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Economic Inequality

paulgraham.com

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Re: Economic Inequality

#481

Post by argonaut »

loteck wrote: 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…

It's just an analogy. I think you're reading way too much into the choice of words.

Re: Economic Inequality

#482

Post by Futurebot »

argonaut wrote: post #476
Futurebot wrote: post #459

Earlier quoted context omitted.

There's little irony. Krugman has publicly changed his opinion on several items over the years, and isn't an advocacy organization or a think tank. Cato's raison d'etre is the promotion of "negative liberty" to the exclusion of virtually everything else. I regularly read Cato, and I even agree with some of their work (things like replacing the welfare state with a GBI, free speech absolutism, etc.), but I still consi…

I consider myself center-left and I like Krugman a lot, but you can't deny he's just as biased as Cato/AEI (on the right), and the Brookings Institute (on the left). They are all biased. That being said, they are all reputable enough not to outright lie or distort. At worst they selectively omit, or their opinions/editorializations/analysis are wrong or speculative.

No way. There is absolutely no symmetry in the positions; that's part of the false equivalence narrative. Is Krugman, Baker, DeLong, Thoma perfectly unbiased? Of course not. Do I trust their lack of bias more? I do.

If someone were to argue about the less biased nature of Cowen, Hanson, or Murray, or other RW intellectual, we might have a discussion. I don't agree with those people half or more of the time, but I definitely trust them to change their minds and look at the facts, rather than having an a priori position immune to facts. I don't expect the same from Cato, and certainly not from AEI or Heritage (whom I consider far more biased than Cato.)

Re: Economic Inequality

#483

Post by Futurebot »

argonaut wrote: post #479
Futurebot wrote: post #231

Earlier quoted context omitted.

Even those in what remains of America's radical left don't make this argument (the few that do aren't taken seriously by their fellow leftists anymore); even in Europe, which is far more generous in terms of social welfare provision has some level of wealth inequality. So it's definitely a huge strawman. PG makes several statements which shows that he understands important parts of the problem (poverty, mobility), bu…

In the spirit of PG's essay, his response would likely be that the fact that economic leverage affects politics substantially at all is the direct cause of distorted preferences, and wealth inequality is the indirect cause. So what you really want is campaign-finance reform ( and other reform for areas outside of politics like higher education, etc.) EDIT: emphasis added.

No, it's not just that. CF is not the only mechanism through which the wealthy can exert their influence:

- think tank funding

- ad spending

- lobbying (CF will not fix that)

- the potential of future jobs / revolving door

Most importantly, cultural deference does not go away with CF reform; people respect the monied and the powerful for more than their campaign contributions. They also respect people "like them" (http://time.com/373/congress-is-now-mostly-a-millionaires-cl...), which means similar socio-economic backgrounds, elite schools, clubs, etc.

They buy influence indirectly by simply having wealth and power concentrated with them. You can only reduce that by reducing the distance between the bottom and the top. You have to reduce "vertical social distance."

Nothing is a silver bullet here, but reducing wealth inequality is the most direct route to equalizing political power.

https://en.wikipedia.org/wiki/Elite_theory

https://en.wikipedia.org/wiki/Iron_law_of_oligarchy

I especially recommend reading "The original problem of social distance" in "Twilight of the Elites."

Re: Economic Inequality

#484

Post by argonaut »

RobertoG wrote: post #175
bsbechtel wrote: post #11

I've always thought a good question to ask on this subject is "If you could do something to make the wealthiest 50% wealthier, with 100% certainty that it would not negatively affect the bottom 50%, would you do it?"

A better question is, if the 158 families that dominate U.S. Presidential Campaign Contributions were 50% wealthier, do you think they would contribute more or less? http://nymag.com/daily/intelligencer/2015/10/158-families-do...

Like how PG talks about poverty being the real cause of the problems that people blame on wealth inequality, the solution here is to limit the leverage that wealth has on politics (finance reform).

Re: Economic Inequality

#485

Post by argonaut »

Futurebot wrote: post #483
argonaut wrote: post #479

Earlier quoted context omitted.

In the spirit of PG's essay, his response would likely be that the fact that economic leverage affects politics substantially at all is the direct cause of distorted preferences, and wealth inequality is the indirect cause. So what you really want is campaign-finance reform ( and other reform for areas outside of politics like higher education, etc.) EDIT: emphasis added.

No, it's not just that. CF is not the only mechanism through which the wealthy can exert their influence: - think tank funding - ad spending - lobbying (CF will not fix that) - the potential of future jobs / revolving door Most importantly, cultural deference does not go away with CF reform; people respect the monied and the powerful for more than their campaign contributions. They also respect people "like them" ( h…

I explicitly mentioned "(and other reform for areas outside of politics like higher education, etc.)"

So all those things you've mentioned are the real direct causes (that should be fixed) of the problems you blame on wealth inequality.

Re: Economic Inequality

#486

Post by Futurebot »

argonaut wrote: post #485
Futurebot wrote: post #483

Earlier quoted context omitted.

No, it's not just that. CF is not the only mechanism through which the wealthy can exert their influence: - think tank funding - ad spending - lobbying (CF will not fix that) - the potential of future jobs / revolving door Most importantly, cultural deference does not go away with CF reform; people respect the monied and the powerful for more than their campaign contributions. They also respect people "like them" ( h…

I explicitly mentioned "(and other reform for areas outside of politics like higher education, etc.)" So all those things you've mentioned are the real direct causes (that should be fixed) of the problems you blame on wealth inequality.

