - in 20 years' time you'll have $10m in the bank from this. Do you think that would have encouraged or discouraged him?
Companies like Google, Facebook, Dropbox and Airbnb all looked like crazy ideas to begin with. Ordinary people with limited funds shouldn't be investing in companies like these, as they fail far more often than not.
It's only due to the existence of high-net-worth individuals, who can afford to lose money on most of their investments and who have a "pay it forward" mentality, that these companies can get their start.
If the returns for people Page and Gates and Zuckerburg were capped at $10M, there's a good chance they wouldn't bother.
For people like this, the goal is not personal enrichment but rather the ability to better the world, not just via their products, but also through philanthropy.
Take away the blue sky returns, and you take the motive that is most beneficial to the rest of the world.
I feel this to be the primary reason we have the technology and infrastructure we do today. Take the Robber Barons, for example, their pursuit of endless returns gave us the railroads, electricity for the masses, and cars. I guess the point is there is good with bad in everything. Sometimes the good outweighs the bad. That's how I am interpreting PG's original wealth inequality essay.
"Person X doesn't deserve their amount" does not equal "taking away person X's return would help reduce poverty".
It isn't. But if one farmer works harder than another, wealthier farmer, and the wealthier farmer makes 1000 times more than the harder working farmer, that is bad. And that is how the system currently works: we systematically reward people for being wealthy, regardless of any personal qualities or talents. And whereas there is a natural upper bound on how hard you can work, or how clever you can be (we're all human beings, after all), there is no upper bound on how wealthy you can be, and therefore no upper bound on the advantage you can be born with. It's tough to work 1000 times harder than someone else, but trivial to earn 1000 times more from investments if you have 1000 times more to begin with.
While the political influence of wealth is obviously bad, I think it is a small factor in comparison with economic influence.
The amount of industry attempting to satiate your desires is proportional to the amount of money you have. Hence the huge disparity between the number of BMW ads on primetime TV and the number of people watching primetime TV that could ever conceivably afford a BMW. The GDP of many countries could be repurposed entirely to serving the desires of the wealthiest few and still not exhaust their purchasing power. In theory, Bill Gates could purchase the entire output of any country smaller than Oman for a year. https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nomi...
This is a factor that globalization proponents don't deal with successfully I think. When a country is isolated, it is only the disparities of wealth within the country that distort the production of the country. Once a country enters global trade it is exposed to many orders of magnitude more of difference in purchasing power.
All of the optimality results in economics assume that the current distribution of wealth is optimal (or at least exogenous), hence pareto optima and not any other type. This factor deserves more thought and discussion.
If you qualify it that way, sure. That doesn't mean all economic inequality is bad. You don't have to begrudge Sergey Brin his billions, or say the process in which he made those billions in any way is a bad thing, in order to say that people shouldn't be able to inherit billions.
Paul directly addressed this in his reply to Klein (http://paulgraham.com/klein.html); Ctrl-F "the conversion of money into political power"; in brief, he says that if you're upset that economic inequalities leads to unequal political influence, attack that. Fight to remove the political influence that wealth currently has.
If we lived in a world where everyone has the same opportunities for social mobility (i.e., universal free education from daycare to PhD, unbiased hiring processes) and the same political influence (no SuperPACs, no lobbyists, mandate that no citizen spends more than $100 / year on political donations, and perhaps give every citizen that $100 / year, as a use-it-or-lose-it source of funding for whatever political causes they wanted to support)... if we lived in such a world, would you still be upset that Mark Zuckerberg had a lot more money than you? Why?
When that happens, even though there are very rich people, there's also a healthy middle class and the social support systems (safety nets, education, etc) for poor people to reach the middle class. But what we have now is rich people hiding behind capital gains tax rates to actually pay less than people who earn significantly less that they do. And PG, as someone who earns his living primarily through investing, is no doubt taking advantage of this situation.
When PG says "don't address income inequality directly," it's the equivalent of saying "don't raise my taxes" since raising taxes on the wealthy is the method for addressing income inequality directly. IMHO, the reason he's gotten so much flack is that there is a very large proportion of the population that believes that we need to close the loopholes that the uber-wealthy use to avoid paying the right amount of taxes and increase the top marginal tax brackets to above 50%. And yet he wants to talk about addressing income inequality directly as if his critics want to keep people from earning that much in the first place.
