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The Refragmentation

paulgraham.com

371–380 of 461 posts

Re: The Refragmentation

#371
His arguments on taxes simply don't hold water. Income inequality is expanding because those at the very top either pay taxes much lower than all others (HF, PE, VC) or just don't pay taxes at all (AAPL).

The other problem with income inequality is simply interest rate related. If you look at all asset classes over the last 30 years, real estate gains have far outpaces every other asset class. Real estate prices are very sensitive to interest rates.

If the Fed keeps raising rates, the value of these real estate holdings will go down and well inequality will reverse itself somewhat. To do that significantly, I think we need Fed Funds at 5-6%. I don't see that happening for a long time, though.

Another longer term trend which may help wealth inequality reverse itself is global warming. The global elite own a disproportionate portion of coastal real estate. With rising ocean levels these assets will be wiped out.

Re: The Refragmentation

#374

Very nicely done. Awash in insight about the past and likely also about the future. Should connect with the role of social media . In particular, explains much of why the heck I, first, got a technical Ph.D. and then became an entrepreneur. Did I mention very nicely done and full of good insight. Gee, all that time people spent in courses in history, economics, political science, B-school, and STEM field education, a…

Everything old is good, everything new is bad. Remember when TV was the poison that was ruining family social time? Experts feared families would watch instead of conversing. And yet he praises it.

Re: The Refragmentation

#375
post #359

Earlier quoted context omitted.

>Companies like Apple do not happen in a pure deregulated neoliberal market paradise because markets don't have the kind of strategic intelligence that can fund projects like Whirlwind, TX-0, and the original Arpanet - all of which are essential steps on the road to making an Apple or a Google. While I can agree that private entities/markets lacked the capability to fund transformative projects during most of the 20t…

Leaving the buzzwordy hand waving in the last paragraph aside, spacex gets the majority of its revenue from the government.

... for services rendered, at a price no one else is able to compete. Or so I've heard. Correct me if I'm wrong(the PR machines are not to be underestimated). Or don't, your choice.

Re: The Refragmentation

#376
Great essay. Though obviously, such a big hypothesis is very speculative.

I think the use of the "market price" concept so heavily here might be taking away a little. It sort of assumes some objective (if unknowable) value to human contribution or achievement. I think in the labour market in general, and specifically the components that he's talking about in the lang term, are hard to describe well this way. Between the difficulty to evaluating labour quality, the variability in "quality" depending on specific circumstances, the bargaining/liquidity issues and other problems, I think we enter a (Ronald) Coase-esqu problem where markets do not play out efficiently enough to reveal an information rich market price.

I wonder if this essay would be much different without market price.

Re: The Refragmentation

#378
post #292

Earlier quoted context omitted.

There's no solid evidence that increasing the minimum wage will create fewer jobs. From Paul Krugman's review of Robert Reich's new book > Other evidence points indirectly to a strong role of market power. At this point, for example, there is an extensive empirical literature on the effects of changes in the minimum wage. Conventional supply-and-demand analysis says that raising the minimum wage should reduce employm…

With so many exemptions to minimum wage laws (self-employed are exempted, family-owned businesses are exempted, waiters are exempted unless their tipping income does not put them over minimum, anybody working under 1099 is exempted) the comparisons become a bit muddled - a minimum wage worker who lost his position and decided to get some moving gigs or drive a few hours for Uber/Lyft certainly has "a job" for survey…

Waiters and tipped employees are not exempt from minimum wage. They must be paid a wage greater than or equal to minimum wage for every hour they work. Tips can take that wage above minimum, but an absence of tips cannot drop their wage below.

https://en.m.wikipedia.org/wiki/Tipped_wage_in_the_United_St...

Re: The Refragmentation

#379
post #269

Earlier quoted context omitted.

Markets do not care how "important" your work is when it values how much you are worth. All it cares about is supply and demand. If people want food, and nobody is growing it, but you have a surplus of welders and nobody wanting steelwork done, of course the farmer is going to make more money. Farming is more valuable than welding, regardless of training. The training itself is not a cost center. It is a barrier to e…

A market's value of work is how important it is to people at the time. It's that simple. You are over-complicating it by pretending there is something different to determine importance. Also, your suggestion of sane progressive taxation is a massive backpedal from the statement that I replied to, which implied that everyone should receive equal compensation. We already have progressive taxation in the US, so advocati…

> so advocating for 'sane progressive taxation' is just a nebulous cop-out that doesn't provide anything concrete enough to be discussed or analyzed.

Capital gains is merged into one income tax bracket. All money earned in a year is one single income. Income from 0 to your providential happiness threshold according to heuristic analysis based off the methodology used in this study: https://www.princeton.edu/~deaton/downloads/deaton_kahneman_...

From that point to 100x the happiness threshold you curve progressive taxation from 0% to 90% quadratically, approximating the median around 25% at 50x. Your total tax burden is simply the area under the curve, so rather than having tax brackets you use actual math to make sense and tax progressively all income earned.

That means any money made over, if happiness is 75k, 7.5 million is 90% taxed forever. I'd even wager to make it 100% as a short term measure to help dramatically curb income inequality. Note this rate is actually 2% lower than the highest its ever been, but in practice capping capital gains would have a dramatically larger effect on economic planning.

Additionally, you need tariffs on exported wealth, on corporate holdings accounts, and on physical goods hoarded, on property all at progressive rates to avoid off-shore tax evasion, hiding your money in a business account, buying material goods to hide your wealth, and stop the current and tangential issue of land hoarding that would be an even bigger problem under a legitimate tax scheme.

Finally, you institute a 10 year wealth tax to try to reclaim some of the amassed ownership of the means of production the ultra-elite have racked up over the last decade and stop some of the rent seeking. It is not just about stopping them from acquiring even more of a share of ownership, its about getting some of it back. The rates here are not something I have researched much, but something of the sort may be required since so much of total wealth has moved to the top.

You would keep sales tax as a means to fund local and state government, because while regressive if you try to push progressive taxes locally you will just have regional wealth flight. I strongly disagree with the argument that if you tried realistically taxing the rich to pay for society that they would all flee internationally - because the tax burden is pretty close to this in almost all European countries. Where else are they going? Politically unstable and unsafe third world nations? China? Russia? You would absolutely want some global effort here to prevent there from being such an easy escape route, but its a problem of global scale after all, the asset controllers in the US also dominate international commerce and are as much a problem in their influence on every other nation as they are here.

Re: The Refragmentation

#380

Earlier quoted context omitted.

Here's the specific part in question: " People did start their own businesses of course, but educated people rarely did, because in those days there was practically zero concept of starting what we now call a startup: a business that starts small and grows big. That was much harder to do in the mid 20th century. Starting one's own business meant starting a business that would start small and stay small."

That part is a bit questionable. Educated people starting small companies that grew big is not something new in American business. Not even educated people starting small technology companies that grew big. It's possible there has been a quantitative change, with it being more common now (I'd need to see numbers to be convinced of that, but it's possible). But "practically zero concept" prior to the 1980s?

Actually, the rate of new business creation has been falling ever since the 80's. According to [0], “Unfortunately, new firm formation has waned since the 1980s, and the recession accelerated the decline."

[0] https://www.washingtonpost.com/blogs/on-small-business/post/...

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