8 ms·

Of the 1%, by the 1%, for the 1%

86 points by rosser 16y ago

SamReidHughes 16y ago
The worst kind of article is the kind that makes you want to flag it for being inappropriate and rant about it at the same time.
- grails4life 16y ago
  you want to lag the article just because you disagree with it?
- nice1 16y ago
  The last tsar of Russia and his lot also practiced denial. The ensuing tragedy not only wiped them out, but also caused misery to countless people for almost a 100 years. Lets hope history won't repeat itself.
  - pjscott 16y ago
    Unless I'm misunderstanding what you're saying, you can apply that argument to just about anything.
pg 16y ago
This is written more like a speech by a politician than as an attempt at analysis. The type of economic inequality that successful startups yield, and which accounts for a lot of the entries in the Forbes 400, is described merely as a theory cherished by the rich, and dismissed with evidence it would be a compliment to call anecdotal. And while there's a lot of talk about how the rich own the government, he doesn't even attempt to analyze whether this is more or less true now than it was 50 years ago, when there was less economic inequality (on paper).
- deleted 16y ago
  [deleted]
- drgolf 16y ago
  It lacks in analysis because it's an opinion piece for a general audience, hence the use of anecdotes. Its not an academic article. No offense, but your articles often use anecdotes to make a point. For example, you write: "As anyone who has worked for the government knows, the important thing is not to make the right choices, but to make choices that can be justified later if they fail." What evidence do you have of this? What about agencies like DARPA? Your statement could also apply to employees of large corporations. You are doing the same thing that Joe Stigliz did in the article (without his academic ethos)
  - pg 16y ago
    I'm not complaining about the fact that this is, like my essays, in the form of an essay rather than an academic paper. I'm saying that it's a piece of advocacy rather than an attempt to figure out the truth. That's an important distinction. In advocacy, you start already knowing the conclusion you want to reach, and you try as hard as you can to convince the audience of it, the way a lawyer or a politician would. Whereas an essay, as the name implies, starts with a question, and from there you try to follow the truth wherever it leads. I wrote about this in "The Age of the Essay" (http://paulgraham.com/essay.html http://paulgraham.com/essay.html). There is not a mathematically sharp distinction between the two approaches, of course. A lawyer or politician will use the truth when it suits his purpose. And an essayist trying to follow the truth will inevitably have biases that cause him not to follow the truth as far down some roads as others. But though the two approaches form a continuum, and writers sometimes drift along it in the middle of a given piece, the distinction is a meaningful one.
    - bfe 16y ago
      The hardest thing for me going from studying physics and astronomy to law school was getting used to the idea of a form of learning that had little to do with figuring out truth.
- qq66 16y ago
  The Forbes 400 is mostly entrepreneurs but the "Forbes 40,000" is mostly financiers, only a small fraction of whom create net positive value.
  - pg 16y ago
    I don't see any reason to assume the distribution of outcomes for financiers is flatter than that for entrepreneurs. Is there something about finance that should make that so?
  - deleted 16y ago
    [deleted]
  - deleted 16y ago
    [deleted]
  - onan_barbarian 16y ago
    The Forbes 400 contains a mix of entrepreneurs and inherited wealth, and tends to describe people as self-made if there is _any_ way of justifying that at all. For example, you typically might raise an eyebrow at the description of Philip Anschutz as 'self-made'... from Anschutz's wikipedia page: "Anschutz bought out his father's drilling company in 1961" (age 22) ... as you do. Paging down the list shows a quite interesting mix of self-made to lesser or greater extents, but a lot of Waltons and Rockerfellers... still. More broadly, the emphasis on the ultra-rich isn't enormously illuminating either way, although it's worth noting that a lot of the 'entirely self-made' ultra-rich come from extremely comfortable upper-middle-class backgrounds, most obviously Bill Gates. I would be suprised to hear any evidence supporting your "Forbes 40,000" line - got any, or are you just making it up?
  - bokonist 16y ago
    Source?
    - qq66 16y ago
      No source since the "Forbes 40,000" doesn't exist but I can assure you that it's much more common to make $100m on Wall Street than in entrepreneurship. My direct manager when I interned at Lehman Brothers had probably socked away $50m himself.
- ciamac 16y ago