I can't tell if he's being deliberately disingenuous or if he actually believes that's what people are suggesting, but the net result is a back and forth conversation at two different contextual levels.
> For example, let's attack poverty, and if necessary damage wealth in the process. That's much more likely to work than attacking wealth in the hope that you will thereby fix poverty.
I believe, though I may well be wrong, that PG isn't against taxing the rich in order to provide social services and increased education, healthcare, what-have-you.
Because if there isn't some concrete attack on income inequality, then we're arguing about an abstract concept, which is just pointless.
That's a really good question. Theoretically, I would be fine with that kind of world, but I dont think that kind of world has ever existed or will ever exist. It is more realistic to attack the problem on both fronts - maximize social mobility and minimize the influence of wealth on politics, but also recognize that you will never completely succeed. Wealth will always equal opportunity and influence to some extent, so inequality will always be a bad thing to some extent.
For what it's worth, I'm not upset that Zuck has a lot more money than me. I just think that entrepreneurially generated inequality should not be a sacred cow, and I'm speaking as someone who has created a good deal of inequality with entrepreneurship.
Perhaps, but we may all be surprised to how little extent. Instead of giving up, it's worth giving a better world a try.
It simply isn't possible at this point. The Supreme Court has seen to that quite thoroughly.
A constitutional amendment to "fix" the problem is beyond the realm of possibility.
To fix this, we must fix our money. When someone spends money they got from wealthy people for manipulating our politics, the person who accepts it is fulfilling the promise the money held in the first place. We must refuse to empower money used in this way. As individuals, we must reject money in our own lives when it came from political manipulation so we can remove the incentive to participate in political manipulation.
This is merit capitalism. The technology to make it work exists today, and it doesn't require the impossible task of winning votes in a Congress we can't afford to buy back from the rich. It requires tools to make it easy to reject dirty money and spreading the knowledge that rejecting dirty money is even possible. These are things that we can do. These are things that you can do.
http://meritcapitalism.com
Firstly economic inequality may or may not be a problem, so it is probably not worth talking about. It is only when the inequality manifests itself in terms of power between people. Were some people have to work for a wage in bad working conditions (even here in the US) because they have no other options. They may have kids. All the way up to: having to work for Google or Facebook et al. and hating it because you know on your free time you would rather explore your own creative ideas. But people who work at menial labor jobs are just as creative and should be given paths to allow them to pursue their creative interests too.
Language makes us creative beings, and if power constrains that in any way and it can not make itself legitimate (which the burden is on it to do so) than it is wrong for it to be there.
Thus because economic inequality illegimitately constrains the human capacity to express itself creatively it is therefore problamatic and should be dismantled.
PS I realize in theory this sounds all good, but I am more convinced that humans can organize themselves into these freer societies. And those future denizens will think of us as savage as we think of american colonialism and slavery and genocide (native americans) a few hundred years back.
I'm going to out on a limb and suggest that the point of money is economic growth. This may seem like a circular argument, so let me expand on that a little. Imagine you have a farmer. This farmer wants to grow food and he has plenty of land. However, he does not have enough seed to plant all of his land. He has nothing to barter with until after his food is grown, so he ends up "wasting" part of his land (letting it go unplanted) because he could not get enough seed.
In this scenario, everybody is a loser. The farmer grows less plants and will not be able to barter for things he needs in the future. Society also gets less plants. So it makes sense to give the farmer more seeds so that he can plant his whole field. In fact, because he can do that, he can repay the favour in the future by giving up some of his fully grown plants.
Money is a kind of token that can be used to trade for things. It is very useful for society to give people money if they will use it to trade for things that they need, which will in turn produce things that will improve the quality of living for everyone.
Money that is piled up and not spent is not helpful to the economy or society. If there were a limited amount of money (and in some ways there is), then we could say that people who hoard money are a burden on society because they stop people from making use of that money to improve society. Ideally we would split up all the money in the world and give whatever amount is needed to the people who would be able to use it. In a really ideal world, each person would be motivated and able enough to spend the money in a way that would produce benefit for society.
Of course this is not the case. There are many people who hoard money (bad). We can also see that there are people who would spend money improving the beer brewing industry (maybe not so bad) at the expense of investing in life saving medical research (arguably seems better than beer in some ways). In fact, quite a lot of people simply want to consume goods and distribute money around, as opposed to trying to improve things. Those people are at best neutral to the system, though better than the hoarders.
