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> Taken together, they make the case that Graham -- and others who wave off inequality as inconsequential -- has misread what's happened in the American economy

> Taken together, they make the case that Graham -- and others who wave off inequality as inconsequential -- has misread what's happened in the American economy. It's like everyone who read PG's essay (even respectable journalists!) lack basic reading comprehension skills. Paul never waved off inequality -- he merely pointed out that measuring inequality is measuring the wrong thing, and that we need to have a slightly more nuanced view of the world. I haven't seen a single rebuttal yet that actually responds to the arguments in the essay, instead of a straw man argument PG never made.

Avshalom 11y ago
Stating that measuring inequality is measuring the wrong thing isn't the same thing as being right.
sskates 11y ago
I think what was missed was that a lot of people feel inequality is inherently bad, independent of the cause. I think both sides are mostly talking past each other on this one. It's possible for the fact that an entrepreneur getting rich by founding a startup to be a good thing because of the wealth they create while the fact that it increases inequality to be bad. I think most people agree that entrepreneurs getting rich is on the whole net good. That doesn't make inequality inherently good though.
shasta 11y ago
I think the main point I disagreed with are the examples he gives of "good inequality", like Facebook and Google. Yes, these companies are producing value. That's how you make your first ten million. But to make billions, you position yourself as a gatekeeper to something and take a cut of everything passing through the gate. This is no longer analogous to a carpenter making chairs.
jnbiche 11y ago
Let's forget the original essay for a moment. Can you help me understand your comment? Why would we want to wave off measuring inequality, but not wave off inequality itself?
deleted 11y ago
[deleted]
wfo 11y ago
Yes, every single person who disagreed with him just misinterpreted him and "lacks basic reading comprehension skills". Even people who are better writers than him. The only people in the universe who read him correctly are those who agree with what he has to say. What a coincidence. Can I use this technique next time I write something and people disagree with me? Extreme economic inequality is always, inherently a bad thing for any capitalist society. This is the point he, well, he doesn't argue against it, he just claims it's wrong without argument. He writes an essay as a hyper-rich person about how it's okay for him and people like him to be hyper-rich. He misunderstands the entire debate with a silly woodworking analogy (if one woodworker makes no chairs but owns a woodworking factory and another makes 10 chairs but owns nothing who makes the money?). He describes reasonable attitudes (understanding that while not 100% technically accurate, in a very real way money IS a zero sum game in our society) as fallacious without argument. He brushes off 'rent seeking behavior' as just a few bad apples in the income inequality bushel whereas in the article here we see it's actually the vast majority (86%) of the reason for inequality. He threatens to hold society hostage by suggesting founders will 'go galt' if they can't reap obscene profits and ascend to wealthy capitalist overlord status by inventing the next instagram for dogs. He really misunderstands the entire crux of the issue. Rent-seeking behavior is essentially synonymous with capitalism. In capitalism, wealth is the best/only way to generate more wealth. Just having wealth immediately leads to rent-seeking behavior; you use your capital and leverage to profit off the labor of others. It really reads like 'I'm a millionaire but I'm one of the good ones because I gamble on people who write iPhone apps' self-defense piece and most people who read it see it like that. I really like almost all of PG's essays, just not this one.
- gnarbarian 11y ago
  The problem with this article is it derives the innovation derived growth from patent statistics (14% of rising inequality). Then it simply assumes the rest is due to rent seeking. This is pretty laughable when it comes to software. I'd argue that all software patents are a rent seeking behaviour using regulation to thwart competition. rent-seeking is bad. but more regulations exasperate this problem by creating higher barriers to entry for disruptive startups. Rent-seeking isn't a symptom of capitalism, it's a symptom of the way lobbyists exploit our legislative and regulatory institutions. I think it's feasible for there to be regulations that discourage anti-competitive practices and reduce barriers to entry but it's nigh impossible to get it passed with the lobbyists in the way.
tkiley 11y ago
Ok. Here's a response to his central argument: pg argues we shouldn't attack inequality itself because inequality has both good and bad causes and is thus amoral. He argues we should focus on the bad causes instead. I disagree. Inequality may have good and bad causes, but it is not amoral. Persistent transgenerational inequality is, by definition, the breakdown of democracy, meritocracy, and universal opportunity, and it is bad, even if it is caused by good things. Inequality is a bad side effect of (usually) good processes. We already have an economic term for this: It's a negative externality - like environmental pollution. The similarities between inequality and pollution give me considerable pause for thought. Both can grow or dissipate over time in the right conditions. Both are growing much too quickly right now, threatening to cause severe damage to our biological and economic ecosystems. It is important that we recognize inequality as categorically bad, even when it is caused by good things like entrepreneurship. This allows us to have real discussions about how we keep inequality - like pollution - under control. Ironically, this will preserve the democratic and meritocratic tendencies that have made the past 50 years such a great time for startups.
- TheOtherHobbes 11y ago
  That's a very insightful analogy. But the concept of "externalities" only applies because the game of acquisition is loaded in ways that - literally - doesn't account for social and environmental damage. There would be much less inequality, and much less pollution, if the effects of both were costed accurately. Free-marketers always argue that there would be much less innovation too. I think that's nonsense. You maximise growth by lowering the cost of entry to new markets as far as it will go, and making business-building as attractive as you can make it to anyone who has a service or product to offer. Traditionally this is rationed by very limited access to capital. In an innovation economy, with more equality, much wider access to capital would not only increase economic participation for most of the population, it would also make entrepreneurial activity a lot more possible. This is the opposite of the current model, where you can only access capital by being born into the oligarchy, or being persuasive enough to talk your way into it past the gatekeepers, or - much too rarely - having the talent and energy to bootstrap a successful business from a cold start. Inequality is a form of rationing. It's inexcusably stupid and self-destructive in any culture that considers itself economically civilised.