  There is a lot of empirical evidence supporting the fact that the rich "own" government, or, more precisely, that politicians vote in ways that are more correlated with beliefs of high income voters than other voters, and that politicians are responsive to contributions. See, for example, the references herein: http://econ-www.mit.edu/files/6348 http://econ-www.mit.edu/files/6348 Stiglitz is a serious economist and a Nobel laureate, there is data behind what he says, but bear in mind that he's writing this for Vanity Fair and not the American Economic Review.
- onan_barbarian 16y ago
  I like the use of the phrases "economic inequality that successful startups yield, and which accounts for a lot of the entries in the Forbes 400" and "evidence that it would be a complement to call ancedotal" in the same sentence. Despite the very visible presence of Gates, Buffer, Ellison, etc at the top of the list the Forbes 400 isn't exactly a startup playground (a lot of mineral wealth, the Waltons, a still-pretty decent whack of inherited $$$). The idea that American inequality en masse has much to do with startups is an idea that, well... let's just say it would be a compliment to call it sensible. I'm sure that the American environment has resulted in great inequalities of outcome among, say, _tech_ firms (e.g. big winners and losers rather than having IBM and the seven dwarves pootle along for decades) but this doesn't translate to a fraction of the effect of, say, big declines in the tax rate paid by the very rich, or changes in the USA's blend of manufacturing or service jobs. Not staking a position here either way, just saying that bringing startups into this is absurd navel-gazing. It's hard to see what you're achieving trying to undermine specific points in an opinion piece ("You didn't show evidence that X" looks a lot like "I think you're wrong about X but am trying to look like the bigger man here") with this rather pointless bit of drive-by snark.
thecabinet 16y ago
It's really difficult to take this sort of article seriously. Whether it's the talk of the top 1% "taking" (which is strange, because everything else in the article is trying to demonstrate ther undeservingness) or this: > While many of the old centers of inequality in Latin America, such as Brazil, have been striving in recent years, rather successfully, to improve the plight of the poor and reduce gaps in income, America has allowed inequality to grow. Wait, is the problem poverty or inequality? If "the plight of the poor" is simply that they're not as comfortable as those in the top 1%, but they still have cars, and TVs, ad microwaves, I'm never going to be impressed by this sort of article.
moultano 16y ago
The more divided a society becomes in terms of wealth, the more reluctant the wealthy become to spend money on common needs. The rich don’t need to rely on government for parks or education or medical care or personal security—they can buy all these things for themselves. In the process, they become more distant from ordinary people, losing whatever empathy they may once have had. They also worry about strong government—one that could use its powers to adjust the balance, take some of their wealth, and invest it for the common good. The top 1 percent may complain about the kind of government we have in America, but in truth they like it just fine: too gridlocked to re-distribute, too divided to do anything but lower taxes. Not only is this paragraph entirely unsubstantiated in the essay, but I doubt that it's even true. Perhaps the author could have interviewed people in this top 1% or cited polling data or something. Instead they went with caricature.
- danssig 16y ago
  To be fair, I think the US itself is a pretty good citation.
patio11 16y ago
Top 1% in income is, hmm, $500kish? I hate to break it to you, but that isn't a CEO of a Fortune 500 company (that would imply the had 99 employees apiece, right?) or a hedge fund owner. That's like a couple dozen people who post to HN, or someone with a successful medical practice, or a well-rewarded peon who has leverage in an industry made of money. (A quant, for example.) $500k is a lot of money, but it isn't "senators are at your beck and call, own houses in six countries" money. [Edit to add: guesstimate based on misremembered data. Real number closer to 400k.]
- moultano 16y ago
  250k of household income puts you at the 98.3 percentile, so any two married valley engineers probably qualify, and they probably can't afford a house. http://en.wikipedia.org/wiki/Household_income_in_the_United_States http://en.wikipedia.org/wiki/Household_income_in_the_United_...
  - Anechoic 16y ago
    Those figures are from 2005. Does anyone have more recent numbers? (a quick Google search doesn't turn up anything in the same format. Going to bed now, I'll search again in the morning).
  - alnayyir 16y ago
    >, and they probably can't afford a house. I moved to the bay area recently, and I'm an engineer. I was kind of wondering how people actually live out here. I came here from New York, so I get how people can rent for their whole lives, but I had thought that there'd be more reasonable home ownership in the bay area. Not so. :\