From a societal point of view, it is best to distribute money in a way that maximises people's ability to use it beneficially, while minimizing people's ability to hoard it or distribute it arbitrarily (buying shiny useless toys or food/shelter that they don't need). So already we can see that depending on what people want to do with money, it is beneficial for society that there is an inequality.
Having said all that, I think that the inequality that we have reached at the moment is far from ideal. Now the really interesting bit is that what I wrote so far seems to favour a fascist economic system. I suspect we can do better, though ;-)
Let's correct this into: "excessive economic inequality may be caused by good things, but it is still bad". Then I wholeheartedly agree, and probably PG would agree too. Or, at least, I hope he would agree, and not consider only poverty a bad thing.
Because if the writing is clear, which in this case it is, it means the problem is the audience. It means the writer found a genuinely confusing and probably undervalued topic.
Good job, pg.
Personally I love this style of argument and wish more people would argue in this way, but, anecdotally, people often think you're an asshole when you do. Maybe it's because you miss out on nuances that you find irrelevant to the central question, but that others feel are very important. Maybe it's just a generally unappealing way to be convinced of something.
Graham keeps returning to this point, which is a little silly. His class owns and controls the corporate media, which decided to frame this general issue as one of economic inequality. Then Graham castigates the strawman his class put up as being not focused on the right thing.
There are those of us who work, and then there are the heirs who parasitically expropriate the surplus labor time of those of us who do work. It's as simple as that. Workers periodically fix the problem - as they did with Charles I, Louis XVI and Marie Antoinette, and Nicholas II and his family. As there are still classes, the workers and the parasite heirs, this problem still exists, but I'm confident the problem will eventually be fixed permanently and the parasites will be eliminated as a class.
This sounds like you're advocating for a literal genocide. Is that really what you mean?
But starting it! Starting it was key. And "income equality" was key to starting it as it is to starting most companies. Is the original wording wrong in PG's essay wrong? No, but it's easy to misread unless it's emphasized. E.g., the desire for "economic inequality" as a catalyst for starting companies is great. It can be hugely successful and useful in many ways.
But as soon as a large company has shareholders etc. one of its primary goals is to maintain capital for itself, which is generally speaking in favor of income inequality in more negative ways for the general public, one could argue.
Russell Okung's point at the end is I think actually built on teasing apart this conflation: "I urge you, Graham, along with the rest of the community, to return to your first love. Build people up."
What we do have to ask ourselves is how much inequality should we tolerate in the name of progress? Would Larry and Sergei not have created Google had they made only 1/10th of the fortunes they have today? What about 1/100th, or 1/5th?
My personal view on the subject is that that multiplier is set too high at the moment, and that society would churn out innovators just fine if there were extreme taxes at the ultra-high end of the income spectrum. I would be very surprised indeed if Larry and Sergei would have chosen to abandon their little search engine project if they only had the potential to make $100 million each.
I think any positions taken on this subject that don't discuss it as a question of where to place this multiplier are disingenuous nonsense, to be perfectly frank. And this is my, and I think many people's issue with PG's essay: he seems to be taking the position that some types of economic inequality are good and some are bad. But it's not how someone made the money that's good or bad, it's whether or not it's really necessary that they have that much.
In my mind, whether wealth is zero sum or not is irrelevant. The discussion around income inequality is about the area under the curve. If that area increases again and again and again but the bottom, say, 90% remain in the same state, that's not progress.
Personally, I think "where to place this multiplier" is not anywhere close to the most relevant question.
What matters isn't how big the multiplier is. What matters is what's causing it, and what problems it causes. If a big multiplier is caused by an atmosphere that promotes innovation, that's better than a small multiplier caused by a stagnant environment, which is better than a big multiplier caused by massive corruption and oppression. Norway, Sweden, and Finland have some of the lowest Gini coefficients in the world, way "better" than the US or the UK -- but so do Pakistan and Afghanistan. "Where to put the multiplier" is, at best, a secondary question after fixing all of the primary problems, and possibly a completely irrelevant question.
I agree with you that a big multiplier caused by innovation is better than one caused by stagnation and rent seeking, but I don't think that we would be willing to accept any multiplier just because it promoted innovation. So the question remains: how much inequality is worth how much innovation?
Assuming you accept PG's premise that more inequality equals more innovation
or, put another way, only becomes relevant when the bottom is unacceptably low.
