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Economic Inequality

paulgraham.com

441–450 of 580 posts

Re: Economic Inequality

#441

Earlier quoted context omitted.

It's depressing that the idea at the core of our prosperity is dismissed by some as an extreme view indistinguishable from parody. Thankfully, people like Friedman and Hayek have laid down a rock-solid intellectual defense of capitalism. We ignore their wisdom at our own peril.

>Capitalist wealth comes from repeated consensual and mutually beneficial transactions. Tech hiring collusion, 2008 financial crisis, environment degradation and global warming, slavery-like conditions at suppliers of multinational corporations, medical bankruptcies in US and lack of guaranteed holidays, ghettos, plundering of natural resources, monopolies everywhere (as prescribed by Thiel btw). Such a wonderful, mu…

The free-marketeer response is that many of those problems have actually been caused by a lack of adherence to capitalist/free-market principles - eg. a policy of bailing out banks since Continental Illinois, preventing market discipline and leading to riskier behavior; heavy involvement of public policy distorting markets (both through laws pushing cheap housing mortgages, and through government-sponsored institution like Fannie Mae); land expropriations in China that force people to accept those slavery-like jobs (obviously not in accordance to strong property rights as defended by free-marketers); government-granted monopolies (including patents), and many more.

Re: Economic Inequality

#442

Earlier quoted context omitted.

I live in France, I can tell you that most of the countries you list here built their wealth before building their huge welfare state and that it's now turned into a money losing machine nightmare which are being urgently reformed as you read this. It's also turned people against one another and created more racism for a simple reason. Given that the welfare state takes money from people and redistributes it to other…

Welfare discouraging work has largely been refuted: http://www.nytimes.com/2015/10/21/business/the-myth-of-welfa... Where it does discourage work, the effects are extremely minor. Your contention that their wealth was before the welfare state is completely incorrect and ahistorical. Even the crudest measures show that to be wrong. Examples: http://www.tradingeconomics.com/denmark/gdp http://www.tradingeconomics.com/s…

I know for a fact that here in France we have both substantial unemployment and at the same time many job offers available that people refuse to accept because they can afford to live on welfare instead. By definition, if they could not live on welfare they would accept these job offers. As for these countries building their wealth before the welfare state:

- http://www.cato.org/pubs/pas/pa-160.html

- http://www.forbes.com/global/2001/0319/034.html

Re: Economic Inequality

#443
post #104
post #80

Earlier quoted context omitted.

He is defending what he is doing and what Y-combinator has been doing. One of the most important roles of a leader is to create vision -- build a story that explains and interprets reality based on it. In general, startup world lives on hopes and ideals. More so than other industries. Founders have to have a "burning desire to change the world". It could be building a better future, moving the technology forward, mak…

> He is defending what he is doing and what Y-combinator has been doing. But that is the straw man. Those of us who think extreme economic inequality is a bad thing do not think that YC is a bad thing, notwithstanding that it does contribute to economic inequality. The problem is not YC, the problem is that extremely rich people use their money to buy political power, which they then use to create laws that allow the…

> But that is the straw man.

That was my point -- consider the source and the motivation of the author.

I see I got downvoted after a while, wonder if that idea didn't come out as clear.

Re: Economic Inequality

#444
Interesting rhetoric: first, PG ridicules people that fight inequality by using a straw man, to then call then infantile (ad hominem) and call for an us vs them, wolves and hunters, Silicon Valley against the world, in the most Goebbelian style.

But most infantile is his metaphor of the chair maker. Yes, we know in fact that economy is not zero sum game. But economic inequality is not generated by chair makers that gain an advantage over those who don't make chairs. Economic inequality happens because the owners of chair factories (who, are not, the chair makers) get to own both the factory and the chairs that chair makers make. Hence, while the chair makers get a salary to support themselves, the owners accumulate the surplus value of the chair producing business allowing them to expand their business, acquire more assets and, too, influence politics to turn the game in favour of capital instead of labour. This is too a simplistic metaphor, but hey, it's at least a bit closer to reality than PG's view of the world.

Of course, he is a venture capitalist, not a chair maker. His way of living is extracting surplus of founders that in turn extract surplus of engineers and other workers and contractors that support their businesses. He is in the business of selling ever increasing inequality.

This PG article is pure ideology. Ideological class war. It's a hoot--a network of fallacies building some sort of implausible moral self-justification. PG, you are not a wild animal in a room of hunters. It's more like you are the hunter, and this is a bait that we won't bite.

