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Economic Inequality

paulgraham.com

211–220 of 580 posts

Re: Economic Inequality

#211

Swing and a miss with this article. I wrote a full response at http://cryoshon.co/2016/01/02/a-response-to-paul-grahams-art... . I've abridged some of my comments/quotations for this comment. Let's break it down bit by bit: FTA: "I'm interested in the topic because I am a manufacturer of economic inequality." Well, not quite. The throughput of successful startup folks is never going to be enough to make a dent in the…

> the current flap about economic inequality is not about people wanting to become rich, it is about people wanting to get by

In other words, it's about poverty.

Re: Economic Inequality

#212
post #96

It's hard to take this seriously when pg asks us to believe, on the basis of a single out of context quote, that Stiglitz is a simple-minded victim of the "pie fallacy". Stiglitz explicitly anticipates and addresses this criticism: > One can think of what’s been happening in terms of slices of a pie. If the pie were equally divided, everyone would get a slice of the same size, so the top 1 percent would get 1 percent…

I believe he wrote this as an example after someone reposted his article on "corn-pone thinking" to show how no matter who or how wealthy you are, your thoughts and opinions won't interfere with how you earn money.

Re: Economic Inequality

#214
post #102

Graham is arguing against an enormous straw man. Nobody is suggesting that we “prevent people from getting rich” or “end all economic inequality”. The most extreme proposals I’ve seen in America are ones like, “institute an unconditional basic income as an alternative to means-tested welfare programs,” or “allow every citizen/resident into a single-payer healthcare system,” or “go back to the tax structure of the 195…

There's nothing wrong with someone getting rich provided they contribute a proportional amount of value to society. Problem is that since the post-WII period (also called the Golden Age of Capitalism) such rewards have been happening less and less [1,2]. In fact, I think reducing inequality is essential for promoting productivity. [1] https://en.wikipedia.org/wiki/Post%E2%80%93World_War_II_econ... [2] https://upload.…

But is it wrong for a rich person to hoard wealth, or to spend only on luxuries for themselves? Why do they have to "contribute to society"?

I'm by no means wealthy, and at my age of 29 I've donated more money than many of my coworkers. And I'm all for a portion of tax dollars supporting the underprivileged. But when I read about Larry Ellison's yacht-racing hobby, I think to myself, "good for him." He can spend his money on whatever he wants, right? I don't see that he owes anyone anything just because he has more.

Re: Economic Inequality

#215
post #157

> So when I hear people saying that economic inequality is bad and should be eliminated, I feel rather like a wild animal overhearing a conversation between hunters. But the thing that strikes me most about the conversations I overhear is how confused they are. They don't even seem clear whether they want to kill me or not. Straw man aside, I continue to be deeply concerned about individuals who spend their time beli…

[deleted]

Re: Economic Inequality

#216
post #210

Earlier quoted context omitted.

Hoarding? Do you think rich people just stuff their money in a mattress? Even if they deposited it all in checking accounts, the banks would reinvest it all over the economy.

Yes I do, that mattress is called stock.

If you're buying newly issued stock, that's going to be directly spent on business expenses like salaries and payments to other companies. Even buying existing stock directly supports the market for companies to raise money in that way.

If you're buying existing stock, someone on the other end is receiving your money that they will then spend or invest as they see fit. Very little money is idle, since it's in no one's interests for it to be.

Re: Economic Inequality

#218

Earlier quoted context omitted.

"Nobody is suggesting that we “prevent people from getting rich"" Yes they are. Don't you remember all the articles about Zuckerberg's charity, and how it is bad that rich people have so much control over society, and that the solution shouldn't be charity, it should be to prevent people from becoming so rich in the first place? That shit was all over the place.

"That shit" could be interpreted this way: Having "obscene" wealth accumulate with one or a few persons means the decision-making about using that wealth becomes idiosyncratic and volatile at worst, generally misdirected at best. In market-fundamentalist terminology, huge actors cannot result in optimal results. Markets work best with broadly-held wealth and millions or billions of small bets, lowering the criticalit…

The Gates Foundations is a counterpoint to your theory. Yes they're volatile, but they've helped change the way that charities operate, with numbers and tracking progress. It feels like when single/double-digit millionaires donate their money, they're too often donating to charities which are social status symbols rather than the most effective causes.

In addition, places like GiveWell are helping the direction of that wealth. http://www.givewell.org/

Re: Economic Inequality

#219
> The most common mistake people make about economic inequality is to treat it as a single phenomenon. The most naive version of which is the one based on the pie fallacy: that the rich get rich by taking money from the poor.

For most of us, our largest single expense is housing, whether that be rent or mortgage repayments. Supply of housing is quite inelastic, something that should be clear to all of us who live in California, New York, or London.

By driving up the costs of homes, those of us who have more to spend are driving those who have less further out from the urban centres where the jobs are found, reducing their leisure by forcing them to spend more time commuting instead of with their families.

While the cost of manufactures has been falling as the economy grows, food - the other major expense for the poor and middle class, has also seen much higher inflation than the headline figures.

Entrepreneurial progress is a great thing. But we need to recognise that for many, the 'pie fallacy' really isn't a fallacy. For someone on the median income, a reduced share of total earnings is materially increasing deprivation.

The biggest thing we could do to increase entrepreneurialism would be to redistribute more and make more people feel secure. It's much easier to take risks when you have the security of parental wealth.

Re: Economic Inequality

#220
The hole in the positive sum view of capitalism is the effect that savings have on asset and commodity prices.

Savings equals debt equals savings. Money has to be put somewhere. When the savings of the top 10% or so exceed a certain threshold then they tend to be dumped into things like property or "safe" forms of debt like student loans and mortgages.

Thus the wealth of the rich does steal from the poor, not directly but by making housing, college, and commodities more expensive. Your savings is why I can't afford a house.

Keynes called this "savings beyond planned investment" and on that count at least history seems to be proving him right.

To make capitalism truly positive sum we must find a way to deal with this problem. Perhaps the answer is to make things like equity investment and startup founding even easier-- to increase the efficiency and availability of productive growth investment markets so they can compete for idle dollars against destructive rentier investments.

So while I no longer believe in naive Randianism on these issues, I do still prefer non coercive solutions if such can be found. I wonder if the sort of work YC is doing is really the "problem" or whether PG is actually a bit wrong about that. Every startup represents some investment capital going somewhere other than to jack up the rent.

Sarbanes Oxley seems like precisely the wrong thing. I wonder if the present day housing silliness would exist if IPOs hadn't been made borderline illegal. The housing bubble, which made housing unaffordable to at least two generations, immediately followed the partial closure of the IPO market. Did all the capital that should have gone into post-series-A-D financing go into inflating real estate instead?

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