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I didn't remember PG writing anything about startups mostly driving the income gap, and I just searched the essay and didn't find it. Here's what PG wrote about

I didn't remember PG writing anything about startups mostly driving the income gap, and I just searched the essay and didn't find it. Here's what PG wrote about the proportions of each group causing income inequality: "But while there are a lot of people who get rich through rent-seeking of various forms, and a lot who get rich by playing games that though not crooked are zero-sum, there are also a significant number who get rich by creating wealth." It's unclear what the WaPo writer is responding to when he says "it's difficult to conclude that startups are mostly driving the income gap." The writer also has this odd paragraph: "If there is middle ground between Graham and this body of research, it's the idea that policymakers shouldn't go after inequality with blunt instruments, like big tax hikes just for the sake of soaking the rich. Perhaps, instead, they should target rent-seeking, which economists agree is bad for everyone who isn't a rent seeker." This doesn't look like a middle ground; rather, it's what PG suggests: "if there are people getting rich by tricking consumers or lobbying the government for anti-competitive regulations or tax loopholes, then let's stop them. Not because it's causing economic inequality, but because it's stealing." And: "startups aren't the problem, [the problem is] corrupt practices in finance, healthcare, and so on." (But it's a long essay; please let me know if I've missed parts that support a different interpretation.)

mordocai 11y ago
I would argue that 14% isn't a significant number and, therefore, PG's point stating "a significant number who get rich by creating wealth" is indeed disproved. The rest of your comment I agree with.
- marcosdumay 11y ago
  What would you call significant then? Are you arguing that it's ok to apply blunt instruments that will hurt those 14% as much as the rest, since they are not enough to care about?
  - noobermin 11y ago
    Another way to think of this, if you'll forgive my pro-business tone here, say that that 14% who actually create value generate a significant portion of the utility gains (if not income as well) for the rest of us. We could be harming the incomes of the 99% in that case by gutting the 86% and the 14%. The solution is a scalpel, not a pick-axe. That is one of the possible resolutions stated in the article, which is one that I think is worthy.
- michaelkeenan 11y ago
  Weirdly, the figure from the paper is actually 17%, not 14% (http://www.ucl.ac.uk/~uctp39a/innovation_and_top_income_inequality.pdf http://www.ucl.ac.uk/~uctp39a/innovation_and_top_income_ineq...). I'm not sure where the WaPo writer got 14% from. Also note that the paper warns that 17% is an underestimate: "Our results are likely to understate the true impact of innovation on top income inequality at the national level for at least two reasons. First, if successful, an innovator from a relatively poor state, is likely to move to a richer state, and therefore not contribute to the top 1% share of her own state. Second, an innovating firm may have some of its owners and top employees located in a state different from that of inventors, in which case the effect of innovativeness on top income inequality will not be fully internalized by the state where the patent is registered. Nevertheless, overall we find a sizeable effect of innovativeness on top income inequality."
eigenvector 11y ago
I honestly think PG and the WaPo writer are in agreement: encouraging innovation and entrepreneurship is good and shouldn't be targeted by new regulations, rent-seeking behaviour is bad and should be targeted by regulators. For PG, the former (startups) is clearly a huge source of wealth, whereas the latter is just a proposition. In the quote you cited, he literally qualified the idea of corporations engaging in anti-competitive behaviour with "if", as if this is some unproven supposition. It's clear he thinks startups are the larger effect. For the WaPo writer, rent-seeking is most of the inequality growth and startups are a small piece. But this writer has some data to backup his assertions, while PG doesn't. I understand where PG went wrong - he's a startup investor. He's surrounded himself with startups for the last decade. Intuitively, he overestimated their impact relative to, say, banker bonuses, something he doesn't encounter regularly. That's natural.
- beat 11y ago
  It doesn't help that the WP article basically attacked pg's article with the usual inflammatory crap. It's easy to argue that pg kind of missed the point by caring too much about his source of inequality (productive creativity), and not enough about the primary source of inequality (rent-seeking). The article was unnecessarily and unfairly inflammatory about it.
- ghufran_syed 11y ago
  I read his use of "if" as being in the mathematical sense, where "if A, then B" is identical in meaning to "A implies B"
- michaelkeenan 11y ago
  > he literally qualified the idea of corporations engaging in anti-competitive behaviour with "if", as if this is some unproven supposition. I don't think that's the right interpretation of that phrase. PG has been complaining about rent-seeking corruption for over a decade: "[Buildings are ugly because of] the notoriously corrupt relationship between the government and construction companies." - http://www.paulgraham.com/usa.html http://www.paulgraham.com/usa.html, 2004 "[Corruption includes] construction firms that fund politicians' campaigns in return for government contracts, or rich parents who get their children into good colleges by sending them to expensive schools designed for that purpose." - http://paulgraham.com/inequality.html http://paulgraham.com/inequality.html, 2005 "There are a lot of people who get rich through rent-seeking of various forms, and a lot who get rich by playing games that though not crooked are zero-sum...[There are] corrupt practices in finance, healthcare, and so on. Once again, that is exactly my point. The problem is not economic inequality, but those specific abuses." - http://paulgraham.com/ineqold.html http://paulgraham.com/ineqold.html, 2016 I think ghufran_syed's interpretation, using 'if' in the logical sense, is correct. (I think it was a poor way of expressing it.) > It's clear he thinks startups are the larger effect. I think he had plenty of opportunities to say that startups were the larger effect, and he didn't say that. This sentence would have looked different if he'd meant that: "But while there are a lot of people who get rich through rent-seeking of various forms, and a lot who get rich by playing games that though not crooked are zero-sum, there are also a significant number who get rich by creating wealth." If startups were the larger effect, the natural way to end that sentence would have been "most get rich by creating wealth." His version was longer and wordier. For what it's worth, I didn't get the impression that he thought startups were the larger effect, which is why the WaPo article sent me searching for something I might have missed.

