How Paul Graham Gets It Wrong in “Economic Inequality”
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Re: How Paul Graham Gets It Wrong in “Economic Inequality”
#2As I said last time this came up, the answer is a maximum wage. We can still set the maximum wage beyond the level of most people (e.g. $1,000,000 per annum after tax). I don't see how it would discourage innovation, but I do see how it'd help curb financial inequality.
Re: How Paul Graham Gets It Wrong in “Economic Inequality”
#3As I said last time this came up, the answer is a maximum wage. We can still set the maximum wage beyond the level of most people (e.g. $1,000,000 per annum after tax). I don't see how it would discourage innovation, but I do see how it'd help curb financial inequality.
It would discourage innovation for a lot of reasons, and one is that high earners would move to other countries.
Re: How Paul Graham Gets It Wrong in “Economic Inequality”
#4As I said last time this came up, the answer is a maximum wage. We can still set the maximum wage beyond the level of most people (e.g. $1,000,000 per annum after tax). I don't see how it would discourage innovation, but I do see how it'd help curb financial inequality.
Most wealth doesn't come from "wages" or salaries. It comes from inheritance and increasing value of assets.
Many high profile CEO's are worth tens / hundreds of millions but take $1 salaries.
Re: How Paul Graham Gets It Wrong in “Economic Inequality”
#5As I said last time this came up, the answer is a maximum wage. We can still set the maximum wage beyond the level of most people (e.g. $1,000,000 per annum after tax). I don't see how it would discourage innovation, but I do see how it'd help curb financial inequality.
If you set a maximum wage like that, a lot of what is good in society would not happen because people would not be able to amass capital.
For example, you would not have a SpaceX or a Tesla. You would not have Y Combinator as it exists today. You would not even have the video game that I am about to release next month.
Yes, there are a lot of jerks who amass capital and do nothing with it or who do irresponsible things. But you also have people who use it to work very hard to make positive change in the world, and even if those people are in the minority, their impact is very large.
Re: How Paul Graham Gets It Wrong in “Economic Inequality”
#6As I said last time this came up, the answer is a maximum wage. We can still set the maximum wage beyond the level of most people (e.g. $1,000,000 per annum after tax). I don't see how it would discourage innovation, but I do see how it'd help curb financial inequality.
Problems with this:
1. "wage" is ambiguous to the point of useless given: executive compensation isn't solely in the form of salaries, a complex tax code, and wealth begets wealth (it's relatively easy to maintain wealth once you're able to reap more from safe investments than it takes you to live).
2. even if #1 could be solved with some complex formula, it's very easy to argue a maximum imposes a hard limit on how much work a person is willing to do. Elon Musk could surely easily hit the limit without all of his current ventures. What would be the incentive for him to continue to innovate once he's reached the limit?
3. estates are the extreme problem for 1 & 2: if they're counted against maximum wages than recipients of large estates likely have no incentive to ever work. If they're not counted then maximum wages are severely limited in its ability to affect change.
Perhaps a complex enough formula exists to make maximum wages work, but given how easily gamed our complex tax code is in the US, I can't imagine it's feasible.
Re: How Paul Graham Gets It Wrong in “Economic Inequality”
#7>while this report by the OECD found that “income inequality has a sizable and statistically significant negative impact on growth.
Actually it doesn't do this. It shows that income inequality is associated with lower economic growth. Mixing correlation and causation.
Re: How Paul Graham Gets It Wrong in “Economic Inequality”
#8As I said last time this came up, the answer is a maximum wage. We can still set the maximum wage beyond the level of most people (e.g. $1,000,000 per annum after tax). I don't see how it would discourage innovation, but I do see how it'd help curb financial inequality.
That's addressing the wrong side of the equation. The problem is phrased as "income inequality", but that's not the actual problem that needs solving (it doesn't necessarily hurt someone for one person to have a billion dollars, unless they use that money to influence policy in ways that harm others). The actual problem, as I see it, or, at least the variable that needs adjusting is the other side. The problem is that the middle class is nearly extinct in the US, huge swaths of people will never know a life free of debt, home ownership is a fantasy from another era, and rents are being driven up through a variety of circumstances mostly outside the control of the people those rising rents most impact. So, adjusting the other side of the equation (how many people are living in poverty or debt) is the one that minimizes harm.
Almost nobody who is poor wants to limit how much money someone can make; it's an irrelevant detail...most poor folks just want an opportunity to escape being poor, themselves. Capping wages does nothing to solve that problem.
pg, despite being a very bright and extremely sincere and decent person, is living in a world quite far removed from most American's reality and gets a lot of things wrong (sometimes hilariously so), based on that disconnect. But, a maximum wage is a ridiculous rebuttal, IMHO.
Re: How Paul Graham Gets It Wrong in “Economic Inequality”
#9Although PG makes a few turns of phrase, one of which is quoted in OP, that implies a straw-man who wants to end all economic inequality, he also talks several times about tackling the effects of economic inequality. The footnote in OP referring to studies that cover the negative effects on economic inequality supports rather than disproves PG's stance on this: economic inequality has multiple negative effects.
One of PG's core arguments is that while the inequality is caused by a lot of factors, a big one of which is the snowball effect of capital, when all those factors are removed, the wealth creation aspect will still remain. He explicitly says that attacking the non-virtuous feedback loops that increase economic inequality is desirable for him, he's just interested in targeting those as well as specific negative effects (e.g. poverty) rather than have the conversation framed around "economic inequality".
Re: How Paul Graham Gets It Wrong in “Economic Inequality”
#10As I said last time this came up, the answer is a maximum wage. We can still set the maximum wage beyond the level of most people (e.g. $1,000,000 per annum after tax). I don't see how it would discourage innovation, but I do see how it'd help curb financial inequality.
It would discourage innovation for a lot of reasons, and one is that high earners would move to other countries.
If they want to move, let them. The opportunities for making money would still be present.
There's a bizarre notion going around that protecting the economy requires protecting the rich. However if you look at it, it doesn't make any sense. The strength of an actor in the economic system is directly related to their participation in that system. The rich are where they are because they hoard more of their wealth. Hoarded wealth slows down an economy. The rich are poor economic actors, let them hoard their money elsewhere.