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Economic Inequality: The Simplified Version

100 points by janvdberg 11y ago

cryoshon 11y ago
Ah, but we still disagree on the point that economic inequality inevitably worsens a society, and a decrease in inequality does not correspond to a decrease in the ability for people to make startups. I think this is a philosophical disagreement that won't be solved by clarification of ideas.
jacknews 11y ago
Simplified version? The entire argument one of an economic simpleton. Startups, ie Innovation, is of course good, it is almost entirely responsible for economic growth (simple population growth being the other). The inequality question is about how to distribute the benefits. Especially with tech startups the benefits have gone disproportionately to the founders or early investors. Particularly when these startups "disrupt" an existing industry that employs many, then that is clearly problematic. Additonally, capitalism itself delivers the most gains to those who already have. Of course some degree of inequality is entirely fair, but much larger taxes on the rich (preferably in the form of pre-distribution) do not stop the rich wanting to do what they do, but if handled properly, can vastly improve the lot of the poorest and give a helping hand to those who want to advance themselves but can't afford it.
bootload 11y ago
"For example, instead of attacking economic inequality, we should attack poverty." This is such an anemic statement in the face of the reality of corporate fraud such as, "HSBC escapes action by City regulator following Swiss tax scandal" [0] The biggest fault in the essay, in my view is not acknowledging and exploring the externalities in economics described. While the big end of town scams its way to profit, what hope has an individual? Creating tech startups is one way to profit from this imbalance. [0] http://www.theguardian.com/business/2016/jan/04/hsbc-escapes-regulatory-action-swiss-tax-scandal http://www.theguardian.com/business/2016/jan/04/hsbc-escapes...
foldr 11y ago
>But economic inequality per se is not bad. This is the controversial assertion, and it's not argued for here. So I'm not sure how this can help. edit: As others have clarified, of course there are few people who would object to any degree of economic inequality whatsoever. In the context of this discussion, 'economic inequality' refers to economic inequality on (at least) the scale that we see at present in the US and other wealthy countries, since this is what pg is defending.
- emmett 11y ago
  Great point! That sounds like a genuine disagreement. Can you expand a bit on why economic inequality is intrinsically bad, rather than instrumentally bad?
  - foldr 11y ago
    I could, but that whole discussion was already had on the thread for the original article. You can find a summary of the main arguments by googling e.g. "why economic inequality is bad". I don't mean this in a snarky way, it's just that so much has already been written on the topic that I don't see the point in trying to summarize what economists, philosophers and any number of others have already said.
    - emmett 11y ago
      The previous thread had lots of reasons economic inequality is instrumentally bad. I really saw nothing about how it's intrinsically bad, and I was looking. Can you link to a specific comment maybe?
      - foldr 11y ago
        I'm not sure exactly what distinction you're making with instrumentally vs. intrinsically. People pointed out that economic equality as such has certain bad consequences. For example, wealthy people become disproportionately powerful. Here's an ok list turned up by a simple Google query: http://ideas.ted.com/the-4-biggest-reasons-why-inequality-is-bad-for-society/ http://ideas.ted.com/the-4-biggest-reasons-why-inequality-is...
eridius 11y ago
> Attacking economic inequality would be doubly mistaken. It would harm the good as well as the bad causes. But even worse, it would be an ineffective way to attack the bad causes. You can't say something like this without providing evidence. Why is it ineffective? And why is it bad that it harms the "good" ways too? After all, startups are not good because they cause income inequality. Startups are good for a variety of reasons, and they also happen to cause income inequality, and it's reasonable to argue that this particular generation of income inequality is not intrinsically bad. But the value of a startup is not in the income inequality that it generates, and therefore taking steps to reduce income inequality that happen to reduce the income inequality resulting from startups does not actually mean that it's "harm[ing] the good".
- ThomPete 11y ago
  And its a strawman. People arent attacking economic inequality, they are critiquing extreme inequality which is something rather different.
- neilk 11y ago
  Well, I don't agree with pg at all on this issue, but this is the simplified version. It's not fair to ask for citations here.
  - eridius 11y ago
    It is when this seems to be the crux of his argument. His entire argument depends on the assumptions stated in that paragraph.
    - edanm 11y ago
      And he wrote an entire, long essay to prove his points. Maybe you disagree that he did so, but argue about the full article, not the "here's my main points 'abstract'".
- salmonet 11y ago
  > And why is it bad that it harms the "good" ways too? After all, startups are not good because they cause income inequality. Because without the potential for outsized returns significantly fewer would be founders would take the risk.
chroma 11y ago
For those who missed it, here's the discussion of Paul Graham's original essay about economic inequality: https://news.ycombinator.com/item?id=10826838 https://news.ycombinator.com/item?id=10826838
JBiserkov 11y ago
I think there are 2 types of economic inequality: Person A has more wealth that average, because he or she created a lot more wealth than the average person can create. This is great, startups are one way to do it, let there be more startups! Person B has more wealth than average because he or she stole a lot more wealth than the average person can create. This is terrible, and must be stopped! The main issue comes from the details involved in creating or stealing said wealth. Do CEOs create or steal wealth? Probably both. OK, what's the ratio. You can't tell.
- ebola1717 11y ago
  Also, Person C who has more wealth than average because his/her parents or ancestors created the wealth? And Person D who has created more wealth than the average person, but only because they started out as a Person C. Edit: Obviously, I'm not suggesting that there should be no wealth inheritance. But economic inequality can happen in a way that is neither meritocratic nor malicious. And there's tons we can do that recognizes this issue, without banning inheritance (scholarships, after-school programs, etc).
  - PKop 11y ago
    Isn't that an argument to allow the existence of "Persons C" : that they end up creating "Persons D"? (A wealth creator at a level higher than what would otherwise exist) Or we should take from Persons C's parents who made good decisions and not allow them to pass on their success to their children, thus eliminating the benefits of the wealth created by C's and D's ?
  - grondilu 11y ago
    > Person C who has more wealth than average because his/her parents or ancestors created the wealth? Do you think it's wrong for parents to give things to their children? Do you think it should not be allowed to let them ensure that their children will never have to worry about money? I personally don't.
    - jheriko 11y ago
salmonet 11y ago
Pg seems to really hate being criticized. I hope he doesn't stop writing about controversial things (or water down his essays) because the silent majority of us really appreciate it.
- mikeg8 11y ago
  I believe it's less about criticism and more about a hate of being misunderstood. But I agree that there is a majority who really appreciate his insights (I'm definitely one of them).
  - x0x0 11y ago
    I don't know in general -- I haven't read most of pg's writing -- but his original economic inequality essay was indistinguishable from fox news uncle. It's a level of understanding of economic history and a well argued theory (see eg Paul Krugman, Robert Reich, Brad DeLong, Bernie Sanders, Paul Wellstone, others) you would expect from Glenn Beck. Mixed in with some first principles derivation that lead pg to claim So let's be clear about that. Ending economic inequality would mean ending startups. with a straight face. Ignoring the fact that ending economic inequality in a sort of perfect equality is a goal of essentially (yes, I'm sure you can find one dude on a blog somewhere) nobody. And that startups somehow occurred in periods with much less economic inequality.
    - ThomPete 11y ago
      Exactly. It seems like PG haven't really thought this through and is going for a more superficial understanding of economic inequality. I love his essays on tech and startups but this is an area where his thinking obviously isn't as developed.
    - bobby_9x 11y ago
      "but his original economic inequality essay was indistinguishable from fox news uncle" More like a much wiser Uncle telling his inexperienced nephews why they are making a bad decision. "And that startups somehow occurred in periods with much less economic inequality." Startups did occur in periods with much less economic equality, but there were also much less government regulations. PG is saying that the current solutions for economic equality, which is always an increase in taxes and regulations, will mean the death of startups. He's right. It's a warning for the future generations of startups. Anyone with wealth won't really be effected, because other countries will accept them (and their tax dollars) with open arms. Look at any of the Nordic countries: They all tout income equality, but your only options for work are the government or a big corporation. Startups are nearly impossible to get past the initial stages because regulations and taxes kick in and your lifeblood is cut off before you even get a chance to get anything going. Investors also steer clear of the entire region. This is a great indicator that it is not conducive for any sort of small business. This bottleneck prevents prosperity and creates an environment where citizens are more dependent on big corporations and there is almost no chance of moving up the socioeconomic ladder. It also means less of a chance of getting a loan from a bank, which is another requirement for someone with no money to start a business. I've never met a group that tries so hard to sabotage their own future success/vote against their own self-interests.
grecy 11y ago
> But if we fix all the bad causes of economic inequality, we will still have increasing levels of it, due to the increasing power of technology. Which is why so many people suggested changing other things that would reduce or eliminate economic inequality. Suggestions included limiting the ratio between highest paid employee and lowest paid, or changing tax structures, etc.
- gruez 11y ago
  because it's easier to not bother understanding the other side's position and instead, attack a strawman.
- UK-AL 11y ago
  And then your limiting the incentives for the potentially high paid employee to do even better! Is inequality really that bad if the low paid employee still lives an excellent life, and is out poverty? What difference does this make?
teachingaway 11y ago
but can PG write again using only the ten hundred most common words? https://xkcd.com/1133/ https://xkcd.com/1133/
supercanuck 11y ago
>So let's be clear about that. Ending economic inequality would mean ending startups. I'm curious why this comment was in the first version and not in the second, simplified version since this was to me the most simplistic point pg made, even going so far as to say "Let's be clear" Pg seems to be arguing that income inequality and startups are mutually exclusive and if we are to have startups, we must accept some income inequality. Thats what I'm interpreting that to mean at least. This to me just seems like, why can't we have both? More income equality and startups? I'm not seeing the reasons we cannot