    - tesseract 16y ago
      I'm a recent (last few months) migrant to the bay area. I have to say, for a city that hates capitalists, San Francisco sure is expensive. (hmm, maybe there's some causation there?)
yewweitan 16y ago
This is a good time to reflect again upon PG's essay 'Mind the Gap' - http://paulgraham.com/gap.html http://paulgraham.com/gap.html
rradu 16y ago
NYT piece from a few days ago shows trends of top income earners over the last 90 years - http://economix.blogs.nytimes.com/2011/03/30/inequality-is-most-extreme-in-wealth-not-income/ http://economix.blogs.nytimes.com/2011/03/30/inequality-is-m...
gentschev 16y ago
We all agree the article's dumb and pretty poorly written. Many lower income people pay no income taxes at all. I think that's rightly so, but it seems silly to write about a lack of redistribution in the US. In fact, the top 50% of households in income paid 97% of income taxes in 2008. What is troubling, and what the author ignores, is the changing distribution of returns in our economy. There's no point in trying to legislate it away, but more and more work is becoming automated. We're in the middle of a second industrial revolution, and many kinds of work that people rely on for income and identity will go away over time. Will we end up in a society where 90% of us, who don't have the skills to be productive, are subsidized by the remaining 10%? That seems like an awful outcome from a social perspective, but I'm not sure how we should respond to it. From a policy perspective, I would like to see a higher short-term capital gains rate to limit the attractiveness of financial instrument trading, and I think carry income (on VC and private equity) should be taxed as income, not at the lower rate for capital gains. But apart from those areas, we need to address the long-term trend of growing income inequality as a society, not with legislation.
- yaks_hairbrush 16y ago
  You get a pretty skewed version of the facts when you talk about income tax shares. Payroll taxes hurt quite a bit at lower income levels.
- mark_l_watson 16y ago
  Tax all financial transactions: a very small tax, but just enough to keep trading systems that do many transactions quickly become less attractive. I believe that this type of high speed trading does not generate value for society. I am thinking of something similar to proposals that would make people pay $0.000001 per email to make spamming none cost effective.
hootmon 16y ago
Just consider this. Most tax money goes toward providing defense, Which is just a nice word for protecting the property of the wealthy. The more property you have, then the more value you receive, thus the more, not less, you should pay. Its called welfare for the rich. Our taxes go towards securing their position and goods. Say hello to that boot rushing down on you.
- varjag 16y ago
  Perhaps that is taking defense too literally. In this day of age, there is very little threat to people's property from Mexico or Canada.
  - stellar678 16y ago
    However, there is ever-present threat to the interests abroad of American individuals and companies.
- cagey 16y ago
  > Most tax money goes toward providing defense It seems like (FY2010) 20% of Federal expenditures go toward defense, and 58% go to entitlement programs (which (I speculate) the 1% wealthiest do NOT receive disproportionate benefit from). Source: http://globaleconomicanalysis.blogspot.com/2011/03/usa-incorporated-grim-look-at-financial.html http://globaleconomicanalysis.blogspot.com/2011/03/usa-incor... second graph
  - gersh 16y ago
    From that chart, it appears the problem is the healthcare industry is getting too much money. Medicare is expensive along with the tax deduction for health insurance. If we could get down healthcare costs, it would solve the problem.
rudiger 16y ago
The top 1 percent of American income-earners account for ~25% of the nation’s total income every year. The top 1 percent of American wealth-holders account for ~40% of the total wealth. I hear statistics like this all the time but I never understand... What is the "correct" amount? The top 1 percent of anything by definition are going to hold some larger share. There are compelling theoretical reasons for wealth and income distribution to follow a power law (ie. Pareto distribution). Why should these numbers be as they were 25 years ago, or as they are in other countries now?
- dot 16y ago
  Because the bottom X% are starving.
- henrikschroder 16y ago
  The main criticism isn't that "the rich" have a lot of the income and assets, or that their share is increasing, it's that the rest of the people are getting less. The american society as a whole is getting richer, but the majority of the members of that society are getting poorer. Is that really the way things should be? On the other hand, this piece only talks about inflation-adjusted net income. If you compare the quality of life or purchasing power I think that everyone is still better off with each year. Even though a typical middle-class family has less money now than 30 years ago, they can have mobile phones and a flat-screen TV and a computer and internet and one or two fuel-efficient comfortable cars, and none of those things existed 30 years ago.