mordocai 11y ago

I would argue that 14% isn't a significant number and, therefore, PG's point stating "a significant number who get rich by creating wealth" is indeed disproved. The rest of your comment I agree with.

marcosdumay 11y ago
What would you call significant then? Are you arguing that it's ok to apply blunt instruments that will hurt those 14% as much as the rest, since they are not enough to care about?
- noobermin 11y ago
  Another way to think of this, if you'll forgive my pro-business tone here, say that that 14% who actually create value generate a significant portion of the utility gains (if not income as well) for the rest of us. We could be harming the incomes of the 99% in that case by gutting the 86% and the 14%. The solution is a scalpel, not a pick-axe. That is one of the possible resolutions stated in the article, which is one that I think is worthy.
michaelkeenan 11y ago
Weirdly, the figure from the paper is actually 17%, not 14% (http://www.ucl.ac.uk/~uctp39a/innovation_and_top_income_inequality.pdf http://www.ucl.ac.uk/~uctp39a/innovation_and_top_income_ineq...). I'm not sure where the WaPo writer got 14% from. Also note that the paper warns that 17% is an underestimate: "Our results are likely to understate the true impact of innovation on top income inequality at the national level for at least two reasons. First, if successful, an innovator from a relatively poor state, is likely to move to a richer state, and therefore not contribute to the top 1% share of her own state. Second, an innovating firm may have some of its owners and top employees located in a state different from that of inventors, in which case the effect of innovativeness on top income inequality will not be fully internalized by the state where the patent is registered. Nevertheless, overall we find a sizeable effect of innovativeness on top income inequality."

eigenvector 11y ago

I honestly think PG and the WaPo writer are in agreement: encouraging innovation and entrepreneurship is good and shouldn't be targeted by new regulations, rent-seeking behaviour is bad and should be targeted by regulators. For PG, the former (startups) is clearly a huge source of wealth, whereas the latter is just a proposition. In the quote you cited, he literally qualified the idea of corporations engaging in anti-competitive behaviour with "if", as if this is some unproven supposition. It's clear he thinks startups are the larger effect. For the WaPo writer, rent-seeking is most of the inequality growth and startups are a small piece. But this writer has some data to backup his assertions, while PG doesn't. I understand where PG went wrong - he's a startup investor. He's surrounded himself with startups for the last decade. Intuitively, he overestimated their impact relative to, say, banker bonuses, something he doesn't encounter regularly. That's natural.

beat 11y ago
It doesn't help that the WP article basically attacked pg's article with the usual inflammatory crap. It's easy to argue that pg kind of missed the point by caring too much about his source of inequality (productive creativity), and not enough about the primary source of inequality (rent-seeking). The article was unnecessarily and unfairly inflammatory about it.
ghufran_syed 11y ago
I read his use of "if" as being in the mathematical sense, where "if A, then B" is identical in meaning to "A implies B"
michaelkeenan 11y ago
> he literally qualified the idea of corporations engaging in anti-competitive behaviour with "if", as if this is some unproven supposition. I don't think that's the right interpretation of that phrase. PG has been complaining about rent-seeking corruption for over a decade: "[Buildings are ugly because of] the notoriously corrupt relationship between the government and construction companies." - http://www.paulgraham.com/usa.html http://www.paulgraham.com/usa.html, 2004 "[Corruption includes] construction firms that fund politicians' campaigns in return for government contracts, or rich parents who get their children into good colleges by sending them to expensive schools designed for that purpose." - http://paulgraham.com/inequality.html http://paulgraham.com/inequality.html, 2005 "There are a lot of people who get rich through rent-seeking of various forms, and a lot who get rich by playing games that though not crooked are zero-sum...[There are] corrupt practices in finance, healthcare, and so on. Once again, that is exactly my point. The problem is not economic inequality, but those specific abuses." - http://paulgraham.com/ineqold.html http://paulgraham.com/ineqold.html, 2016 I think ghufran_syed's interpretation, using 'if' in the logical sense, is correct. (I think it was a poor way of expressing it.) > It's clear he thinks startups are the larger effect. I think he had plenty of opportunities to say that startups were the larger effect, and he didn't say that. This sentence would have looked different if he'd meant that: "But while there are a lot of people who get rich through rent-seeking of various forms, and a lot who get rich by playing games that though not crooked are zero-sum, there are also a significant number who get rich by creating wealth." If startups were the larger effect, the natural way to end that sentence would have been "most get rich by creating wealth." His version was longer and wordier. For what it's worth, I didn't get the impression that he thought startups were the larger effect, which is why the WaPo article sent me searching for something I might have missed.