I'm much more interested in worrying about where the bottom is than worrying about the multiplier. It's a proxy measure -- perhaps a good proxy measure, but still a proxy measure. Instead of focusing efforts on the proxy measure as a whole, focus on specific issues that matter at the low end. If it happens that some specific issue is best resolved by closing tax loopholes or steepening the tax progression curve, OK -- but don't do it just to "lower inequality", do it to solve a specific problem.
The former says that assigning people directly the fruits of their labors leads to an efficient marketplace and ultimately greater welfare for all. The latter says that the efficacy of the former grants those people a moral right to those fruits.
The former is almost certainly true - capitalism is much more effective at accelerating efficiency and innovation than anything else we've tried. But the moral corollary doesn't necessarily follow. And if you accept the former but deny the latter, you're faced with a question: Do we really need extreme outliers of wealth in order to achieve the benefits of capitalism? And if the answer is no, then does it really make sense to let those outliers keep all those resources?
I don't think we do (and by "we", I include government).
Some people want to believe that you can create a solution that fixes the opportunity/social-mobility problem without eroding the concentrations of wealth. Others believe that you have to attack those concentrations of wealth in order to bring back opportunity/social-mobility. I sit in the latter camp.
To give an example. When house prices expand out of reach for the much of the local population many will object to any additional taxation that targets excessive ownership (landlords) or even foreign ownership. They all have the same argument, that it will cause house prices to go down and harm the economy. Instead they promote low income housing programs which are just handouts that only slightly offsets this gigantic problem. These people really don't seem to understand that house prices are abnormal and need to go down to sane levels that will on average align with normal incomes in order for the gentrification process to reverse course.
In other words you can't really fix the problems that both Paul and Russell agree on without directly attacking the concentration of wealth problem. Everything else is just bullshit.
The world is not the USA. The world is 7 billion people, in countries and cities of varying economic outcomes. While income inequality is rising between inhabitants of the first world, global income inequality is shrinking. Specifically, the gap between Brooklyn, Beijing and Botswana is shrinking, even as the gap between individual citizens is rising.
And the biggest gap of all - the gap between 21 meals a week and < 21, is shrinking rapidly. As much as we bemoan great wealth compared to middle-classness, this gap - the gap between the never-hungry and the sometimes hungry - is IMHO the single biggest gap of all.
Just because you can find some examples where economic normalization is occurring doesn't mean that excessive wealth concentration isn't killing more opportunities than it creates.
Ok, we shouldn't look at indicators of inequalities (the Gini Index for example), but we should look at inequality effects. Well, there's a lot of literature looking at it and finding that the Gini index is an acceptable proxy for the other measures (acceptable is kind of fuzzy here, bear with me). We also know that a Gini index of 1 doesn't mean perfect equality. This because it depends on the definition of equality and on what you measure. Also, we know that a little bit of inequality is not only acceptable but required to foster social mobility (and it is probably part of PG's argument). How much is the problem! But saying we shouldn't look at inequality index but at the underlying issues and the individual cases is as much a misguided suggestion as suggesting a startup to stop looking at DAU/MAU.
But even if we discount this critique as futile. Do we really think that reducing a little bit the inequality will stop startups? If we setup the system in a way that Page make just 10 billion dollars instead of 15 billion out of Google (I'm making numbers up) he would have decided for a clerk work instead? Is he seriously saying that? And then, wasn't him (to be honest, could have been Sam Altman) that said that you shouldn't start a company to become reach but because you think you are the only one able to solve this issue? I know it sounds like a straw man argument. It is a sort of. But I believe in the law of diminishing return. I believe that I started a startup because I was determined to solve a hard problem, not for the upside (although it was important, but I was smart enough to know that the probability of making big money were really small and other investment had better returns).
Then there's the point of variation in productivity that is so fuzzy my head exploded. What does he mean by that? Which his the definition of productivity he is using? Seriously, that's a problem. Because if he defines productivity by the ratio value individually produced/hours, I wonder how he estimates the value produced in the last week by Larry Page. By Google's value? And how he approportionate the value produced between Page and the thousands of people working for Google. Even for a simple example, how do you compare a productivity of a woodworker making chairs and a steelworker making swords? You could count the unit produced per day, but they are different products. You could assess the market values of their output, but I'm pretty sure the value of their output changes between peace time and war time without their productivity actually changing.