  - lusis 16y ago
    Wealth isn't a fixed pool of stuff. Me having more wealth isn't taking away from someone else.
    - chairface 16y ago
      Nor is that what henrikschroder is claiming. I understand him to be saying that the majority of Americans have declining incomes, adjusted for inflation, over some recent period of time. Could be true, but I'd like to see numbers.
marknadal 16y ago
This article makes one logical fallacy after another, offhandedly referring to "economists" as an appeal to authority without providing any reference, proclaiming numbers and statistics without any evidence, making bias slurs and assumptions without giving any warrant or citation. It spews Keynesian Economics and a Communistic regard everywhere while blaming Capitalism for the consequences of Progressivism in the last century. That somehow the Recession is the fault of a rich CEO and not hyperinflation and credit expansion. And provides no accountable cross reference to other time periods or governments. It is a great relief to see that this was not upvoted by HN for its content but rather to demystify its preposterous pontification. Worst of all, the author tagged himself in the keywords, now talk about vanity.
stretchwithme 16y ago
Some people work very hard and are very creative. Those who produce more should get more. That isn't the entire picture of how people get wealthy in America, but it is the gist of it. Of course, America has an increasingly corrupt government and a great many people acquiring wealth by using government to scam the rest of us. And we should be railing against that. But the fact that wealth is distributed unevenly is inevitable. Not only are the productive wildly different in their abilities to produce, the ability of the corrupt to steal varies greatly as well.
- cheez 16y ago
  Your second paragraph is very interesting and reminded me of this talk here: http://www.youtube.com/watch?v=dmzZ8lCLhlk http://www.youtube.com/watch?v=dmzZ8lCLhlk
dctoedt 16y ago
The key section of the article is the last one, about "the erosion of our sense of [national] identity, in which fair play, equality of opportunity, and a sense of community are so important." The author, Joseph Stiglitz [1], doesn't explain how inequality of wealth alone causes such erosion. On its own, inequality very well might not. But other factors might be at work as well. Consider the effects of envy, or more precisely, "relative deprivation" [2]. There's been research indicating that no matter how well off humans are on an absolute scale, we tend to become dissatisfied when we perceive that we're worse off than our neighbors; we tend to believe we're somehow entitled to do at least as well, or even better, than they. (See also "keeping up with the Joneses.") Envy is probably a product of natural selection; it can be a useful motivator, at least when properly channeled. On the other hand, envy might be less adaptive in an era of global mass communications. It's certainly easier today for millions of people to become aware of, and then (perhaps subconsciously) resentful of, others who seem better off than they. So it could be that we have a combination of causes at work: Increasing public awareness of wealth inequality leads to increased envy, which might indeed start to erode the social fabric. If this turns out to be the case, what could we do about it? Some might say humanity should be less envious, that people should just accept inequalities of wealth as natural consequences of their own limitations. History suggests that they -- or should I say, we -- probably won't. [1] Joseph Stiglitz, professor at Columbia, former chief economist of the World Bank, Nobel Memorial Prize in Economics 2001 http://en.wikipedia.org/wiki/Joseph_Stiglitz http://en.wikipedia.org/wiki/Joseph_Stiglitz [2] http://en.wikipedia.org/wiki/Relative_deprivation http://en.wikipedia.org/wiki/Relative_deprivation
Tycho 16y ago
What's the point of taking arbitrary cutoffs like 1%, 20%, whatever%? Just show us the overall plot/curve.
charlieconroy 16y ago
This article is fodder for those 1000 Thoreau is talking about -- "There are a thousand hacking at the branches of evil to one who is striking at the root." Not once did the author submit forth anything of value. I kept thinking I wish I wrote this article and instead of complaining about the troubles focus on WHY? WHY is this happening? I've always come to the same answer: give kids the opportunity to find what they love (or who they are) through education. I dislike the PIE analogy! Anytime they mention pie and those greedy few it gives the wrong idea about wealth generation. I think a growing trend of more educated peoples will fix this inequality over time -- wealth distribution will be more sparse.

