Economic Inequality

Systems wherein the wealthy are the primary allocators of 'funds for common good objectives' have already existed. They were called 'aristocracies'.

They did not result in improved lives for the non-wealthy.

Thank you for articulating this. It's an interesting perspective I hadn't seen before and will have to ponder over the degree to which it manifests itself..

With this comment I'm answering both PG's post and an answer to his post that can be read here: http://cryoshon.co/2016/01/02/a-response-to-paul-grahams-art...

What really matters is that * being taxed doesn't remove the incentive to start startups or innovate in general . Because Sweden. Because Denmark, because Norway, and because basically every european country plus Canada and Australia, etc etc etc. That's all. Debate closed for me. Sure startups, and innovation in general, is what made people better off since prehistory and we want to keep that exponential trend going. But is it true that people need to starve and be in debt so we can have startups? People need to get screwed over? No, on the contrary! GET TO THE GIST OF THE ISSUE! People arguing that we need a lot of inequality to have innovation and startups are misinformed, and/or brainwashed by the media.

One fun fact: there's more poor* smart kids than rich smart kids, in raw numbers (despite kids from rich households being more likely to be smart, on average). Allowing these poor smart kids to waste less time at small jobs and spend more time in school and on startups is what we want. So actually it might even help innovation to have less poors.

Other fun fact: the computer, the internet, the web, GPS, touch screens, modern encryption, and most things we rely on today aren't coming from startups (see TED talk on that issue). Most tech innovations were done by regular employees with no financial stakes, working for a country's government or a university. And there's more ... I wouldn't count an employee innovating at Google, IBM or Facebook in the "startup" category. Artificial intelligence at Google or IBM or Facebook happens mostly because people are smart and passionate. These people are often knowledgeable academics, often coming from other countries where education and health care is free. Startups are the tip of the iceberg for innovation. People don't usually innovate just to get rich. They did it because they are smart, it was their job, and they got lucky to combine two old ideas together -- they were at the right place at the right time with the right knowledge.

Other fun fact: a strong middle class is necessary for innovation. Otherwise no one will buy smartphones and use the apps. (see excellent "banned TED talk" by venture capitalist Hanauer)

It's not looking good for the neo conservative ideology, the "we need inequality" and no tax for the rich idea. How can people still be convinced that we need higher inequality to have a healthy economy and get innovation? The only reason it's still widespread is because of American media owners.

What this means for anyone with half a brain is that socialism works, when done right, done smart, ... No offense to PG, who is otherwise a smart dude, but he didn't completely nail it in this article, on this specific issue. He is trying hard though and that's admirable. He is a brainwashed neo-conservative, to some extend, trying to make sense of things. It's admirable that he is trying really hard to make sense. Some of what he says almost makes sense. We can feel the neo con ideology from the early 2000s Bush Jr era still running in his neurons and preventing a fair appraisal of the problem, but he is trying. Also, he is inherently in conflict of interest, one should point out here. It's ok PG, neo cons do seem to have a lot of strong points, mostly that the USSR and China failed with communism. Economic freedom also seemed to make sense. And it's on TV. And most people agree. And it does feel kind of uncool to tax companies and successful people. But with a bit of reasoning and at this point in history, we can say for sure that "a lot of inequality isn't necessary for startups". Just a bit is sufficient. Taxing companies and personal income is fine, it's done in most successful countries.

The current state of technology (affordable smartphones and laptops, programming languages that are easy and affordable, and more people than ever in history with some free time and extra money on their hands, etc) is what's allowing the startup phenomenon, today in history. It wasn't superhuman levels of effort, that could only be triggered in an individual by the promise of millions. Kids innovate by having fun and having free time and no debt -- so peace of mind. High inequality (and the neo con ideology that promotes it) isn't necessary for startups and is even detrimental. Having lobbyists influence the government isn't necessary for startups. Dumb, bro-ish and psychopathic wall street practices and (lack of) laws aren't necessary for startups. Taxing the rich less than the poor isn't necessary for startups. Spending most of the budget on wars isn't necessary for startups. Not having free health care isn't necessary for startups. Having a bunch of psychopaths screw people over isn't necessary for startups. On the contrary. Guaranteed basic income has been tested and empirically didn't remove incentive for people to work (see TED talks on basic income). Do things smart for God's sake. The variability in innovation rates and GDP per inhabitant between countries IS NOT DUE TO SOCIALISM (contrarily to what the economic freedom index people would want you to believe). Russia is still a shithole for the most part after 25 years of capitalism, maybe even more, and it always has been and shithole anyway. It's probable Canada or France would have fared just as fine in GDP with more or less socialism -- they'd just have more poors and more stress, and less kids in school given less socialism. Nordic countries are killing it in innovation despite their small size and "despite" being very socialist. But then you have examples like West vs East Germany which do seem to indicate that socialism (or communism) can be bad for the economy in some cases. Success for a country is complicated, isn't just defined by whether it's socialist. Important to point out that there's smart socialist policies and dumb socialist policies. Look at empirical evidence. Free school and free health care happen to work if done right, and exist in countries that have a lot of startups per capita. You can verify that in countries that tried it.