Avshalom 11y ago

Stating that measuring inequality is measuring the wrong thing isn't the same thing as being right.

sskates 11y ago

I think what was missed was that a lot of people feel inequality is inherently bad, independent of the cause. I think both sides are mostly talking past each other on this one. It's possible for the fact that an entrepreneur getting rich by founding a startup to be a good thing because of the wealth they create while the fact that it increases inequality to be bad. I think most people agree that entrepreneurs getting rich is on the whole net good. That doesn't make inequality inherently good though.

shasta 11y ago

I think the main point I disagreed with are the examples he gives of "good inequality", like Facebook and Google. Yes, these companies are producing value. That's how you make your first ten million. But to make billions, you position yourself as a gatekeeper to something and take a cut of everything passing through the gate. This is no longer analogous to a carpenter making chairs.

jnbiche 11y ago

Let's forget the original essay for a moment. Can you help me understand your comment? Why would we want to wave off measuring inequality, but not wave off inequality itself?

deleted 11y ago

[deleted]

wfo 11y ago

Yes, every single person who disagreed with him just misinterpreted him and "lacks basic reading comprehension skills". Even people who are better writers than him. The only people in the universe who read him correctly are those who agree with what he has to say. What a coincidence. Can I use this technique next time I write something and people disagree with me? Extreme economic inequality is always, inherently a bad thing for any capitalist society. This is the point he, well, he doesn't argue against it, he just claims it's wrong without argument. He writes an essay as a hyper-rich person about how it's okay for him and people like him to be hyper-rich. He misunderstands the entire debate with a silly woodworking analogy (if one woodworker makes no chairs but owns a woodworking factory and another makes 10 chairs but owns nothing who makes the money?). He describes reasonable attitudes (understanding that while not 100% technically accurate, in a very real way money IS a zero sum game in our society) as fallacious without argument. He brushes off 'rent seeking behavior' as just a few bad apples in the income inequality bushel whereas in the article here we see it's actually the vast majority (86%) of the reason for inequality. He threatens to hold society hostage by suggesting founders will 'go galt' if they can't reap obscene profits and ascend to wealthy capitalist overlord status by inventing the next instagram for dogs. He really misunderstands the entire crux of the issue. Rent-seeking behavior is essentially synonymous with capitalism. In capitalism, wealth is the best/only way to generate more wealth. Just having wealth immediately leads to rent-seeking behavior; you use your capital and leverage to profit off the labor of others. It really reads like 'I'm a millionaire but I'm one of the good ones because I gamble on people who write iPhone apps' self-defense piece and most people who read it see it like that. I really like almost all of PG's essays, just not this one.

gnarbarian 11y ago
The problem with this article is it derives the innovation derived growth from patent statistics (14% of rising inequality). Then it simply assumes the rest is due to rent seeking. This is pretty laughable when it comes to software. I'd argue that all software patents are a rent seeking behaviour using regulation to thwart competition. rent-seeking is bad. but more regulations exasperate this problem by creating higher barriers to entry for disruptive startups. Rent-seeking isn't a symptom of capitalism, it's a symptom of the way lobbyists exploit our legislative and regulatory institutions. I think it's feasible for there to be regulations that discourage anti-competitive practices and reduce barriers to entry but it's nigh impossible to get it passed with the lobbyists in the way.

tkiley 11y ago

Ok. Here's a response to his central argument: pg argues we shouldn't attack inequality itself because inequality has both good and bad causes and is thus amoral. He argues we should focus on the bad causes instead. I disagree. Inequality may have good and bad causes, but it is not amoral. Persistent transgenerational inequality is, by definition, the breakdown of democracy, meritocracy, and universal opportunity, and it is bad, even if it is caused by good things. Inequality is a bad side effect of (usually) good processes. We already have an economic term for this: It's a negative externality - like environmental pollution. The similarities between inequality and pollution give me considerable pause for thought. Both can grow or dissipate over time in the right conditions. Both are growing much too quickly right now, threatening to cause severe damage to our biological and economic ecosystems. It is important that we recognize inequality as categorically bad, even when it is caused by good things like entrepreneurship. This allows us to have real discussions about how we keep inequality - like pollution - under control. Ironically, this will preserve the democratic and meritocratic tendencies that have made the past 50 years such a great time for startups.

TheOtherHobbes 11y ago
That's a very insightful analogy. But the concept of "externalities" only applies because the game of acquisition is loaded in ways that - literally - doesn't account for social and environmental damage. There would be much less inequality, and much less pollution, if the effects of both were costed accurately. Free-marketers always argue that there would be much less innovation too. I think that's nonsense. You maximise growth by lowering the cost of entry to new markets as far as it will go, and making business-building as attractive as you can make it to anyone who has a service or product to offer. Traditionally this is rationed by very limited access to capital. In an innovation economy, with more equality, much wider access to capital would not only increase economic participation for most of the population, it would also make entrepreneurial activity a lot more possible. This is the opposite of the current model, where you can only access capital by being born into the oligarchy, or being persuasive enough to talk your way into it past the gatekeepers, or - much too rarely - having the talent and energy to bootstrap a successful business from a cold start. Inequality is a form of rationing. It's inexcusably stupid and self-destructive in any culture that considers itself economically civilised.