How Paul Graham Gets It Wrong in “Economic Inequality” • Hacker News Board

Re: How Paul Graham Gets It Wrong in “Economic Inequality”

#51

Post by tdaltonc » Sun, Jan 03, 2016, 9:25 PM UTC

lisper wrote: post #22

solomatov wrote: post #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.

Except that the data support a particular theory: extreme income inequality limits growth because growth is ultimately driven by broad-based consumption. If there's a plausible theory purporting to explain how the causality could possibly be the other way around, I haven't heard it.

Capital (and an executive elite) is more mobile then labor. When there's a local downturn, people who derive their income from labor suffer, but the capital class does not --> increased wealth inequality.

Re: How Paul Graham Gets It Wrong in “Economic Inequality”

#52

Post by angularly » Sun, Jan 03, 2016, 9:26 PM UTC

sradu wrote: post #30

Coming from a former communist country, I don't understand why smart, capable people want to give away their money to a corrupt, incompetent state to manage it for them. The US is fundamentally different than Nordic countries, where socialism appears to be working: * The Nordic countries are tiny compared to the US. * They are highly educated. * Their society is homogenous. It seems like everybody is assuming that th…

I agree, thinking the politicians can handle anything is naive. Politicians seldom make the situation better, mostly they make it worse while enriching themselves.

Socialism don't work in the Nordic countries either. In Denmark where I am from we were in the top 5 richest countries only 60 years ago, before we introduced the Welfare State. Back then we actually had lower taxes than in the US.

Since then we have been sliding fast down that list, so we are today around 20th place. We now have an absurd situation where a small minority of ~33% in the private sector has to pay for ~66% of people on welfare or working in the public sector. And we are past the point of no return, we can not make any reforms to cut the public sector or welfare, because the majority is obviously against.

A high earner often pays 80% counting both taxes and levies/duties. It has killed almost all initiative in Denmark. People prefer time off instead of working extra hours, we are one of the countries with the lowest amount of entrepreneurs percent wise, like in France young people and entrepreneurs are fleeing the country in hordes.

I myself moved to Switzerland to start my startup.

Re: How Paul Graham Gets It Wrong in “Economic Inequality”

#53

Post by schmichael » Sun, Jan 03, 2016, 9:27 PM UTC

Pyxl101 wrote: post #38

Is economic inequality a problem in and of itself? Why? Economic quality seems like a red herring for actual issues like how well off people are. Is the actual concern about how poorly off the poor are? Imagine a thought experiment where aliens come to earth and give every human 100x the resources they have currently (or 100x a year's min wage), as an annuity. The poor are all now rich, and the wealthy can buy their…

As long as money begets power: yes, it is a problem as it undermines the fundamental principle of equality in a democracy.

Now the extent to which money begets power and therefore undermines democracy is a subject open to much debate.

Re: How Paul Graham Gets It Wrong in “Economic Inequality”

#54

Post by ZenoArrow » Sun, Jan 03, 2016, 9:27 PM UTC

schmichael wrote: post #19

ZenoArrow wrote: post #15

Earlier quoted context omitted.

> "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?" Whilst I can't speak directly for Elon, it does appear that his work is targeted at benefitting mankind. I'm sure that is plenty of incentive on its own. > "wage" is ambiguous to the point of useless given: executive compensation isn't solely in…

Perhaps a better critique of a maximum wage would be: What does it solve that graduated income, property, and estate taxes do not? I can't imagine it could possibly be any less complex than a tax code since it needs to contain the same estimations of wealth ("wage" in your approach).

Whatever method is used, the important part is in slowing down the rate at which the inequality gap grows. Graduated income, property and estate taxes could do the job, but only if much stronger taxes were brought in, and there appears to be reluctance to raise taxes on the wealthy. If higher taxes end up being the solution, then so be it.

Re: How Paul Graham Gets It Wrong in “Economic Inequality”

#55

Post by totalrobe » Sun, Jan 03, 2016, 9:28 PM UTC

trav4225 wrote: post #31

"I’m going to be charitable here and assume that PG is not arguing against those that want to, literally, end economic inequality completely [...] I’ve never met anyone arguing for this." Interesting. Perhaps I'm misinterpreting their rhetoric, but my impression has been that many people are arguing for precisely this.

I've also never seen anyone arguing for this. Many argue for specific issues and policies like estate taxes, single payer health, cost of housing and education, but I've never met anyone that thinks everyone should have the same income.

Re: How Paul Graham Gets It Wrong in “Economic Inequality”

#56

Post by jernfrost » Sun, Jan 03, 2016, 9:28 PM UTC

Pyxl101 wrote: post #38

Is economic inequality a problem in and of itself? Why? Economic quality seems like a red herring for actual issues like how well off people are. Is the actual concern about how poorly off the poor are? Imagine a thought experiment where aliens come to earth and give every human 100x the resources they have currently (or 100x a year's min wage), as an annuity. The poor are all now rich, and the wealthy can buy their…

No, actual inequality does cause actual problems. 1) Happiness is affected by absolute wealth but as we get richer the effect wears off. Relative wealth however retain its effect on happiness regardless of absolute wealth level. 2) Inequality distorts supply and demand in society. In any society there is a limit to labour. If you shift larger part of society's wealth to a few they will command an increasing share of the labour of a society. This will affect what gets produced in society and relative prices. 3) High concentrations of wealth distorts politics. With more equal distribution politicians will mainly cater to the interests of the majority of the people. With extreme wealth concentration society will become increasingly like an oligarchy. Studies show that this has already started to happen in the US. Studies show that what becomes actual practical politics is generally not in line with the will of the majority, but rather with the will of the wealthy few.