I'm sure he would argue that my chair makers are exploited only because they are not smart enough to start their own chair making business. His utopia is one in which everyone is an entrepreneur--a CEO or a VC. I wonder who makes chairs in that world (if it's machines, someone has to keep the machines running). See, not everyone can be a winner. It's not about killing the rich. It's about making sure that those that lose in the game--who are in fact, too, valuable and indispensable to society--have a chance to a decent and realized life in dignity.

But even in a legal and political system that are very much (and increasingly) biased towards capital, I've seen coops, foundations, institutions and other forms of sustainable and non-exploitative businesses that succeed and provide real value pushing the game out of the zero sum. We can also see this in the libre and open source world--it's an outcry from software makers to collaborate on producing value in a way that they still own (instead of the proprietary firms that they work for). It provides collectively a leverage to our society that very few SV startups can claim to. In a way, in this other utopia, everyone is as well a business owner. A business owner and a maker, organized in the democratic networks of both competition and cooperation. No VC's needed though. Sorry Paul.

Re: Economic Inequality

#445
post #396

Earlier quoted context omitted.

> or at least Larry Page selling his company to other private owners, once his shares are worth $500M I would argue definitely public. Google market cap is over $500B. Anyone else who owns $500M would have the same incentive, so you would have at least 1000 owners, and almost certainly far more than that because the owners would want to diversify instead of investing their entire $500M into a company they don't even…

Can you do a progressive tax on consumption, such that the rough cost for essentials is essentially untaxed, from there to average upper-middle-class consumption is moderately taxed, and O(a yacht) is highly taxed? I suppose this used to be impractical because consumption taxes are generally implemented at point of sale, but since most large transactions are digital (and there are well-accepted laws about moving huge…

> Can you do a progressive tax on consumption, such that the rough cost for essentials is essentially untaxed, from there to average upper-middle-class consumption is moderately taxed, and O(a yacht) is highly taxed?

Of course. But weird taxes are very hard to get right.

You can basically order taxes by how progressive they are. The least progressive is a head tax; everybody pays a fixed dollar amount every year, income and consumption irrelevant. Next is a flat tax; some universally fixed percentage of total income or consumption. After that it isn't really a straight line: Luxury taxes, property tax, graduated income tax, etc.

The problem with everything more progressive than the flat tax is they heavily induce tax avoidance and often hit the wrong target. If you tax cars with big engines then wealthy people start buying trucks with big engines. If you tax trucks with big engines you end up hitting working class people. If you tax real estate then rich people invest in the stock market and working class people can't afford a home. If making more than $250K/year brings you into a very high tax bracket then people find all kinds of deductions and tax losses to take, or arrange for their $1M/year compensation to be paid as $200K each to yourself, your spouse and your three children. And so it goes.

The trick is to stop trying to outsmart people. The problem is the least avoidable tax, collecting the same dollar amount from everyone, is very, very regressive. But all we have to do to make a very, very progressive tax is invert the sign. Have the government pay everybody a fixed dollar amount every year. Basic income. If you pay for it with a flat consumption tax, which is the next least avoidable, the flat tax is more progressive than the head tax that the basic income is the inverse of, so you can make it however progressive you want just by changing the amount of the basic income. Then there is no tax avoidance to be had anywhere, no argument about what should be taxed or not, and everyone pays their share.

> Are you also suggesting a high estate tax, so that you're encouraged to spend or invest it instead of building up wealth for your family?

"Invest" and "building up wealth for your family" are synonyms. Estate taxes are silly. It's the same problem with separating owners from their businesses. Then the companies become incorporeal diffusely-owned soulless sociopathic conglomerates. Who cares if the family that started some chain of stores continues to own it forever? Care instead if people in the middle are better off than their parents were.

Re: Economic Inequality

#446
post #80

Earlier quoted context omitted.

He is defending what he is doing and what Y-combinator has been doing. One of the most important roles of a leader is to create vision -- build a story that explains and interprets reality based on it. In general, startup world lives on hopes and ideals. More so than other industries. Founders have to have a "burning desire to change the world". It could be building a better future, moving the technology forward, mak…

But he's defending against a strawman. Almost no one is arguing for flat payment where everyone makes the same amount of money. What most want is equality for opportunity (something that YC and other VCs might give). In many ways, startups and access to capital could be a great equalizer for opportunity equality. It allows individuals to control so much of their destiny. The alternative is to pass through a gatekeepe…

> But he's defending against a strawman

Yes. That was my point. Consider the source and the reasons for writing this. I didn't necessarily say whether this points are valid or not just strawmen, but rather that he has an incentive to take the position he took.