- grecy 11y ago
  Though it's complete nonsense because it assumes the only motivation for founding a startup is to gain extreme wealth Ending extreme economic inequality would mean founders of successful startups would no longer become absurdly richer than average. There would absolutely still be people passionate about doing things, and they would absolutely still make startups. Their motivation for doing so would no longer be extreme wealth. If people choose not to do a startup because it can't make them extremely wealthy, that's perfectly fine.
beatpanda 11y ago
The question for defenders of the theory that economic inequality isn't intrinsically bad is this -- does it actually matter how economic inequality was arrived at if its effects are the same? The best example I have is the Bay Area housing market. While it is true that a lack of new construction has a role in rising costs, so does the gulf between the lowest and highest paid workers. Where income inequality is high, but people are still competing for the same scarce resources, prices are going to get further and further out of reach for people at the low end. Arguably, an influx of relatively highly paid workers is a result of wealth being "created", but if I'm the janitor at Stanford who has to commute from Stockton [1], does it actually matter why there is income inequality? Income inequality means, regardless of how it is generated, that a huge amount of wealth is being created and the benefits are being concentrated to a few people. And in the case of where I live, it means things that things that used to be accessible to lots of people have been placed out of reach. It doesn't matter how it happened. Until income inequality is reduced (e.g. income at the low end increases), or something fundamental about the way markets work changes, people are still going to get hurt. [1] http://ww2.kqed.org/news/2015/03/28/long-commute-to-silicon-valley-increasingly-the-norm-for-many/ http://ww2.kqed.org/news/2015/03/28/long-commute-to-silicon-...
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tptacek 11y ago
I feel like it's not hard to be happy about people making large amounts of money building things like Facebook, while at the same time worrying about a system that allows Harvard attendees like Mark Zuckerberg to do that but provides virtually no opportunity for students at Orr Academy High School in Lawndale to get to Harvard, let alone to a place where they can start something like Facebook. I don't have to hate Paul Graham to think that economic inequality by itself, intrinsically retards equality of opportunity. I hope we can agree that inequality of opportunity is an intrinsically bad thing.
- obrero 11y ago
  It's not that Zuckerberg went to Harvard. It's that he went to Phillips Exeter Academy. A high school that costs over $36,000 a year (tack on more than $10k more if you're boarding there). Zuckerberg is rare among these creatures in that he likes programming and wanted to build something. Most of them are the kind of parasites you can see in a documentary like "Born Rich" (it's on Youtube), who will live luxurious lives off the profit they expropriate off of those of us who do work and create wealth. They are not people like you, spending months of drudge work going over BSD code back in the mid-1990s to find rfork holes and such, who two decades down the line might see a little payoff due to the efforts of their labor.
- deleted 11y ago
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  - harryh 11y ago
    Cancer is (currently) just a part of life. Do you dislike cancer?
- Natsu 11y ago
  In principle, though, can it be fixed? Won't some people always have more advantages than others because they know more people who happen to be skilled at various things (e.g. technologies) than others? I mean, you have more chance to recruit skilled technologists simply by virtue of being in SV and that fact itself attracts more skilled people to the area. So people outside the area either relocate or can't compete at quite the same level. Sure, there are other places that are more or less as good, but you're probably not going to have the same connections growing up in, say, Strawberry Point, Iowa.
harryh 11y ago
My attempt at a simple rebuttal: https://gist.github.com/harryh/fb3dae9eb14b675821e4 https://gist.github.com/harryh/fb3dae9eb14b675821e4
givan 11y ago
We need to lower economic inequality so that more people have a chance to start startups, now you need savings and a lot of hard work only to convince an incubator or an investor and most people don't even have that chance. Maybe we should start taxing corporations the same way we tax the average person, no more tax heavens and special tax laws, everyone pays the same unique percentage from earnings/profits and from the extra cash the government can provide a social service to allow everyone who meets certain requirements to start a startup. Unfortunately governments are bought by corporations and they get special treatment, they get bigger and not only we all pay higher taxes because they pay less but it's also harder to start a company because of oligopolies and government special treatment for the 1%
- joelrunyon 11y ago
  > now you need savings and a lot of hard work only to convince an incubator or an investor and most people don't even have that chance. Or you could bootstrap it.
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jrcii 11y ago
I have no more interest in a successful programmer's economic philosophy than a successful baseball player's. That is to say, not much. As a libertarian I'm a fan of economic inequality, I see it as the inevitable byproduct of liberty, but who cares? I'm not an esteemed economic philosopher and neither is Paul Graham. I see in American society, and maybe the trend extends beyond that, that we idolize people who have a lot of money or notoriety and consequently invest a lot in their opinions on any topic, especially politics, regardless of their qualifications. It's inappropriate.
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ctvo 11y ago
When people talk about income inequality and lowering it in the USA, (in my experience) they tend to mean these things: - Increase the capital gains and inheritance tax so the wealthy pay a comparable tax percentage - Increase government funding for public education and trade schools - Increase spending on infrastructure projects (broadband, public transportation) - Increase the minimum wage - Lower the influence of the wealthy in politics Never heard of anyone asking to kill incentives for the ambitious or to stop people from becoming wealthy.
- nedwin 11y ago
  And I suspect those are the types of things PG supports though I wouldn't want to put words in his mouth.
- sib 11y ago
  If you do all of those things, plus raising income taxes [otherwise you would not be reducing income inequality, but only wealth inequality], then you will, by necessity, be raising taxes on successful entrepreneurs and, therefore, reducing those incentives and reducing the ability of people to become wealthy.
  - ZenoArrow 11y ago
    Depends on how you tax them. We could get rid of income tax and still strive towards reducing some of the issues surrounding income inequality. https://m.youtube.com/watch?v=gD_dZvPwAj0 https://m.youtube.com/watch?v=gD_dZvPwAj0
  - danans 11y ago
    Ironically, those successful entrepreneurs are hugely dependent on the physical infrastructure built by government (roads, broadband), and the human infrastructure built by the public education system (us). It's not valid to put those things at odds with each other.
cromwellian 11y ago
There appears to be an either-or fallacy here, that somehow addressing economic inequality means people are trying to eliminate it and will only accept perfection. Like most things in politics, action happens in the grey area,and I don't think trying to argue against extremes poses much benefit. Technology is increasing returns to capital vs labor. One day, robots, 3d printing, and AI services (e.g. self driving everything), may put the majority of human beings out of a job. How can entrepreneurs or capitalists even get rich if the majority of people's work has no surplus value? In such an end state, the concept of regular folks working is practically extinct and there should be a basic income, so that the massive returns to automation continue to benefit everyone and provide income for people to spend. Think of it as an extreme version of social security: Instead of 1 worker supporting 10 retirees, you have 1 robot, or 1 AI supporting hundreds of "retirees" (from birth) using "wages" that are no longer paid to the robot (labor), but to the capitalist. Hans Moravec in _Mind Children_ outlined a version of this 20 years in how increasing productivity from automation will gradually produce a society that looks more like a hunter gather society and less than an industrial one, in that the basic needs of the population will literally "grow" on trees (robotic manufacturing bush robots) My point is, if you want to look at extremes, then extreme unchecked technology and inequality will produce a degenerate broken economy in the long run, so quite clearly, there must be mitigating factors to keep the capitalist system going. I like PG's framing of the issues, but dislike his conclusions, which are unsubstantiated and basically fall to a kind of nativist/natural fallacy, that because something is a natural driving force, it should not be opposed, or else bad things will happen. History is replete with humans changing their natural physical or economic environment, and we will continue to do so. I think one can address economic inequality and it would not prevent startups or "big winners". Moreover, I'd argue that living in a society where failure doesn't mean abject poverty, possibly a life long impact, encourages people to take more risks, and that overall, if we have in place a safety net, and fix issues with racial inequality especially, it'll be a boon for the startup economy, not a negative one. That's an unsubstantiated claim as well, but if you comparatively look at other countries, you can't really find a tight correspondence between the level of social welfare and failure of startup culture. But you can see improved social mobility, and having superior mobility and racial/cultural diversity I'd argue helps in building companies which scale globally.
- 11y ago
vemy 11y ago
> And unlike high incarceration rates and tax loopholes, startups are on the whole good. That's a highly debatable assertion. I really wish he would explain why he thinks startups are "good".
- nedwin 11y ago
  Why do you think that they are, "on the whole", bad?
- UK-AL 11y ago
  Does this have to be explained? Startups provide service/product that people are willing to pay for. You must be providing some value to those people for people use or pay for your product. Maybe because it's convenient, quicker or better. And startups add that value for millions of users.
jheriko 11y ago
Wealthy people talking about economic inequality - no matter how valid your points - is going to stir trouble. Its like men talking to women about sexism in the workplace, or able-bodied people talking about the abundance of disabled access everywhere, white people talking about racism against black people etc. You don't have to be wrong, or have flaws in your reasoning, to make a socially naive commentary that is easily perceived as insensitive (regardless as to meaningful content).
- golemotron 11y ago
  This is the legacy of political correctness and identity politics. We made this bed now we have to lay in it.
  - jheriko 11y ago