If you look at societies with high wealth concentrations like those with large oil wealth or other resource wealth you find typically very weak political institutions and poor development of democracy. The super rich gulf states e.g. are far behind politically speaking from much poorer countries.

Re: How Paul Graham Gets It Wrong in “Economic Inequality”

#57

Post by danhak » Sun, Jan 03, 2016, 9:36 PM UTC

Pyxl101 wrote: post #50

danhak wrote: post #40

Earlier quoted context omitted.

The issue is always inequality and not absolute wealth, so your hypothetical of everybody having 100x the resources is not fundamentally different than the current situation. The issue is that wealthy people do not have a monopoly on talent, good ideas or intelligence. But they have a monopoly on power and influence. Society therefore suffers when the best ideas do not necessarily compete on an equal basis within the…

Excellent! Thank you for clarifying. It sounds like the concern is that some people hold a monopoly on power, such that good ideas don't compete on their merits. Is that a good way of saying it? I ask because that problem does not seem to me to be directly related to income equality. In communist societies everyone had very similar income, and yet a small group had all the power and functioned as kingmakers in busine…

> In communist societies everyone had very similar income...

Again we're reverting to the straw man of 100% (or nearly) equal society.

Our society must be unequal to some extent because capital is a reasonable and effective reward for figuring out how to best allocate resources. But extreme inequality prevents a large % of the population from fully developing, exploring and disseminating their talents, shutting them out of this virtuous cycle altogether.

You bring up Google, Microsoft, Facebook and Uber as examples of companies that succeeded on their merits. All four of those companies were started by straight white men with upper middle class upbringings. Do you believe that's a coincidence? Or are there some "lost Zuckerbergs" out there who never had a chance to fully explore computers when they were kids? Is a family's ability to afford the latest technology a material advantage for the next Zuckerberg / Gates / Brin / Page / Kalanick? In your original example, who is going to invent the next great space tech? Probably the kid whose family is buying a space station.

Re: How Paul Graham Gets It Wrong in “Economic Inequality”

#58

Post by Pyxl101 » Sun, Jan 03, 2016, 9:36 PM UTC

danhak wrote: post #35

sradu wrote: post #30

Coming from a former communist country, I don't understand why smart, capable people want to give away their money to a corrupt, incompetent state to manage it for them. The US is fundamentally different than Nordic countries, where socialism appears to be working: * The Nordic countries are tiny compared to the US. * They are highly educated. * Their society is homogenous. It seems like everybody is assuming that th…

> Coming from a former communist country, I don't understand why smart, capable people want to give away their money to a corrupt, incompetent state to manage it for them. You are inventing a complete straw man. That is not what I want nor is it what most other people who are concerned about wealth inequality want. What we want are policies that do not make it so absurdly easy for those who already have access to cap…

> What we want are policies that do not make it so absurdly easy for those who already have access to capital to continue to accumulate wealth and influence at an exponential rate

What specific policies are those? Most people who advocate for such policies recommend taxation, which is what the GP is referring to: the government forcibly seizes the money. The GP is not really addressing a straw man when the most common solution is tax.

It's worth remembering that taxing is taking, so a "policy" that prevents people from becoming wealthy is just a societal license for seizing their assets.

Personally I've seen the government squander or tax revenue on pointless wars and ineffective programs like F-35, and would be happy for those who are fortunate to keep their wealth and invest it smartly; they will drive more positive change in society than the government will.

Re: How Paul Graham Gets It Wrong in “Economic Inequality”

#59

Post by ZenoArrow » Sun, Jan 03, 2016, 9:38 PM UTC

jblow wrote: post #5

ZenoArrow wrote: post #2

As 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 thin…

> "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."

I wish you well with your game launch, I hope it's a success.

The issue I'm tackling isn't about erasing the rich, it's about setting limits on the differences between the rich and the poor. If you believe the rich should be richer, why shouldn't the poor be richer too?

The issue with wealth accumulation is that it's a runaway process, wealth begets wealth, past a certain point it's no longer based on merit or contribution to the strength of the economy.

Re: How Paul Graham Gets It Wrong in “Economic Inequality”

#60

Post by douche » Sun, Jan 03, 2016, 9:40 PM UTC

angularly wrote: post #52

sradu wrote: post #30

Coming from a former communist country, I don't understand why smart, capable people want to give away their money to a corrupt, incompetent state to manage it for them. The US is fundamentally different than Nordic countries, where socialism appears to be working: * The Nordic countries are tiny compared to the US. * They are highly educated. * Their society is homogenous. It seems like everybody is assuming that th…

I agree, thinking the politicians can handle anything is naive. Politicians seldom make the situation better, mostly they make it worse while enriching themselves. Socialism don't work in the Nordic countries either. In Denmark where I am from we were in the top 5 richest countries only 60 years ago, before we introduced the Welfare State. Back then we actually had lower taxes than in the US. Since then we have been…

60 years ago, Denmark was one of the few industrialized countries other than the United States which was not extremely devastated and still in the rebuilding process after WW2...