I'm sorry, I don't follow. You cannot reduce social distance without reducing income inequality. If those other things include "reduce income inequality", then yes, we're in agreement. If those other things do not include that, then we're not in agreement - those things are ultimately eating around the edges (and we should do them. 100% we should do them because they matter, too) and not attacking the core problem. Income inequality is both a symptom (policy preferences that favor low taxes, loopholes, etc.) and a cause of the problem (inequality itself causes vertical social distance, causing unresponsive elites, causing people to get elected that favor the preferences of other elites, which causes..) It's self-reinforcing.

You can't fix "vertical social distance" without reducing inequality. Read my links to find out why.

Here's another: https://en.wikipedia.org/wiki/Income_inequality_in_the_Unite...

Re: Economic Inequality

#487

Post by dzink »

cko wrote: post #214
xiler wrote: 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…

Hoarding slows down the economy and creates dynasties who continue to excercise power well past the time their judgement on the stewardship of money and social good has been incapacitated. That is what death taxes are for. Luxury however is awesome - it is one of the fastest ways to transfer wealth from the incapacitated hoarders to publicly owned companies which then feed retirement savings (unless you're like a certain luxury brand dynasty and want to keep your money by tricking the tax system upon death). Oops.

Politics is a zero sum game - at the end of the day everyone is pulling the rug in their own direction. The poor do it by voting in populist politicians, the rich by paying off those politicians through lobbying, or gaming the tax system.

What everyone needs is an economic model that maximizes the wellbeing of society as a whole, so the pie at least gets bigger as it gets redistributed. That, and a political model that prevents any single group from pulling the rug completely out and causing war.

Re: Economic Inequality

#488

Post by whybroke »

Turing_Machine wrote: post #348
whybroke wrote: post #53

Earlier quoted context omitted.

Well food prices are significantly lower in the EU than the US. A more dramatic case, Spain, the consumer bread prices can be 1/10 US prices. Vegetables run a fraction of US price, eggs about 1/3. Even corn is less expensive when it reaches the consumer. Yet the median wage is on the order of .75 US and minimum wage including farm worker wages, are higher. Yet US agriculture is more mechanized and agro-business more…

"So empirically the most significant factor is now something else." That "something else" would be the 40%(!) of the EU budget that is spent on agricultural subsidies.

The EU spends approximately the same per capita on direct farm subsidies as the US.

Your choice of words however would mislead people into believing that 40% of European national budgets are devoted to farm subsidies and that EU subsidies exceed US subsidies by a similar proportion. This is grossly untrue.

The difference is the US consumer realizes far less benefit. e.g. corn receives far more subsidies in the US than in the EU yet somehow is still more expensive to the US consumer.

What the US does have is an aversion to enforcing anti trust laws, tariffs designed to disadvantage consumers (eg on rice), a taboo on regulations and effectively no consumer advocates in government.

Re: Economic Inequality

#489

Post by abalashov »

murbard2 wrote: post #417
srean wrote: post #362

Earlier quoted context omitted.

> Anyone who made money from business has already created wealth and contributed to society, via the market. What in your opinion would be the contribution of a high frequency trader to a society or an individual ? Getting markets to be arbitrage less at sub-mili-second time scales was a pressing problem for no one. For some of the other industries, if you price the externalities, it is far from clear if they are pro…

It's not a large problem and that's exactly why the high frequency trading industry is tiny. You only think it's big because it gets disproportionate attention in the media.

I guess it depends on how you bracket the problem and how you define "large". According to http://www.marketswiki.com/mwiki/High-frequency_trading,

"It was estimated that as of 2010, high-frequency trading accounted for an estimated 50 to 70 percent of trading."

Re: Economic Inequality

#490

Post by questerzen »

karmacondon wrote: post #448
questerzen wrote: post #434

Earlier quoted context omitted.

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 diffi…

PG does appear to want to do a better job than the rest of his industry and he should be applauded for that.

But there is very little evidence that PE or VC funding adds much value to a company through advice or services: the poor performance of post-boom PE funds and their companies, for example, suggests that such claims are vastly exaggerated. I recently had a conversation with the head of a very successful fund who, reflecting on the aftermath of the financial crisis, openly expressed his doubt that his fund had really helped the companies they bought stakes in. He, of course, became exceedingly rich and the steady stream of inflated IPOs produced healthy returns for the funds investors (at least until they didn't.) A large part of the problem is that the compensation model (the traditional "2 and 20") is geared towards the capital providers not the entrepreneurs or indeed to social benefits. Funds are incentivised to raise huge sums of capital from sources who offer nothing but cash and a healthy appetite for risk and over-capitalise the companies they fund (the fund earns 2% on invested external capital regardless of how it performs). To compensate the investors, the funds rely almost exclusively on extracting a very large profit from the few "unicorns" that succeed outrageously (of which the fund gets to keep 20%, or sometimes more). Taking $100 million from a single company is hard to justify, however greatly you value the advice and support you got. And the many worthy productivity-enhancing near-successes are left to flounder. PG may like to focus on the positive impact he is having helping founders succeed, but the reality of his business model is strongly skewed to financial rent extraction.

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