    I refuse to lay in it! There is one type of correctness, it is called 'correctness' everything else, 'political correctness' included is a flavour of 'wrong'. Its also easy to overreact when you consider yourself to have been misjudged for poorly conveying a point. :)
jacobolus 11y ago
I claim that economic inequality at the scale we are seeing today, with Bill Gates, Mark Zuckerberg, Peter Thiel, Donald Trump, the Koch Brothers, the Walton family, et al. as plutocrats, and with Paul Graham and various other bourgeois pseudointellectuals as their kiss-up apologists, is per se bad. It erodes the broad social/economic power balance in our society, atrophies our civic institutions or coöpts them into quasi-fascist tools of the elite, breaks our journalistic institutions and cheapens our political discourse, diverts our resources into building wasteful things, and prevents us from tackling the serious challenges we face, while leaving millions of people struggling for basic survival. I don’t see Paul Graham out there fighting in any concrete way for improvements to any of the “bad things that cause inequality” he hand-waves away. Where’s his work to improve labor rights, end police brutality, guarantee a functioning healthcare system, track down and close tax loopholes, expose and regulate industrial polluters, or figure out how to save the lives of all the people economically displaced by his startup “disruptor” buddies? Where’s his respect or help for teachers, social workers, doctors, policemen, civil rights activists, local politicians, garbage collectors, journalists, mail carriers, or any of the other people who keep our civil society functioning in return for regular wages. All I see is contempt for those “losers” (quoting from a recent tweet, https://twitter.com/paulg/status/672112234521231361 https://twitter.com/paulg/status/672112234521231361) who don’t want to become rich capitalists. How does Paul Graham’s imagined perfect society work? If everyone is a startup founder, who is left to be the employees at all these startups, much less do any of the other work we all need for things to keep running.
- tptacek 11y ago
  Arguments that put Bill Gates, Mark Zuckerberg, Peter Thiel, Donald Trump, and the Koch Brothers on one "plutocrats" team are probably the reason Paul Graham keeps writing dubious posts about income inequality.
  - jacobolus 11y ago
    Here Thomas, read this: http://www.nybooks.com/articles/2015/12/17/reimagining-journalism-story-one-percent/ http://www.nybooks.com/articles/2015/12/17/reimagining-journ... They’re not on one “team”, but these people have outsized wealth and influence without any kind of accountability to the public. By virtue of having so much money, they can drive the funding of political campaigns (now without any limits or accountability) with less and less counterbalance from the middle class, and do whatever they like to promote their own interests, whether those interests are aligned with the public or not. I claim this is per se bad, even in the case that the plutocrats care about their image or self-image and turn out to be relatively “enlightened”. Even if Gates and Zuckerberg, e.g., are well meaning philanthropists, there’s no evidence that their interventions are better than anyone else’s would be. Indeed, since they tend to not have a priori knowledge of fields outside whatever made them wealthy to begin with, and they tend to have led relatively charmed lives protected from the struggle of those at the bottom of the social pyramid, their interventions often look like bumbling stabs in the dark, and sometimes cause more harm than they prevent. In education policy for example, Gates and Zuckerberg’s efforts (and the efforts of the Waltons and other billionaires) have mostly been disastrous distractions pushing policy in the wrong direction. https://www.dissentmagazine.org/article/got-dough-how-billionaires-rule-our-schools https://www.dissentmagazine.org/article/got-dough-how-billio... Beyond that though, all the good that Gates can do is undone multiple times over by folks like the Koch Brothers, who have explicitly decided to turn their wealth to subverting democracy. It would be better if we had publicly financed (or small-donor financed) elections, more transparency/accountability for advertising and PR spending of all kinds, and if these folks were taxed at (let’s say) the same rate they were during the Reagan administration, and there’d be plenty of public money to fund whatever charity projects in a publicly accountable way.
HSO 11y ago
> But economic inequality per se is not bad. Both essays feel like they are built on a strawman argument. Nobody serious said inequality was bad or good, not even Piketty. The discussion is about degrees, and PG adds nothing to it by arguing categorically. That we are talking degrees of inequality is also the reason why economists argue with statistics and do not differentiate much between specific causes or mechanisms on the micro level. Sorry to burst that bubble but PG is not a "creator of inequality" on the level that is interesting. Shifting a few hundred people around means nothing given that we are talking about income and wealth distributions over millions of households in the US alone (and increasing inequality is a global phenomenon). Clearly, tax policy, financial (de)regulation, labor market policies, even the fall of the Soviet Union, etc. are more relevant than petty arguments over whether this startup or that high freq trader made a few mega- or even gigabucks in a nice or not so nice way. On a sidenote, the relative impacts of the trader vs the startupper on aggregate welfare is not as clearcut as intimated by PG at all, once you take second- and higher-order effects into account. Furthermore, creating wealth for some individuals may also decrease overall inequality; it depends on the starting and end positions of said individuals in the wealth distribution and the other ongoing processes in the economy. Lastly, economic systems have a lot of feedback mechanisms, both positive (ie destabilizing) and negative (stabilizing). We should at least consider the possibility that past a certain degree of inequality, wealth becomes self-perpetuating. This is especially pertinent for US Americans, given the degenerate nature of their "democracy".
- nabla9 11y ago
  Well said. Macroeconomics is mostly closed sytem, not open system like microeconomics. Roughly 70% of US GDP is private consumption (household final consumption expenditure). Startups that build cool products need markets that can afford to buy them. The top 1%-2% may be wealthy, but as a consumer segment they are not big enough to justify new microprocessor plant or Apple product line. More importantly, rich don't pay for innovation. Luxury phones like Vertu are diamonds and personal service, there is no pressure for innovation. You don't need speech recognition if you can afford personal service. You don't need self driving car if you have a driver or enjoy driving with your Porsche. It's the middle class who creates demand for high-tech bleeding edge innovations. Who will buy the Oculus rifts and create enough cash flow to carry the VR-industry next 5 years? If the number of upper middle class families drops 5%, will Tesla lose 5% of their sales? The share of the GDP going to the middle class has been falling. It's down roughly 10% from 2000 and something like 30-20% from 70's. Low income people spend more money into necessities and very small high income population just can't consume enough to be large demand creating force. If the income distribution of the country starts to resemble classical South American country, it will have the economic structure of classical South American country sooner or later. PG has supply side view of the economy. It's not the whole picture.
sly_foxx 11y ago
How about fixing dating/sexual inequality? You know, one guy sleeping with 20 girls is not fair to all the losers/ugly_guys like me who can't get a date. We have to redistribute partners and make sure that even the unattractive guys can get a date. We'll have to kidnap women who are into attractive/successful guys and then take them to losers like me. You think this is rape? It's not, just like taxes on goods are not theft, because the only reason attractive people can get partners is because a lot of unattractive people like me contribute by building roads, bridges, apps, infrastructure, schools, which enables attractive people to arrange dates and then use roads to get there. We are also in the friend zone all the time, while the attractive guys are getting deep inside our female friend. They have to give something back. I am proposing a 'sexual tax'. ALSO, since pretty people inherited good genes and didn't work for it, I also propose taxing physical beauty by making pretty people look uglier by 30-40%(call it 'inheritance sexual tax'). That way, already ugly people will look great in comparison.
- Balgair 11y ago
  News Years resolutions of 'dating more' aren't going so well for you either. eh?
ZenoArrow 11y ago
> "But economic inequality per se is not bad. It has multiple causes. Many are bad, but some are good." Thank you for clarifying your points, hopefully it will help make this rebuttal equally clear. Economic inequality is bad not because of what causes it, but because of the effects it has on society. The problems boil down to issues of influence, both in the economic and political spheres. The wealthier someone gets, the more opportunity they have to game the system for their own advantage. Even if we're not aiming to eliminate the rich/poor divide completely, we still have a responsibility to ensure concentration of power is limited. This is why economic inequality is an issue.
aliston 11y ago
I think most of the backlash came from the way that startup wealth was definitively placed in the "good" bucket in the prior essay. Yes, on the whole startups create wealth and that's generally a good thing. BUT... there is a still an open question as to whether the current SV culture and associated wealth inequality is entirely "good." In other words, it's not a binary question. There is all sorts of financial chicanery associated with startup wealth that make it decidedly unmeritocratic. I've known a number of founders make millions with unprofitable companies that hardly contributed millions of dollars worth of value to the world. As far as I'm concerned, its a virtual certainty that the current startup allocation of capital is not efficient in a utilitarian sense.
avz 11y ago
I think the reason the original essay was so controversial is that it set out to demonstrate that a society faces a binary choice: * We allow both startups and inequality. * We attack both startups and inequality. This is perhaps most clearly articulated in this quote: "You can't end economic inequality without preventing people from getting rich, and you can't do that without preventing them from starting startups." And here strikes the controversy: on average the hacker community has a favorable view of startups while also opposing economic inequality (this is at least my general impression). Perhaps the optimal solution is a compromise that allows startups and inequality while providing a system that eliminates the most undesirable effects of inequality. There are already systems in place to prevent extreme poverty, to ensure some minimum access to education and healthcare etc. From the remaining issues the most pressing one is the problem of excessive concentration of political power. A system that weakens the link between money and political influence seems necessary.
- UK-AL 11y ago
  A large chunk of the hacker community is probably close to libertarian, and that was well known and well criticised. (https://en.wikipedia.org/wiki/The_Californian_Ideology https://en.wikipedia.org/wiki/The_Californian_Ideology) Well back in the day it was, I don't think an article like this would have been that controversial on hackernews many years ago. A lot of pauls earlier writing has similar stances. As more people have joined, it moved quite heavily to the left.
