My simplified response to Paul Graham's simplified essay

Let me define terms. "Profit" - nominally, returns above investment - can either be rents or a reflection of consumer surplus, or a mix of both.

If there is a problem here, it is that we have a hard time distinguishing ... consumer-surplus-bearing-profit from rents. Because this isn't easy. We are also confused because monopolistic - monpsomistic, really - behavior as re the application of the Sherman Act against Standard Oil resulted in lowered end price for consumers. This is a WTF> rich environment.

I suspect that if we worked harder at it, rather than relying on just-so stories, we'd be better at it. So to me, the whole argument looks like learned helplessness. As a culture, we seem to prefer to not be able to distinguish between them.

As to the rest of your list, IMO ( and very aggressively-and-error-prone IMO ):

- tax-avoidance is just inevitable, and there's arguably nothing wrong with it re: Tim Worstall's continued line of reasoning. The entire edifice of using taxes to modify behavior is rather nauseating. It is inherently a game and trying to de-gamify it seems utterly pointless.

If you've ever had a conversation about tax-avoidance with a tax-avoider, it's clearly not much about the money any more. Milton Friedman talks in places about how it costs more to avoid most ( well-made ) taxes than to simply pay them - which is consistent with my observation.

- Buying political influence is of dubious ... provenance - we, again, get just-so stories and bias confirmation instead of hard empirical work. "Access" isn't an obvious good, and seeking photos with famous people who happen to be politicians seems like seeking photos of yourself with famous people, to me. As a thought experiment - is there enough money in the world to make, say Ted Cruz, embrace, say, abortion?

- corruption is well understood and easily preventable. It exists if and only if the public face of the polity presents the contradiction that we want a public servant to work for less than what their market value is. "Renormalizing" the ... values-field of the tax scheme is in order.

To my ear, the (inevitable) corruption surrounding alcohol Prohibition in the US is the mechanism for parsing this out. There's little more to it than constructing good, sound models in which we price corruption and then do what we can to behave as if we mean that.

- nepotism seems insoluble outside of somehow magically adding market pressure to make it unpleasant. It's also hard because we, at the same time, say "hire people you know from within your network because that information is expensive." But I suspect it's its own reward, from firsthand observation.

- inheritance is empirically rather uninteresting outside of a handful of pathological cases.

See how easy this is? I've solved the entire thing in a blog reply. HA! :)

Two points:

1) Income inequality in these countries is very similar to that in the US. In the case of China, where I am, it is arguably worse than the US. So they are not producing a decrease in global income inequality -- rather they are helping accelerating inequality by dramatically increasing the inequality in the two largest nations.

2) The concept of middle class is completely orthogonal to the concept of income inequality. Whether the middle class is increasing or shrinking tells you nothing about if income inequality is increasing or shrinking. Being middle class simply means you are bought into the system, so not working class, but not wealthy enough to not work, so not upper class. You a house and your children are being well educated. You have a vested interest in maintaining the society but not the power to control it.[1] The middle class be grown and it can shrink. It has no connection to quantiles. It has no connection to the median or average income levels other than how they relate to the cost of living. You can have low income inequality with a tiny middle class (classic low development nation). You can have high income inequality with a large middle class (traditional example being the US). You can have high income inequality with a small middle class (typically middle income countries such as Chile). Of course you can have, what in my mind is the ideal, low income inequality with a large middle class (Sweden being a good example).

[1] https://en.wikipedia.org/wiki/Middle_class