> tartups and access to capital could be a great equalizer for opportunity equality ... It allows individuals to control so much of their destiny.

It sounds like the exact opposite of a great equalizer. It puts the wealth in the hands of a few owners and the rest get magic options funny money in exchange of a dream of landing a job in a future unicorn.

> Opportunity equality is what almost everyone is pushing for,

Who is pushing for that? I remember seeing the "meritocracy is a myth" a lot more than "we just need equal opportunity".

Re: Economic Inequality

#447
post #114
post #80

Earlier quoted context omitted.

He is defending what he is doing and what Y-combinator has been doing. One of the most important roles of a leader is to create vision -- build a story that explains and interprets reality based on it. In general, startup world lives on hopes and ideals. More so than other industries. Founders have to have a "burning desire to change the world". It could be building a better future, moving the technology forward, mak…

It's only me? because when people talk about inequality they are talking about poverty even if they are formally different things. If the lower income segment has good education, health, food, basic housing problem solved, transportation, basic services, and good opportunities based more on their capabilities than their connections the inequality discussion will be more about luxury.

That's a good point. It depends what gets compared to what.

Compared to 100 years ago, everyone is doing better. Compared to Africa or under-developed countries we are doing better. Compared to Western / Northern Europe we are doing so so depending on which metric you look at. Compared to an imagined parallel "what we could have" universe we might not be doing as well. Etc.

> capabilities than their connections the inequality discussion will be more about luxury.

Speaking of, an interesting side note: relationship of luxury and technology is kind of funny. Technology can bring luxury to regular people. Apple products, even those on food stamps could conciveably save enough money to own an iPhone, iPad etc. And that is a the same luxury product that a multi-billionaire would get. I doubt many have custom designed and manufactured phones (custom OS, custom gold plated batteries, etc). That almost never happens with anything else -- housing, cars, clothes, vacation destinations, food, free time. But it happens with technology. That is kind of crazy when you think about it.

Re: Economic Inequality

#448

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 are two separate issues here and it is important to distinguish them clearly. PG is correct that there are two basic strategies for making money: rent and productivity. 1) rent, although it has a positive aspect (it helps to efficiently allocate scarce resources to where they are most valuable and provides an incentive to add scarce resources to the economy), provides an inherent redistribution of wealth which…

The hell are you talking about? The argument could easily be made that AirBnB exists because of the efforts of the YCombinator team. It's not like Paul Graham is personally just sitting back and collecting money. He works hard to advise and provide seed capital to hundreds of startups at year, at a stage when their success is far from guaranteed.

For whatever you think about his views on income inequality, it's difficult to make the case that he's rent seeking.

Re: Economic Inequality

#449
post #80

Earlier quoted context omitted.

He is defending what he is doing and what Y-combinator has been doing. One of the most important roles of a leader is to create vision -- build a story that explains and interprets reality based on it. In general, startup world lives on hopes and ideals. More so than other industries. Founders have to have a "burning desire to change the world". It could be building a better future, moving the technology forward, mak…

> He is defending what he is doing and what Y-combinator has been doing. One of the most important roles of a leader is to create vision -- build a story that explains and interprets reality based on it. Defending against a strawman isn't really defending against anything but rather perpetuating the delusion that the strawman is real. It isn't helpful or productive.

> Defending against a strawman

That is what I was saying too. I wasn't being direct though.

Yes he is defending against a strawman to bolster his position and to justify and bring context to a certain narrative that revoles around startups. It makes sense to create these PR stories so to speak, masked as simple blog posts, to provide conext and interpretation for those who follow him.

Re: Economic Inequality

#450
post #83
post #55

Earlier quoted context omitted.

The ironic thing is that the wealthiest now try to live a rather stoic, normal life with a focus on whole, local foods and simple agrarian pleasures. Sure, they don't fly coach, but honestly, they don't exactly live extraordinary lives when compared to that of the middle class in America. Reminds me of a Warhol quote: > What’s great about this country is that America started the tradition where the richest consumers…

This correlation of equality breaks down in regards to the justice system however, where the poor are systematically curb-stomped and viewed as revenue generators for local governments while the rich can literally destroy the world economy through fraudulent mechanisms and walk away scot free.

Not justice, nor healthcare, housing, education, or political influence. But when it comes to sugar water Virginia yes it's true: we're all equals.
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