- ild 11y ago
  > We attack both startups and inequality. That would've been true if there was no non-profit startups.
- throwawaymaroon 11y ago
  I don't think society faces that binary choice exactly, I think the reduction to a binary choice is pointless, and I think pg is really bad at knowing when to keep his mouth shut. In the end he's trying to exonerate himself from the 'hunters,' but he's not even making arguments the hunters would understand. It's all directed towards people like him. He's not saying "You shouldn't eat me," he's saying "They shouldn't eat me" to the other prey animals (or those that already don't make much of an issue of income inequality). I don't know why he bothers. Say he's saying something uncontroversial endorsing weakening 'the link between money and political influence' or some such. He should say that instead! He's either deliberately inflammatory or he really has no idea how terrible he sounds.
pknight 11y ago
Just as you can't say startups create jobs without considering the jobs it displaces, I think you can't hide behind the notion that startups are generally a force of good. That way you sweep all the startups that have a net negative effect under the rug. Studies show FB can have a negative effect on happiness. In the tech startup playbook is stated that you need to make your site/app addictive. Well we've mastered that now and it must cost billions of dollars with people's time being wasted on crap. Even startups geared toward productivity aren't that impactful in the grand scheme, they tend to make life more convenient and only when enough customers can be found at the right pricepoint. We're training people to be distracted by trivialities and stuff that doesn't matter. Many venture backed startups are exposing the defects of the way economy functions and just how poor we are at delivering the value that is truly needed. We don't really need another gadget or app, we need to fix the way society has painted a growing number of people into a corner. Income inequality is just one way to expose the symptoms of an increasing problem, a problem that isn't really being focused on by startups because startups are born and survive by exploiting leverage that can be turned into profit.
crabasa 11y ago
> But if we fix all the bad causes of economic inequality, we will still have increasing levels of it, due to the increasing power of technology. So, PG's logical conclusion is that economic inequality is an inevitable byproduct of technology and capitalism. I'm happy to grant him that. But it seems to me that history (pick your favorite revolution) teaches us that no matter what the inevitable consequences of a given system are, the majority of the people will not stand by and see their economic futures reduced to scraping by. Which is why I'd love to see more people in the startup community (including PG) discuss what steps could be taken to both incentivize creators while simultaneously making average people better off. Because that's the amazing thing about creating value and growing the pie. Win-win scenarios.
wstrange 11y ago
What bother me is the hand waving about fixing the bad effects of inequality without offering any concrete proposals of how that might happen. Practically speaking, how do you reduce poverty, provide better health care and education without some form of wealth redistribution? Perhaps there are ways (I am all ears) - but progressive and fair taxation seems like a pretty reasonable approach.
obrero 11y ago
> For example, instead of attacking economic inequality, we should attack poverty. The problem is the people on the rentier side of the economic inequality scale are doing the opposite. They want poverty. The need poverty. It is the cornerstone of the rentier system. Here is a BusinessWeek article: http://www.businessweek.com/1999/99_44/b3653163.htm http://www.businessweek.com/1999/99_44/b3653163.htm What does it see as the problem? Unemployment is too low. Too many people who want to work are working. Businessweek sees this as a problem. CEOs and LP's and rentiers see this as a problem. Workers work. They create wealth. A carpentry shop has carpenters bang wood and nails together to make tables. The workers labor creates wealth - wood and nails becomes a table which costs more. For the first six hours a day the worker keeps the wealth they create - their wage. The rest of that revenue goes for replenishment of supplies - wood, nails, 1/90th of a hammer cost etc. For the last two hours a day, the worker is not paid the wealth they create. It goes in profit to the heir who owns the manufacturing plant. The worker's surplus labor time is being expropriated by the heir. If unemployment was low, if poverty was lessened - then those who work could demand to be paid for more of their time. Increasing unemployment, increasing poverty lessens the chance of this happening. The LP's, the heirs want poverty. It's an essential cornerstone of their profit and expropriation. Centuries ago, most of the world were farmers under feudalism (or hunter/gatherers etc.) There was not structural unemployment then. Lords wanted farmers working hard to sow during planting and reap during harvest. Only in our modern age of capitalism do those who control production desire poverty, unemployment etc. That Businessweek article lays out a portion of that ideology, it's been spoken of elsewhere for a long time. The idea that the heir LP's on the other end of the inequality divide want poverty to end is absurd. The reserve army of labor is a foundational necessity of the system.
dpweb 11y ago
We already have a massive war on poverty. Just the Govt. is $1T per year. http://www.heritage.org/multimedia/infographic/2014/12/total-welfare-spending-reaches-949-billion http://www.heritage.org/multimedia/infographic/2014/12/total... Economic Inequality is not bad per se, too much inequality is. At extremes, societies tend to tear apart in violence. Startups are good. But execs get rewarded for dodging taxes, laying people off, global labor arb, and automation. It's not surprising inequality is increasing. There's tradeoffs in everything. For all the hulabaloo about income inequality, tax policy could easily reverse the trend. It's not that complicated. It's a political, not an economic challenge.
rdiddly 11y ago
Better in being much more concise, but unfortunately, and for the same reason, even more revealing of the central emptiness of the argument. I don't know why we're even talking about such overbroad themes, even in the longer version. Whether you believe you can "create wealth" or not, poverty is quite simply a central facet of inequality; it is part of the DEFINITION of inequality. Poverty IS inequality, along with riches. All it means, is there's an income or wealth distribution curve whose slope is nonzero. There is no conceptual definition of inequality that doesn't include poverty. If everyone had the same wealth, that, by definition, is a situation of 1) no inequality 2) no poverty Whereas as soon as some people have more, and others have less (which is quaintly known as a little thing we call "inequality") there is a phenomenon crying out to be described, and that phenomenon is: A poorer group exists. There is poverty. Even if the poorer group is only just slightly poorer. Which interestingly indicates that poverty is inherently comparative. Equality is absolute; inequality is always relative. Just like in math. You probably think you happen to have a lot, and people in the Third World happen to not have a lot. No. You have a lot, BECAUSE the people in the Third World don't have a lot. And they have less BECAUSE you have more. The corporations working on your behalf extracted that wealth from them, and conveyed it to you. (And to themselves of course.) And when those people try to immigrate to your country they are just trying to follow their own money to your doorstep. Anyway the thing everybody hates and wants to fight is not that "some people make money" but that "the Paul Graham class" can buy themselves a Congressman. They can emit ridiculous brain-farts over and over (Musk) and the media fawningly fellates. They can invest in a thing and slavish people infer directly from that, "Wow, must be real valuable!" Inequality confers unfair political advantage which leads to disproportionate opportunity which leads to further inequality in the same direction. It is not a self-stabilizing system inherently. It is prone to excesses and failure, and a shity quality of life for the majority on its way to getting there. Go ahead and push that as far as you can, see what happens.
- lostsock 11y ago
  There will always be a "poor" if there is a "rich" but I have always thought poverty was about being impoverished, and was a separate issue. My understanding was that poverty was about lacking food, shelter and security, and I can easily imagine a society in which everyone has those things while there are still richer and poorer people
JamesBarney 11y ago
No billionaires created a billion dollars by themselves. How much Mark Zuckerberg keeps of the multi-billion dollar company he created with his employees is not decided by the value he adds. It is decided by value he keeps from negotiating with his employees.
c23gooey 11y ago
"Billionaire thinks current levels of income inequality are a good thing" More NEWS at 11
sethbannon 11y ago
Imagine a factory that's dumping large amounts of arsenic into the public drinking water supply -- a factory that can't operate without doing so. Imagine also that studies show small amounts of arsenic are safe, but large amounts in drinking water can cause serious negative health effects. Seeing these studies, someone comes along and proposes a regulation that limits the amount of arsenic this factory is allowed to dump into the public water supply, to keep it within safe levels. A critic then comes along and says: "The amount of arsenic in the water is not the root problem -- the root problem is that arsenic makes people sick. We should focus on helping people not get sick when exposed to arsenic! That way, we wouldn't have to hurt this job-creating factory." This feels like what PG is arguing for here. In an ideal world, where governmental systems were purely representative and incorruptible, and where markets were efficient and impossible to manipulate, sure, focusing on huge economic inequality wouldn't make sense. But we don't live in this world, just like we don't live in a world where we can easily make people immune to large amounts of arsenic.
sjg007 11y ago
The argument is that technology creates income equality but you can't stop texhnology. It does this because it acts as a multiplier for creating wealth. Technology encapsulated in the form of a for profit company does this because the metric that values the impact is stock and this stock can be exchanged for dollars. Stock itself also allows another lever on top of actual revenues. This is magnified by network effects. Taxes may mitigate the conversion of wealth into currency. For example in the US, this has a big negative impact on stock option holders when they buy their options at a strike price lower than the current valuation. At this point you have to pony up cash to the IRS even if they newly acquired stock is illiquid. As such many people may not exercise because they can't afford them and the taxes. this is a form on inequality as well... and the options return to the company. Raising taxes could mitigate inequality but various perks or bank guaranteed loans could be arranged to circumvent the loss of benefits associated with taxing wealth (as seen in the past). In addition Stock ownership allows the public participation in wealth generation so taxing theconversion to currency is likely negative and would be a driver of increased inequality since only the rich would buy stock (more so than now?). So that's one side of the argument.