The bottom line is, we want innovation, and we want less inequality. We can have both. Why are we even debating this? Because people are dumb and the neo con ideology is spread far and wide by the American media, and some of its arguments can seem to make sense (the "lazy communist worker" argument and the "economic freedom index" argument are two). People have very little time and cognitive resources to spend on this issue and are easily manipulated. Recently Hillary was declared winner of the democrat debate in the news, when every online poll indicated that Sanders won. Talk about corrupted, communist-style use of the media -- media owners trying to influence the issue of elections, straight up. People better wake up. Hopefully the internet is making things better and making people more informed over time, and avoiding the biased news. Brain time is a scarce ressource.

Now some more thoughts. Most current jobs will likely be automated in the next 20 years, including lawyers and truck drivers. Now that's inequality right there! But is stopping exponential innovation the solution? Of course not. We want to speed it up, but benefit from it. How? Spread the risk. Like capitalists in Holland did in the 1600s investing on ships to India that had a high risk of not coming back. Like YCombinator does. This form of spreading the risk basically amounts to taxing the successful ones. Countries can invest by spreading the risk or tax successful companies on behalf of their citizens and then provide guaranteed basic income. I know it doesn't feel cool to tax successful people. But that's what we gotta do to deal with the concentration of wealth inherent to capitalism (see TED talk on capitalism and the concentration of wealth).

SUMMARY: - startups and innovation happen just as much with socialism - startups and innovation might happen more with socialism - to keep the historical trend of exponential innovation going, we need to maximize quality brain time spend on startups and other intellectually challenging ventures - this can be achieved with socialism (free school for selected kids, free health care, basic income, wall street regulation, less money spent on war, no subsidies to oil companies, etc) - to benefit from the exponential tech evolution trend, we need anyway to tax companies that succeed, otherwise they will concentrate all the wealth by automating most current jobs existing today …. we're insanely lucky to have some billionaires give their fortunes to charity, in smart ways currently, but people can't just count on that in the future to have jobs and an income when everything is automated.

If anyone disagrees with these, please tell me why, I'm ready to change my mind! I hope you have good points.

Like you said, I meant the local equivalent to the American IRS. I actually picked up this way of writing here on HN :).

Pretty good reasoning. I'm not sure though that income inequality is necessary for progress. I think it's a side effect of progress but not a cause for it. I think it might be possible to obtain hard work from smart people without a lot of inequality. Of course rewards are important, and in that sense some amount of inequality is necessary for innovation to happen. But if you look at the bulk of major breakthroughs in technology throughout history, they were done by academics or government employees. Sure we need investors to get excited. But for that we don't need insane levels of inequality.

The bottom line for me is that "taxation doesn't remove incentives". We need people to get excited about making money, and investing in startups, but we don't need most of the crap that neo cons are trying to push on us. 99% of problems we face that have to do with inequality won't affect rates of innovation and startups.

We can see that nordic countries have even better rates of startups and entrepreneurship per capita than the US as a whole. What this means is that we can deal with the inequality problem in a smart way and be better off. There is fundamentally no difference between taxation of successful people or companies, and spreading the risk like YCombinator does. This is the solution. It's just the smart thing to do. The reason we're not doing it is not because "we don't know what to do", or because "inequality is necessary for progress" but because people are dumb and are being brainwashed by the media.

Please read my comment (mike429) and answer any point you disagree with. You sound smart so I'd like to see if you make more sense than me on the things I pointed out. Thanks.