Finally, it comes the last issue. He acknowledges that there's a small number of startup founders coming from poor backgrounds. I don't have data about that, so I believe him. Yet, I don't think determination is something lacking from poor people; it is the opposite! So, which is the problem here? Well, my little anecdotal experience tells me that when your parents could help you, you could go for the long shot, but if you need to eat, it is better to find something that give you the food quickly. It doesn't go against his argument, actually, kind of make it. But I wonder why it didn't make it explicit.
Having only one startup center in the country contributes to limiting social mobility (how many can afford to move to and live in SV; amazingly, some don't want to live in SV; what about people with an "n-body problem"?) and deprives other areas of the country of the tax base in SV. It could be transformative for, say Detroit, to get even a fraction of the attention of SV. "Spreading the love" is also beneficial with respect to diversity, finding problems to solve, and to robustness (e.g., natural disasters).
A more interesting argument that PG could have made is that it is theoretically possible to have inherent wealth inequality in the system without negative results. At this point, I see very few believe that it is even possible.
I get the impression, reading a lot of the responses to pg's essays on this topic that this is like dividing by zero according to most people's model of the world.
It's interesting and probably important that he doesn't actually come out and say whether or not he believes economic inequality to be a bad thing, either.
There is significant evidence that a high level or economic inequality has bad consequences for people - it can literally be bad for your health, via psychological mechanisms. This is important since if inequality is bad in itself, then you might want to eliminate some of the ostensibly good reasons as well, after having eliminated the bad reasons.
So instead of taking a stance on the badness of economic inequality (yay or nay), he bangs on the drum that one should first go after the bad causes of economic inequality. I doubt anybody else in the discussion would disagree with that, which makes the whole first point rather pointless.
On point 2, "So you could for example have no poverty and perfect social mobility, and still have great economic inequality."
Does pg realize that perhaps somebody might not agree with that? This seeming lack of understanding makes the second point rather pointless as well.
On point 3, "I called out lack of social mobility as one of the worst problems contributing to economic inequality"
Is he aware of the argument that economic inequality can reduce social mobility?
Since I doubt that pg is wilfully ignorant of the potential subtext that goes on in the heads of the people he responds to, I can't help but have the impression that people are talking past each other. I guess part of the problem is that the people he responds to aren't making their arguments very well (at least from the perspective of a highly technical mind), and another part of the problem is that pg seems to be insufficiently aware of the large body of work on the topic in disciplines outside his "home turf".
Like "global warming", the term "economic inequality" has become something people use to refer to all of the related issues. PG's essay was controversial because he used a narrow definition. He says other people are confused, but in this case, I think he is. The fact that his essay necessarily strayed outside of his own definition proves the point.
> ... and talked about how I had personally seen the effects of it in the relative scarcity of successful startup founders who grew up poor.
And yet PG has never made any effort to help founders from poor backgrounds. In fact, YC has chosen to provide the majority of their help to people from the same elite backgrounds as themselves. Literally turning away thousands of people from poor backgrounds. It truly is "the Harvard of startup accelerators".
It sure would be amazing if the most powerful person in Silicon Valley decided to help more poor people do startups. Nothing has the same potential to increase social mobility in the U.S. like thousands of new startups run by poor people solving problems they care about, like maybe helping more poor people do startups.
It's fine because everyone makes mistakes. This is a life lesson that he needs to internalize.
or, possibly, their listening/comprehension skills were not good enough. Communication requires solid effort and methodology by both the speaker and the listener. Either or both sides can be responsible for a breakdown.
Example:
> [PG] thinks that those concerned with income inequality want communist style income equality.
Nope - none of what PG said in his essay comes anywhere close to making that characterization of his opposition, and yet many people have attacked PG as if his view was this view, and other equally outlandish, baseless interpretations of what he actually said. They've said things like, "PG is blaming the poor for being lazy", which is not anything remotely like what he said.
The people who wish to criticize PG's essay or otherwise respond to it would do well to simply quote his words directly and respond to the quote. What's actually happening is that people are projecting emotionally charged beliefs onto PG, and claiming that he said things or believes things he doesn't and that weren't in the essay, and then attacking those made up, straw-man ideas instead. It's really disappointing and frustrating for me to watch.
Thus, this has nothing to do with pg's actual words. This is all based on the current groupthink about inequality.