100 points by janvdberg 11y ago

Ah, but we still disagree on the point that economic inequality inevitably worsens a society, and a decrease in inequality does not correspond to a decrease in the ability for people to make startups. I think this is a philosophical disagreement that won't be solved by clarification of ideas.

jacknews 11y ago

Simplified version? The entire argument one of an economic simpleton. Startups, ie Innovation, is of course good, it is almost entirely responsible for economic growth (simple population growth being the other). The inequality question is about how to distribute the benefits. Especially with tech startups the benefits have gone disproportionately to the founders or early investors. Particularly when these startups "disrupt" an existing industry that employs many, then that is clearly problematic. Additonally, capitalism itself delivers the most gains to those who already have. Of course some degree of inequality is entirely fair, but much larger taxes on the rich (preferably in the form of pre-distribution) do not stop the rich wanting to do what they do, but if handled properly, can vastly improve the lot of the poorest and give a helping hand to those who want to advance themselves but can't afford it.

bootload 11y ago

"For example, instead of attacking economic inequality, we should attack poverty." This is such an anemic statement in the face of the reality of corporate fraud such as, "HSBC escapes action by City regulator following Swiss tax scandal" [0] The biggest fault in the essay, in my view is not acknowledging and exploring the externalities in economics described. While the big end of town scams its way to profit, what hope has an individual? Creating tech startups is one way to profit from this imbalance. [0] http://www.theguardian.com/business/2016/jan/04/hsbc-escapes-regulatory-action-swiss-tax-scandal http://www.theguardian.com/business/2016/jan/04/hsbc-escapes...

foldr 11y ago

>But economic inequality per se is not bad. This is the controversial assertion, and it's not argued for here. So I'm not sure how this can help. edit: As others have clarified, of course there are few people who would object to any degree of economic inequality whatsoever. In the context of this discussion, 'economic inequality' refers to economic inequality on (at least) the scale that we see at present in the US and other wealthy countries, since this is what pg is defending.

emmett 11y ago
Great point! That sounds like a genuine disagreement. Can you expand a bit on why economic inequality is intrinsically bad, rather than instrumentally bad?
- foldr 11y ago
  I could, but that whole discussion was already had on the thread for the original article. You can find a summary of the main arguments by googling e.g. "why economic inequality is bad". I don't mean this in a snarky way, it's just that so much has already been written on the topic that I don't see the point in trying to summarize what economists, philosophers and any number of others have already said.
  - emmett 11y ago
    The previous thread had lots of reasons economic inequality is instrumentally bad. I really saw nothing about how it's intrinsically bad, and I was looking. Can you link to a specific comment maybe?
    - foldr 11y ago
      I'm not sure exactly what distinction you're making with instrumentally vs. intrinsically. People pointed out that economic equality as such has certain bad consequences. For example, wealthy people become disproportionately powerful. Here's an ok list turned up by a simple Google query: http://ideas.ted.com/the-4-biggest-reasons-why-inequality-is-bad-for-society/ http://ideas.ted.com/the-4-biggest-reasons-why-inequality-is...

eridius 11y ago

> Attacking economic inequality would be doubly mistaken. It would harm the good as well as the bad causes. But even worse, it would be an ineffective way to attack the bad causes. You can't say something like this without providing evidence. Why is it ineffective? And why is it bad that it harms the "good" ways too? After all, startups are not good because they cause income inequality. Startups are good for a variety of reasons, and they also happen to cause income inequality, and it's reasonable to argue that this particular generation of income inequality is not intrinsically bad. But the value of a startup is not in the income inequality that it generates, and therefore taking steps to reduce income inequality that happen to reduce the income inequality resulting from startups does not actually mean that it's "harm[ing] the good".

ThomPete 11y ago
And its a strawman. People arent attacking economic inequality, they are critiquing extreme inequality which is something rather different.
neilk 11y ago
Well, I don't agree with pg at all on this issue, but this is the simplified version. It's not fair to ask for citations here.
- eridius 11y ago
  It is when this seems to be the crux of his argument. His entire argument depends on the assumptions stated in that paragraph.
  - edanm 11y ago
    And he wrote an entire, long essay to prove his points. Maybe you disagree that he did so, but argue about the full article, not the "here's my main points 'abstract'".
salmonet 11y ago
> And why is it bad that it harms the "good" ways too? After all, startups are not good because they cause income inequality. Because without the potential for outsized returns significantly fewer would be founders would take the risk.

chroma 11y ago

For those who missed it, here's the discussion of Paul Graham's original essay about economic inequality: https://news.ycombinator.com/item?id=10826838 https://news.ycombinator.com/item?id=10826838

JBiserkov 11y ago

I think there are 2 types of economic inequality: Person A has more wealth that average, because he or she created a lot more wealth than the average person can create. This is great, startups are one way to do it, let there be more startups! Person B has more wealth than average because he or she stole a lot more wealth than the average person can create. This is terrible, and must be stopped! The main issue comes from the details involved in creating or stealing said wealth. Do CEOs create or steal wealth? Probably both. OK, what's the ratio. You can't tell.

ebola1717 11y ago
Also, Person C who has more wealth than average because his/her parents or ancestors created the wealth? And Person D who has created more wealth than the average person, but only because they started out as a Person C. Edit: Obviously, I'm not suggesting that there should be no wealth inheritance. But economic inequality can happen in a way that is neither meritocratic nor malicious. And there's tons we can do that recognizes this issue, without banning inheritance (scholarships, after-school programs, etc).
- PKop 11y ago
  Isn't that an argument to allow the existence of "Persons C" : that they end up creating "Persons D"? (A wealth creator at a level higher than what would otherwise exist) Or we should take from Persons C's parents who made good decisions and not allow them to pass on their success to their children, thus eliminating the benefits of the wealth created by C's and D's ?
- grondilu 11y ago
  > Person C who has more wealth than average because his/her parents or ancestors created the wealth? Do you think it's wrong for parents to give things to their children? Do you think it should not be allowed to let them ensure that their children will never have to worry about money? I personally don't.
  - jheriko 11y ago

salmonet 11y ago

Pg seems to really hate being criticized. I hope he doesn't stop writing about controversial things (or water down his essays) because the silent majority of us really appreciate it.

mikeg8 11y ago
I believe it's less about criticism and more about a hate of being misunderstood. But I agree that there is a majority who really appreciate his insights (I'm definitely one of them).
- x0x0 11y ago
  I don't know in general -- I haven't read most of pg's writing -- but his original economic inequality essay was indistinguishable from fox news uncle. It's a level of understanding of economic history and a well argued theory (see eg Paul Krugman, Robert Reich, Brad DeLong, Bernie Sanders, Paul Wellstone, others) you would expect from Glenn Beck. Mixed in with some first principles derivation that lead pg to claim So let's be clear about that. Ending economic inequality would mean ending startups. with a straight face. Ignoring the fact that ending economic inequality in a sort of perfect equality is a goal of essentially (yes, I'm sure you can find one dude on a blog somewhere) nobody. And that startups somehow occurred in periods with much less economic inequality.
  - ThomPete 11y ago
    Exactly. It seems like PG haven't really thought this through and is going for a more superficial understanding of economic inequality. I love his essays on tech and startups but this is an area where his thinking obviously isn't as developed.
  - bobby_9x 11y ago
    "but his original economic inequality essay was indistinguishable from fox news uncle" More like a much wiser Uncle telling his inexperienced nephews why they are making a bad decision. "And that startups somehow occurred in periods with much less economic inequality." Startups did occur in periods with much less economic equality, but there were also much less government regulations. PG is saying that the current solutions for economic equality, which is always an increase in taxes and regulations, will mean the death of startups. He's right. It's a warning for the future generations of startups. Anyone with wealth won't really be effected, because other countries will accept them (and their tax dollars) with open arms. Look at any of the Nordic countries: They all tout income equality, but your only options for work are the government or a big corporation. Startups are nearly impossible to get past the initial stages because regulations and taxes kick in and your lifeblood is cut off before you even get a chance to get anything going. Investors also steer clear of the entire region. This is a great indicator that it is not conducive for any sort of small business. This bottleneck prevents prosperity and creates an environment where citizens are more dependent on big corporations and there is almost no chance of moving up the socioeconomic ladder. It also means less of a chance of getting a loan from a bank, which is another requirement for someone with no money to start a business. I've never met a group that tries so hard to sabotage their own future success/vote against their own self-interests.

grecy 11y ago

> But if we fix all the bad causes of economic inequality, we will still have increasing levels of it, due to the increasing power of technology. Which is why so many people suggested changing other things that would reduce or eliminate economic inequality. Suggestions included limiting the ratio between highest paid employee and lowest paid, or changing tax structures, etc.

gruez 11y ago
because it's easier to not bother understanding the other side's position and instead, attack a strawman.
UK-AL 11y ago
And then your limiting the incentives for the potentially high paid employee to do even better! Is inequality really that bad if the low paid employee still lives an excellent life, and is out poverty? What difference does this make?

