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Economic Inequality

paulgraham.com

371–380 of 580 posts

Re: Economic Inequality

#371
post #214
post #102

Earlier quoted context omitted.

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…

> Why do they have to "contribute to society"?

In my country, it's part of the basic law (constitution). Specifically, 14/2

http://www.gesetze-im-internet.de/gg/art_14.html

Re: Economic Inequality

#372
I really wish nobody would pay attention to quintiles. They cause more confusion than anything, because they don't follow people.

Even high earners spend maybe 25% of their life as high-earners and the rest of their life as low-income. That does not mean poor, just low-income. They might be college students, PhDs, doctors in residency, or just building up their careers still.

Re: Economic Inequality

#373
post #366

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…

I don't think PG is attacking a straw man at all. In my career as a software engineer, I've run into a significant number of outright communists. Like most of us, they keep their political opinions to themselves most of the time. But occasionally, they let slip how they would welcome revolution. I don't want to name names or expose people who don't want to be exposed, so I'll just give one prominent example. Steve Kl…

I haven't read through the links you cited, just the excerpt. A lot of non-communists cite Marx. My economics professors in University certainly did, including one who advocated eliminating corporate taxes.

Re: Economic Inequality

#374

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…

> Graham is arguing against an enormous straw man.

This is a very hard case to make when Graham's money quote, at the start of the essay, is from a Nobel-Prize-winning economist saying, pretty much in so many words, that rich people get rich by taking stuff from poor people--which is exactly the claim Graham is arguing against.

> Nobody is suggesting that we “prevent people from getting rich” or “end all economic inequality”.

I think you're missing Graham's point. His point is not that people explicitly suggest these things, but that the discussion is framed so that they are implicit assumptions, so far in the background that nobody even thinks to question them. Judging countries by their Gini coefficient, and the criticism the US has gotten because its Gini coefficient is too high, is an obvious example. Everybody argues over what Gini coefficient is "too high" and requires action to correct; nobody even asks whether the Gini coefficient is the right thing to judge by.

> institute an unconditional basic income as an alternative to means-tested welfare programs

A key argument for which is that unconditional basic income would do better at reducing income inequality than means-tested welfare programs.

> allow every citizen/resident into a single-payer healthcare system

This I agree is pretty much irrelevant to reducing income inequality; it is aimed more at reducing the impact of income inequality on access to health care, without doing anything about the inequality itself.

> go back to the tax structure of the 1950s–70s

A key argument for which is reducing income inequality by taxing more of what rich people make. The point being that none of these measures ask why certain people have more income, which is a key piece of information. Graham's point is that if one person makes more than another because they're more productive, you don't want to "fix" that, because it's not a problem, it's what fuels economic growth. It's true that there are other ways for people to make more than others, which are not based on wealth creation, and Graham explicitly says he wants those to be shut down. But after you've shut them all down, you won't have "fixed" the "problem" of income inequality, because people's productivity will still vary, and the more technology advances, the more the variation will be amplified, so the more unequal incomes will be.

Re: Economic Inequality

#375
PG, and his ilk, are increasing inequality in this country largely because they are exploiting the carried interest tax loophole whereby they are able to re-classify regular income as long term capital gains which is taxed at a much lower rate (now approx 23.9%, but used to be 15%). In any case, both are lower than the top federal rate of 39.6%.

Even worse than the VC's are the HF mangers like Dan Loeb and Einhorn who set up re-insurers in Bermuda and push all their earnings here (except the are not declared as earnings (and taxed) but as reserves against future claims (and not taxed)).

Carried interest isn't the only bogeyman, but it's by far the largest one at the individual level. There are tons at the corporate level (which is then monenitzed by Tim Cook, et al, by paying themselves in stock which goes up in price as their burgeoning untaxed corporate cash hoards accumulate).

I am free marketeer, but all these crony capitalism set asides are anything but the free market in action.

Re: Economic Inequality

#376
post #344

Earlier quoted context omitted.

On that note: the most offensive economic inequality isn't the 1% vs. the 99%, which successful startup founders would find themselves on the wrong side of. It's more about the 80 individuals with more wealth than half the world's population [1] – which, yes, does include "startup founders" such as Gates, Ellison, Bezos, Zuckerberg, Page & Brin, etc. But the vast majority of successful startup founders aren't in this…

Is there any danger that such levels of inequality reach a tipping point where the have nots band together and say why don't we take some of that for us. We have the numbers to either change the law or take by force. Such things are not unknown in history...

Nick Hanauer believes so...

https://www.ted.com/talks/nick_hanauer_beware_fellow_plutocr...

Re: Economic Inequality

#377
post #60
post #28

Pg, in effect: "if there was no economic inequality there would be no startups (and all the good they bring). The real problem is the number of super poor, not the number of super rich". But this is a straw man: no one is arguing for total economic equality, just a reduction in inequality. Further, pg asserts that startups are wealth creators, and they thus create rich founders without having influence on poverty in…

> This is patently false: the best startups make money eating other people's lunch, and they concentrate this money in the hands of the founders. No, they concentrate the profits in the hands of their founders, but the big winners are the millions of consumers. Yeah, Jeff Bezos is rich, but not as rich as a world with Amazon in it

i don't have enough f's on my keyboard to pffft hard enough.

Re: Economic Inequality

#378

So much material, so little time (today, for me at least). A few of his key points that I noticed: > In the real world you can create wealth as well as taking it from others. A woodworker creates wealth. He makes a chair, and you willingly give him money in return for it. A high-frequency trader does not. He makes a dollar only when someone on the other end of a trade loses a dollar. Not surprising that he uses this…

Retail traders don't have liquidity needs on a sub-second basis. They'd all be better off with exchanges that used batch auctions. HFT is a tax on our economy.

http://www.businessinsider.com/michael-lewis-high-frequency-...

Re: Economic Inequality

#379

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…

> pure common sense in a democracy Does not exist. Democracy means that 51% of the people can destroy the life/liberty/property of the other 49% whenever they feel like it.

That's a very theoretical approach to democracy. Real democracies are less about the majority deciding things than keeping the people that do decide things in check.

Just look at what the majority of the people think. There are so many wrong things that the majority of people believe, you wouldn't want those beliefs made real through politics. Also nobody can be even interested in all topics decided.

Re: Economic Inequality

#380

The wealth that PG and his friends accumulate through app startups does not come from nowhere. The millions of dollars that make a handful of men rich depends on extracting value out of: 1) Government funding. GPS, the Internet, touch screens and the CPU. All funded by government research where the tax dollars contributed by each and every citizen is the investment capital. 2) Global cheap labour. Miners in Africa (m…

You forgot to mention regulatory capture. AirBnB breaks all sorts of local laws and profits from this, but because of its political connections/lobbying efforts it's been successful and stopping itself from being shut down or even fined in most markets.
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