I think it's impossible to write a bulletproof article, even something longer form, unless it says something trivial like "the sky is blue on some days". Even then, someone form Beijing would argue ;)
PG chose a really difficult subject, tried like a developer to break it down into constituent parts, and got criticized as if he was saying the problem didn't exist, rather than it is more than one thing. I think that is criticism that he can build dialogue on (a positive), rather than a flaw in the original article.
If communication fails, then it's a loss for both side. You can blame another side but that doesn't make things better...
It's interesting that pg has already written how difficult a nonconventional idea to be heard. This can be another instance. It might take 10 more essays. Not the direct rebuttal like this, but tackling the issue from different angle and/or different abstraction level; e.g. ok, how could we attack wealth influencing politics?
https://en.wikipedia.org/wiki/Wiio%27s_laws
I didn't even agree with pg in the above post. Instead, I made an abstract point -- that communication breakdowns can be the fault of either party, and that they're not necessarily related to someone being "dumb" but can be due to problems in effort or methodology.
Imagine a world where everyone thinks the world is flat and somebody comes out saying it isn't. Now imagine what the folks believing in a flat world are thinking. Outrageous? Writing skills not good enough? Bad taste in the mouth? Crazy scientist surrounded by yes-people?
:)
It's difficult to keep emotion out of it.
Thank you, PG, for your responses. They help remind me that "enlightened capitalism isn't perfect, but it's better than every other system that's been tried."
I think he's right: it's probably more productive in the near term to attack bad causes of economic inequality. [1]
But his first assertion (that inequality is not bad) could still be wrong.
I think his essay is built on the assumption that people care more about absolute values of wealth and not relative ones. Psychology indicates that relative measures of wealth more directly map to levels of happiness and unhappiness. People do care about relative levels of income as opposed to absolute levels of income, and social cohesion is affected directly by such resentment, even if there isn't extreme poverty and incomes are rising across the board!
In Singapore, where I live, there is relatively strong meritocracy and little extreme poverty. GDP per capita is high, and rising; the government is directly incentivised to create economic growth (their bonuses are pegged to national GDP increases). But ostentatious displays of wealth - made easier, IMO, by social media - have led to rising resentment of the government's policies, as well as resentment against the globalised rich who chose to make Singapore their home.
I also think economic literature and history is rich with the negative social effects of economic inequality (even if some of it is conflated with bad causes, as pg describes). Elsewhere in this thread tkiley talks about how economic inequality can be seen as a negative externality, which is a good way of describing it, and is, I think, the attitude economists seem to take.
While pg's essay contains a fascinating call: to imagine a world where we have to chose to live with increasing economic inequality, I do not believe such a world would be easy to live in.
[1] To paraphrase his argument, progressive taxation might bring down the Gini coefficient but not necessarily do anything to alleviate poverty if the systemic causes of poverty aren't attacked. Better to 'attack poverty and destroy wealth in the process, as opposed to attacking wealth and hoping it destroys poverty as a side effect'.
It's almost as if people will always find something to complain about.
I think this is where the evidence is to the contrary - economic inequality predicts poverty and poor social mobility.
"These results suggest that the takeoff in income inequality may account in part for the decline in mobility."
http://web.stanford.edu/group/scspi/_media/working_papers/mi...
That is to say, the position hasn't changed at all.
This is simply a reiteration, a response to the number of people filling HN with emotional comments on the topic.
The potential problem that hasn't garnered much attention is that the issue of having a lifestyle you are not satisfied with goes far beyond the distribution of dollars.
If we agree on that, then there can be room to discuss what's really bothering people.
From an individualistic point of view, it is easy to say 'he has more than he knows what to do with, I'm struggling, I want some of that, just give it to me!' and anyone who says otherwise, is clearly not cool.
It makes sense too. That point of view makes total sense - if someone has a billion, giving me personally a million would be real good right?
Too bad there are just not enough billionaire people to make that work, not even close. So then what are we talking arguing about? The solution is elsewhere.
That is to say, we have to pick our battles, we only have so much time and energy in a lifetime. Arguing about 'if we distribute it differently, I think it'd be better' back and forth if you are an economist, philosopher, or someone in a place where you can actually affect these things is totally fine. That's not the people here, so then maybe all that's happening is people venting their frustrations out on PG and if that's the case, no amount of responses is going to fix that. It's like arguing with a dude who believes the root of his problems is witchcraft.
That's something each person has to fix for him/herself.