teachingaway 11y ago

but can PG write again using only the ten hundred most common words? https://xkcd.com/1133/ https://xkcd.com/1133/

supercanuck 11y ago

>So let's be clear about that. Ending economic inequality would mean ending startups. I'm curious why this comment was in the first version and not in the second, simplified version since this was to me the most simplistic point pg made, even going so far as to say "Let's be clear" Pg seems to be arguing that income inequality and startups are mutually exclusive and if we are to have startups, we must accept some income inequality. Thats what I'm interpreting that to mean at least. This to me just seems like, why can't we have both? More income equality and startups? I'm not seeing the reasons we cannot

grecy 11y ago
Though it's complete nonsense because it assumes the only motivation for founding a startup is to gain extreme wealth Ending extreme economic inequality would mean founders of successful startups would no longer become absurdly richer than average. There would absolutely still be people passionate about doing things, and they would absolutely still make startups. Their motivation for doing so would no longer be extreme wealth. If people choose not to do a startup because it can't make them extremely wealthy, that's perfectly fine.

beatpanda 11y ago

The question for defenders of the theory that economic inequality isn't intrinsically bad is this -- does it actually matter how economic inequality was arrived at if its effects are the same? The best example I have is the Bay Area housing market. While it is true that a lack of new construction has a role in rising costs, so does the gulf between the lowest and highest paid workers. Where income inequality is high, but people are still competing for the same scarce resources, prices are going to get further and further out of reach for people at the low end. Arguably, an influx of relatively highly paid workers is a result of wealth being "created", but if I'm the janitor at Stanford who has to commute from Stockton [1], does it actually matter why there is income inequality? Income inequality means, regardless of how it is generated, that a huge amount of wealth is being created and the benefits are being concentrated to a few people. And in the case of where I live, it means things that things that used to be accessible to lots of people have been placed out of reach. It doesn't matter how it happened. Until income inequality is reduced (e.g. income at the low end increases), or something fundamental about the way markets work changes, people are still going to get hurt. [1] http://ww2.kqed.org/news/2015/03/28/long-commute-to-silicon-valley-increasingly-the-norm-for-many/ http://ww2.kqed.org/news/2015/03/28/long-commute-to-silicon-...

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tptacek 11y ago

I feel like it's not hard to be happy about people making large amounts of money building things like Facebook, while at the same time worrying about a system that allows Harvard attendees like Mark Zuckerberg to do that but provides virtually no opportunity for students at Orr Academy High School in Lawndale to get to Harvard, let alone to a place where they can start something like Facebook. I don't have to hate Paul Graham to think that economic inequality by itself, intrinsically retards equality of opportunity. I hope we can agree that inequality of opportunity is an intrinsically bad thing.

obrero 11y ago
It's not that Zuckerberg went to Harvard. It's that he went to Phillips Exeter Academy. A high school that costs over $36,000 a year (tack on more than $10k more if you're boarding there). Zuckerberg is rare among these creatures in that he likes programming and wanted to build something. Most of them are the kind of parasites you can see in a documentary like "Born Rich" (it's on Youtube), who will live luxurious lives off the profit they expropriate off of those of us who do work and create wealth. They are not people like you, spending months of drudge work going over BSD code back in the mid-1990s to find rfork holes and such, who two decades down the line might see a little payoff due to the efforts of their labor.
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- harryh 11y ago
  Cancer is (currently) just a part of life. Do you dislike cancer?
Natsu 11y ago
In principle, though, can it be fixed? Won't some people always have more advantages than others because they know more people who happen to be skilled at various things (e.g. technologies) than others? I mean, you have more chance to recruit skilled technologists simply by virtue of being in SV and that fact itself attracts more skilled people to the area. So people outside the area either relocate or can't compete at quite the same level. Sure, there are other places that are more or less as good, but you're probably not going to have the same connections growing up in, say, Strawberry Point, Iowa.

harryh 11y ago

My attempt at a simple rebuttal: https://gist.github.com/harryh/fb3dae9eb14b675821e4 https://gist.github.com/harryh/fb3dae9eb14b675821e4

givan 11y ago

We need to lower economic inequality so that more people have a chance to start startups, now you need savings and a lot of hard work only to convince an incubator or an investor and most people don't even have that chance. Maybe we should start taxing corporations the same way we tax the average person, no more tax heavens and special tax laws, everyone pays the same unique percentage from earnings/profits and from the extra cash the government can provide a social service to allow everyone who meets certain requirements to start a startup. Unfortunately governments are bought by corporations and they get special treatment, they get bigger and not only we all pay higher taxes because they pay less but it's also harder to start a company because of oligopolies and government special treatment for the 1%

joelrunyon 11y ago
> now you need savings and a lot of hard work only to convince an incubator or an investor and most people don't even have that chance. Or you could bootstrap it.

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jrcii 11y ago

I have no more interest in a successful programmer's economic philosophy than a successful baseball player's. That is to say, not much. As a libertarian I'm a fan of economic inequality, I see it as the inevitable byproduct of liberty, but who cares? I'm not an esteemed economic philosopher and neither is Paul Graham. I see in American society, and maybe the trend extends beyond that, that we idolize people who have a lot of money or notoriety and consequently invest a lot in their opinions on any topic, especially politics, regardless of their qualifications. It's inappropriate.

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ctvo 11y ago

When people talk about income inequality and lowering it in the USA, (in my experience) they tend to mean these things: - Increase the capital gains and inheritance tax so the wealthy pay a comparable tax percentage - Increase government funding for public education and trade schools - Increase spending on infrastructure projects (broadband, public transportation) - Increase the minimum wage - Lower the influence of the wealthy in politics Never heard of anyone asking to kill incentives for the ambitious or to stop people from becoming wealthy.

nedwin 11y ago
And I suspect those are the types of things PG supports though I wouldn't want to put words in his mouth.
sib 11y ago
If you do all of those things, plus raising income taxes [otherwise you would not be reducing income inequality, but only wealth inequality], then you will, by necessity, be raising taxes on successful entrepreneurs and, therefore, reducing those incentives and reducing the ability of people to become wealthy.
- ZenoArrow 11y ago
  Depends on how you tax them. We could get rid of income tax and still strive towards reducing some of the issues surrounding income inequality. https://m.youtube.com/watch?v=gD_dZvPwAj0 https://m.youtube.com/watch?v=gD_dZvPwAj0
- danans 11y ago
  Ironically, those successful entrepreneurs are hugely dependent on the physical infrastructure built by government (roads, broadband), and the human infrastructure built by the public education system (us). It's not valid to put those things at odds with each other.

cromwellian 11y ago

There appears to be an either-or fallacy here, that somehow addressing economic inequality means people are trying to eliminate it and will only accept perfection. Like most things in politics, action happens in the grey area,and I don't think trying to argue against extremes poses much benefit. Technology is increasing returns to capital vs labor. One day, robots, 3d printing, and AI services (e.g. self driving everything), may put the majority of human beings out of a job. How can entrepreneurs or capitalists even get rich if the majority of people's work has no surplus value? In such an end state, the concept of regular folks working is practically extinct and there should be a basic income, so that the massive returns to automation continue to benefit everyone and provide income for people to spend. Think of it as an extreme version of social security: Instead of 1 worker supporting 10 retirees, you have 1 robot, or 1 AI supporting hundreds of "retirees" (from birth) using "wages" that are no longer paid to the robot (labor), but to the capitalist. Hans Moravec in _Mind Children_ outlined a version of this 20 years in how increasing productivity from automation will gradually produce a society that looks more like a hunter gather society and less than an industrial one, in that the basic needs of the population will literally "grow" on trees (robotic manufacturing bush robots) My point is, if you want to look at extremes, then extreme unchecked technology and inequality will produce a degenerate broken economy in the long run, so quite clearly, there must be mitigating factors to keep the capitalist system going. I like PG's framing of the issues, but dislike his conclusions, which are unsubstantiated and basically fall to a kind of nativist/natural fallacy, that because something is a natural driving force, it should not be opposed, or else bad things will happen. History is replete with humans changing their natural physical or economic environment, and we will continue to do so. I think one can address economic inequality and it would not prevent startups or "big winners". Moreover, I'd argue that living in a society where failure doesn't mean abject poverty, possibly a life long impact, encourages people to take more risks, and that overall, if we have in place a safety net, and fix issues with racial inequality especially, it'll be a boon for the startup economy, not a negative one. That's an unsubstantiated claim as well, but if you comparatively look at other countries, you can't really find a tight correspondence between the level of social welfare and failure of startup culture. But you can see improved social mobility, and having superior mobility and racial/cultural diversity I'd argue helps in building companies which scale globally.

11y ago

vemy 11y ago

> And unlike high incarceration rates and tax loopholes, startups are on the whole good. That's a highly debatable assertion. I really wish he would explain why he thinks startups are "good".

nedwin 11y ago
Why do you think that they are, "on the whole", bad?
UK-AL 11y ago
Does this have to be explained? Startups provide service/product that people are willing to pay for. You must be providing some value to those people for people use or pay for your product. Maybe because it's convenient, quicker or better. And startups add that value for millions of users.

jheriko 11y ago

Wealthy people talking about economic inequality - no matter how valid your points - is going to stir trouble. Its like men talking to women about sexism in the workplace, or able-bodied people talking about the abundance of disabled access everywhere, white people talking about racism against black people etc. You don't have to be wrong, or have flaws in your reasoning, to make a socially naive commentary that is easily perceived as insensitive (regardless as to meaningful content).

golemotron 11y ago
This is the legacy of political correctness and identity politics. We made this bed now we have to lay in it.
- jheriko 11y ago
  I refuse to lay in it! There is one type of correctness, it is called 'correctness' everything else, 'political correctness' included is a flavour of 'wrong'. Its also easy to overreact when you consider yourself to have been misjudged for poorly conveying a point. :)

jacobolus 11y ago

I claim that economic inequality at the scale we are seeing today, with Bill Gates, Mark Zuckerberg, Peter Thiel, Donald Trump, the Koch Brothers, the Walton family, et al. as plutocrats, and with Paul Graham and various other bourgeois pseudointellectuals as their kiss-up apologists, is per se bad. It erodes the broad social/economic power balance in our society, atrophies our civic institutions or coöpts them into quasi-fascist tools of the elite, breaks our journalistic institutions and cheapens our political discourse, diverts our resources into building wasteful things, and prevents us from tackling the serious challenges we face, while leaving millions of people struggling for basic survival. I don’t see Paul Graham out there fighting in any concrete way for improvements to any of the “bad things that cause inequality” he hand-waves away. Where’s his work to improve labor rights, end police brutality, guarantee a functioning healthcare system, track down and close tax loopholes, expose and regulate industrial polluters, or figure out how to save the lives of all the people economically displaced by his startup “disruptor” buddies? Where’s his respect or help for teachers, social workers, doctors, policemen, civil rights activists, local politicians, garbage collectors, journalists, mail carriers, or any of the other people who keep our civil society functioning in return for regular wages. All I see is contempt for those “losers” (quoting from a recent tweet, https://twitter.com/paulg/status/672112234521231361 https://twitter.com/paulg/status/672112234521231361) who don’t want to become rich capitalists. How does Paul Graham’s imagined perfect society work? If everyone is a startup founder, who is left to be the employees at all these startups, much less do any of the other work we all need for things to keep running.

tptacek 11y ago
Arguments that put Bill Gates, Mark Zuckerberg, Peter Thiel, Donald Trump, and the Koch Brothers on one "plutocrats" team are probably the reason Paul Graham keeps writing dubious posts about income inequality.
- jacobolus 11y ago
  Here Thomas, read this: http://www.nybooks.com/articles/2015/12/17/reimagining-journalism-story-one-percent/ http://www.nybooks.com/articles/2015/12/17/reimagining-journ... They’re not on one “team”, but these people have outsized wealth and influence without any kind of accountability to the public. By virtue of having so much money, they can drive the funding of political campaigns (now without any limits or accountability) with less and less counterbalance from the middle class, and do whatever they like to promote their own interests, whether those interests are aligned with the public or not. I claim this is per se bad, even in the case that the plutocrats care about their image or self-image and turn out to be relatively “enlightened”. Even if Gates and Zuckerberg, e.g., are well meaning philanthropists, there’s no evidence that their interventions are better than anyone else’s would be. Indeed, since they tend to not have a priori knowledge of fields outside whatever made them wealthy to begin with, and they tend to have led relatively charmed lives protected from the struggle of those at the bottom of the social pyramid, their interventions often look like bumbling stabs in the dark, and sometimes cause more harm than they prevent. In education policy for example, Gates and Zuckerberg’s efforts (and the efforts of the Waltons and other billionaires) have mostly been disastrous distractions pushing policy in the wrong direction. https://www.dissentmagazine.org/article/got-dough-how-billionaires-rule-our-schools https://www.dissentmagazine.org/article/got-dough-how-billio... Beyond that though, all the good that Gates can do is undone multiple times over by folks like the Koch Brothers, who have explicitly decided to turn their wealth to subverting democracy. It would be better if we had publicly financed (or small-donor financed) elections, more transparency/accountability for advertising and PR spending of all kinds, and if these folks were taxed at (let’s say) the same rate they were during the Reagan administration, and there’d be plenty of public money to fund whatever charity projects in a publicly accountable way.

HSO 11y ago

> But economic inequality per se is not bad. Both essays feel like they are built on a strawman argument. Nobody serious said inequality was bad or good, not even Piketty. The discussion is about degrees, and PG adds nothing to it by arguing categorically. That we are talking degrees of inequality is also the reason why economists argue with statistics and do not differentiate much between specific causes or mechanisms on the micro level. Sorry to burst that bubble but PG is not a "creator of inequality" on the level that is interesting. Shifting a few hundred people around means nothing given that we are talking about income and wealth distributions over millions of households in the US alone (and increasing inequality is a global phenomenon). Clearly, tax policy, financial (de)regulation, labor market policies, even the fall of the Soviet Union, etc. are more relevant than petty arguments over whether this startup or that high freq trader made a few mega- or even gigabucks in a nice or not so nice way. On a sidenote, the relative impacts of the trader vs the startupper on aggregate welfare is not as clearcut as intimated by PG at all, once you take second- and higher-order effects into account. Furthermore, creating wealth for some individuals may also decrease overall inequality; it depends on the starting and end positions of said individuals in the wealth distribution and the other ongoing processes in the economy. Lastly, economic systems have a lot of feedback mechanisms, both positive (ie destabilizing) and negative (stabilizing). We should at least consider the possibility that past a certain degree of inequality, wealth becomes self-perpetuating. This is especially pertinent for US Americans, given the degenerate nature of their "democracy".

nabla9 11y ago
Well said. Macroeconomics is mostly closed sytem, not open system like microeconomics. Roughly 70% of US GDP is private consumption (household final consumption expenditure). Startups that build cool products need markets that can afford to buy them. The top 1%-2% may be wealthy, but as a consumer segment they are not big enough to justify new microprocessor plant or Apple product line. More importantly, rich don't pay for innovation. Luxury phones like Vertu are diamonds and personal service, there is no pressure for innovation. You don't need speech recognition if you can afford personal service. You don't need self driving car if you have a driver or enjoy driving with your Porsche. It's the middle class who creates demand for high-tech bleeding edge innovations. Who will buy the Oculus rifts and create enough cash flow to carry the VR-industry next 5 years? If the number of upper middle class families drops 5%, will Tesla lose 5% of their sales? The share of the GDP going to the middle class has been falling. It's down roughly 10% from 2000 and something like 30-20% from 70's. Low income people spend more money into necessities and very small high income population just can't consume enough to be large demand creating force. If the income distribution of the country starts to resemble classical South American country, it will have the economic structure of classical South American country sooner or later. PG has supply side view of the economy. It's not the whole picture.

sly_foxx 11y ago

How about fixing dating/sexual inequality? You know, one guy sleeping with 20 girls is not fair to all the losers/ugly_guys like me who can't get a date. We have to redistribute partners and make sure that even the unattractive guys can get a date. We'll have to kidnap women who are into attractive/successful guys and then take them to losers like me. You think this is rape? It's not, just like taxes on goods are not theft, because the only reason attractive people can get partners is because a lot of unattractive people like me contribute by building roads, bridges, apps, infrastructure, schools, which enables attractive people to arrange dates and then use roads to get there. We are also in the friend zone all the time, while the attractive guys are getting deep inside our female friend. They have to give something back. I am proposing a 'sexual tax'. ALSO, since pretty people inherited good genes and didn't work for it, I also propose taxing physical beauty by making pretty people look uglier by 30-40%(call it 'inheritance sexual tax'). That way, already ugly people will look great in comparison.

Balgair 11y ago
News Years resolutions of 'dating more' aren't going so well for you either. eh?

ZenoArrow 11y ago

> "But economic inequality per se is not bad. It has multiple causes. Many are bad, but some are good." Thank you for clarifying your points, hopefully it will help make this rebuttal equally clear. Economic inequality is bad not because of what causes it, but because of the effects it has on society. The problems boil down to issues of influence, both in the economic and political spheres. The wealthier someone gets, the more opportunity they have to game the system for their own advantage. Even if we're not aiming to eliminate the rich/poor divide completely, we still have a responsibility to ensure concentration of power is limited. This is why economic inequality is an issue.

aliston 11y ago

I think most of the backlash came from the way that startup wealth was definitively placed in the "good" bucket in the prior essay. Yes, on the whole startups create wealth and that's generally a good thing. BUT... there is a still an open question as to whether the current SV culture and associated wealth inequality is entirely "good." In other words, it's not a binary question. There is all sorts of financial chicanery associated with startup wealth that make it decidedly unmeritocratic. I've known a number of founders make millions with unprofitable companies that hardly contributed millions of dollars worth of value to the world. As far as I'm concerned, its a virtual certainty that the current startup allocation of capital is not efficient in a utilitarian sense.

avz 11y ago

I think the reason the original essay was so controversial is that it set out to demonstrate that a society faces a binary choice: * We allow both startups and inequality. * We attack both startups and inequality. This is perhaps most clearly articulated in this quote: "You can't end economic inequality without preventing people from getting rich, and you can't do that without preventing them from starting startups." And here strikes the controversy: on average the hacker community has a favorable view of startups while also opposing economic inequality (this is at least my general impression). Perhaps the optimal solution is a compromise that allows startups and inequality while providing a system that eliminates the most undesirable effects of inequality. There are already systems in place to prevent extreme poverty, to ensure some minimum access to education and healthcare etc. From the remaining issues the most pressing one is the problem of excessive concentration of political power. A system that weakens the link between money and political influence seems necessary.

UK-AL 11y ago
A large chunk of the hacker community is probably close to libertarian, and that was well known and well criticised. (https://en.wikipedia.org/wiki/The_Californian_Ideology https://en.wikipedia.org/wiki/The_Californian_Ideology) Well back in the day it was, I don't think an article like this would have been that controversial on hackernews many years ago. A lot of pauls earlier writing has similar stances. As more people have joined, it moved quite heavily to the left.
ild 11y ago
> We attack both startups and inequality. That would've been true if there was no non-profit startups.
throwawaymaroon 11y ago
I don't think society faces that binary choice exactly, I think the reduction to a binary choice is pointless, and I think pg is really bad at knowing when to keep his mouth shut. In the end he's trying to exonerate himself from the 'hunters,' but he's not even making arguments the hunters would understand. It's all directed towards people like him. He's not saying "You shouldn't eat me," he's saying "They shouldn't eat me" to the other prey animals (or those that already don't make much of an issue of income inequality). I don't know why he bothers. Say he's saying something uncontroversial endorsing weakening 'the link between money and political influence' or some such. He should say that instead! He's either deliberately inflammatory or he really has no idea how terrible he sounds.

pknight 11y ago

Just as you can't say startups create jobs without considering the jobs it displaces, I think you can't hide behind the notion that startups are generally a force of good. That way you sweep all the startups that have a net negative effect under the rug. Studies show FB can have a negative effect on happiness. In the tech startup playbook is stated that you need to make your site/app addictive. Well we've mastered that now and it must cost billions of dollars with people's time being wasted on crap. Even startups geared toward productivity aren't that impactful in the grand scheme, they tend to make life more convenient and only when enough customers can be found at the right pricepoint. We're training people to be distracted by trivialities and stuff that doesn't matter. Many venture backed startups are exposing the defects of the way economy functions and just how poor we are at delivering the value that is truly needed. We don't really need another gadget or app, we need to fix the way society has painted a growing number of people into a corner. Income inequality is just one way to expose the symptoms of an increasing problem, a problem that isn't really being focused on by startups because startups are born and survive by exploiting leverage that can be turned into profit.

crabasa 11y ago

> But if we fix all the bad causes of economic inequality, we will still have increasing levels of it, due to the increasing power of technology. So, PG's logical conclusion is that economic inequality is an inevitable byproduct of technology and capitalism. I'm happy to grant him that. But it seems to me that history (pick your favorite revolution) teaches us that no matter what the inevitable consequences of a given system are, the majority of the people will not stand by and see their economic futures reduced to scraping by. Which is why I'd love to see more people in the startup community (including PG) discuss what steps could be taken to both incentivize creators while simultaneously making average people better off. Because that's the amazing thing about creating value and growing the pie. Win-win scenarios.

wstrange 11y ago

What bother me is the hand waving about fixing the bad effects of inequality without offering any concrete proposals of how that might happen. Practically speaking, how do you reduce poverty, provide better health care and education without some form of wealth redistribution? Perhaps there are ways (I am all ears) - but progressive and fair taxation seems like a pretty reasonable approach.

obrero 11y ago

> For example, instead of attacking economic inequality, we should attack poverty. The problem is the people on the rentier side of the economic inequality scale are doing the opposite. They want poverty. The need poverty. It is the cornerstone of the rentier system. Here is a BusinessWeek article: http://www.businessweek.com/1999/99_44/b3653163.htm http://www.businessweek.com/1999/99_44/b3653163.htm What does it see as the problem? Unemployment is too low. Too many people who want to work are working. Businessweek sees this as a problem. CEOs and LP's and rentiers see this as a problem. Workers work. They create wealth. A carpentry shop has carpenters bang wood and nails together to make tables. The workers labor creates wealth - wood and nails becomes a table which costs more. For the first six hours a day the worker keeps the wealth they create - their wage. The rest of that revenue goes for replenishment of supplies - wood, nails, 1/90th of a hammer cost etc. For the last two hours a day, the worker is not paid the wealth they create. It goes in profit to the heir who owns the manufacturing plant. The worker's surplus labor time is being expropriated by the heir. If unemployment was low, if poverty was lessened - then those who work could demand to be paid for more of their time. Increasing unemployment, increasing poverty lessens the chance of this happening. The LP's, the heirs want poverty. It's an essential cornerstone of their profit and expropriation. Centuries ago, most of the world were farmers under feudalism (or hunter/gatherers etc.) There was not structural unemployment then. Lords wanted farmers working hard to sow during planting and reap during harvest. Only in our modern age of capitalism do those who control production desire poverty, unemployment etc. That Businessweek article lays out a portion of that ideology, it's been spoken of elsewhere for a long time. The idea that the heir LP's on the other end of the inequality divide want poverty to end is absurd. The reserve army of labor is a foundational necessity of the system.

dpweb 11y ago

We already have a massive war on poverty. Just the Govt. is $1T per year. http://www.heritage.org/multimedia/infographic/2014/12/total-welfare-spending-reaches-949-billion http://www.heritage.org/multimedia/infographic/2014/12/total... Economic Inequality is not bad per se, too much inequality is. At extremes, societies tend to tear apart in violence. Startups are good. But execs get rewarded for dodging taxes, laying people off, global labor arb, and automation. It's not surprising inequality is increasing. There's tradeoffs in everything. For all the hulabaloo about income inequality, tax policy could easily reverse the trend. It's not that complicated. It's a political, not an economic challenge.

rdiddly 11y ago

Better in being much more concise, but unfortunately, and for the same reason, even more revealing of the central emptiness of the argument. I don't know why we're even talking about such overbroad themes, even in the longer version. Whether you believe you can "create wealth" or not, poverty is quite simply a central facet of inequality; it is part of the DEFINITION of inequality. Poverty IS inequality, along with riches. All it means, is there's an income or wealth distribution curve whose slope is nonzero. There is no conceptual definition of inequality that doesn't include poverty. If everyone had the same wealth, that, by definition, is a situation of 1) no inequality 2) no poverty Whereas as soon as some people have more, and others have less (which is quaintly known as a little thing we call "inequality") there is a phenomenon crying out to be described, and that phenomenon is: A poorer group exists. There is poverty. Even if the poorer group is only just slightly poorer. Which interestingly indicates that poverty is inherently comparative. Equality is absolute; inequality is always relative. Just like in math. You probably think you happen to have a lot, and people in the Third World happen to not have a lot. No. You have a lot, BECAUSE the people in the Third World don't have a lot. And they have less BECAUSE you have more. The corporations working on your behalf extracted that wealth from them, and conveyed it to you. (And to themselves of course.) And when those people try to immigrate to your country they are just trying to follow their own money to your doorstep. Anyway the thing everybody hates and wants to fight is not that "some people make money" but that "the Paul Graham class" can buy themselves a Congressman. They can emit ridiculous brain-farts over and over (Musk) and the media fawningly fellates. They can invest in a thing and slavish people infer directly from that, "Wow, must be real valuable!" Inequality confers unfair political advantage which leads to disproportionate opportunity which leads to further inequality in the same direction. It is not a self-stabilizing system inherently. It is prone to excesses and failure, and a shity quality of life for the majority on its way to getting there. Go ahead and push that as far as you can, see what happens.

lostsock 11y ago
There will always be a "poor" if there is a "rich" but I have always thought poverty was about being impoverished, and was a separate issue. My understanding was that poverty was about lacking food, shelter and security, and I can easily imagine a society in which everyone has those things while there are still richer and poorer people

JamesBarney 11y ago

No billionaires created a billion dollars by themselves. How much Mark Zuckerberg keeps of the multi-billion dollar company he created with his employees is not decided by the value he adds. It is decided by value he keeps from negotiating with his employees.

c23gooey 11y ago

"Billionaire thinks current levels of income inequality are a good thing" More NEWS at 11

sethbannon 11y ago

Imagine a factory that's dumping large amounts of arsenic into the public drinking water supply -- a factory that can't operate without doing so. Imagine also that studies show small amounts of arsenic are safe, but large amounts in drinking water can cause serious negative health effects. Seeing these studies, someone comes along and proposes a regulation that limits the amount of arsenic this factory is allowed to dump into the public water supply, to keep it within safe levels. A critic then comes along and says: "The amount of arsenic in the water is not the root problem -- the root problem is that arsenic makes people sick. We should focus on helping people not get sick when exposed to arsenic! That way, we wouldn't have to hurt this job-creating factory." This feels like what PG is arguing for here. In an ideal world, where governmental systems were purely representative and incorruptible, and where markets were efficient and impossible to manipulate, sure, focusing on huge economic inequality wouldn't make sense. But we don't live in this world, just like we don't live in a world where we can easily make people immune to large amounts of arsenic.

sjg007 11y ago

The argument is that technology creates income equality but you can't stop texhnology. It does this because it acts as a multiplier for creating wealth. Technology encapsulated in the form of a for profit company does this because the metric that values the impact is stock and this stock can be exchanged for dollars. Stock itself also allows another lever on top of actual revenues. This is magnified by network effects. Taxes may mitigate the conversion of wealth into currency. For example in the US, this has a big negative impact on stock option holders when they buy their options at a strike price lower than the current valuation. At this point you have to pony up cash to the IRS even if they newly acquired stock is illiquid. As such many people may not exercise because they can't afford them and the taxes. this is a form on inequality as well... and the options return to the company. Raising taxes could mitigate inequality but various perks or bank guaranteed loans could be arranged to circumvent the loss of benefits associated with taxing wealth (as seen in the past). In addition Stock ownership allows the public participation in wealth generation so taxing theconversion to currency is likely negative and would be a driver of increased inequality since only the rich would buy stock (more so than now?). So that's one side of the argument.