86 points by rosser 16y ago

The worst kind of article is the kind that makes you want to flag it for being inappropriate and rant about it at the same time.

grails4life 16y ago
you want to lag the article just because you disagree with it?
nice1 16y ago
The last tsar of Russia and his lot also practiced denial. The ensuing tragedy not only wiped them out, but also caused misery to countless people for almost a 100 years. Lets hope history won't repeat itself.
- pjscott 16y ago
  Unless I'm misunderstanding what you're saying, you can apply that argument to just about anything.

pg 16y ago

This is written more like a speech by a politician than as an attempt at analysis. The type of economic inequality that successful startups yield, and which accounts for a lot of the entries in the Forbes 400, is described merely as a theory cherished by the rich, and dismissed with evidence it would be a compliment to call anecdotal. And while there's a lot of talk about how the rich own the government, he doesn't even attempt to analyze whether this is more or less true now than it was 50 years ago, when there was less economic inequality (on paper).

deleted 16y ago
[deleted]
drgolf 16y ago
It lacks in analysis because it's an opinion piece for a general audience, hence the use of anecdotes. Its not an academic article. No offense, but your articles often use anecdotes to make a point. For example, you write: "As anyone who has worked for the government knows, the important thing is not to make the right choices, but to make choices that can be justified later if they fail." What evidence do you have of this? What about agencies like DARPA? Your statement could also apply to employees of large corporations. You are doing the same thing that Joe Stigliz did in the article (without his academic ethos)
- pg 16y ago
  I'm not complaining about the fact that this is, like my essays, in the form of an essay rather than an academic paper. I'm saying that it's a piece of advocacy rather than an attempt to figure out the truth. That's an important distinction. In advocacy, you start already knowing the conclusion you want to reach, and you try as hard as you can to convince the audience of it, the way a lawyer or a politician would. Whereas an essay, as the name implies, starts with a question, and from there you try to follow the truth wherever it leads. I wrote about this in "The Age of the Essay" (http://paulgraham.com/essay.html http://paulgraham.com/essay.html). There is not a mathematically sharp distinction between the two approaches, of course. A lawyer or politician will use the truth when it suits his purpose. And an essayist trying to follow the truth will inevitably have biases that cause him not to follow the truth as far down some roads as others. But though the two approaches form a continuum, and writers sometimes drift along it in the middle of a given piece, the distinction is a meaningful one.
  - bfe 16y ago
    The hardest thing for me going from studying physics and astronomy to law school was getting used to the idea of a form of learning that had little to do with figuring out truth.
qq66 16y ago
The Forbes 400 is mostly entrepreneurs but the "Forbes 40,000" is mostly financiers, only a small fraction of whom create net positive value.
- pg 16y ago
  I don't see any reason to assume the distribution of outcomes for financiers is flatter than that for entrepreneurs. Is there something about finance that should make that so?
- deleted 16y ago
  [deleted]
- deleted 16y ago
  [deleted]
- onan_barbarian 16y ago
  The Forbes 400 contains a mix of entrepreneurs and inherited wealth, and tends to describe people as self-made if there is _any_ way of justifying that at all. For example, you typically might raise an eyebrow at the description of Philip Anschutz as 'self-made'... from Anschutz's wikipedia page: "Anschutz bought out his father's drilling company in 1961" (age 22) ... as you do. Paging down the list shows a quite interesting mix of self-made to lesser or greater extents, but a lot of Waltons and Rockerfellers... still. More broadly, the emphasis on the ultra-rich isn't enormously illuminating either way, although it's worth noting that a lot of the 'entirely self-made' ultra-rich come from extremely comfortable upper-middle-class backgrounds, most obviously Bill Gates. I would be suprised to hear any evidence supporting your "Forbes 40,000" line - got any, or are you just making it up?
- bokonist 16y ago
  Source?
  - qq66 16y ago
    No source since the "Forbes 40,000" doesn't exist but I can assure you that it's much more common to make $100m on Wall Street than in entrepreneurship. My direct manager when I interned at Lehman Brothers had probably socked away $50m himself.
ciamac 16y ago
There is a lot of empirical evidence supporting the fact that the rich "own" government, or, more precisely, that politicians vote in ways that are more correlated with beliefs of high income voters than other voters, and that politicians are responsive to contributions. See, for example, the references herein: http://econ-www.mit.edu/files/6348 http://econ-www.mit.edu/files/6348 Stiglitz is a serious economist and a Nobel laureate, there is data behind what he says, but bear in mind that he's writing this for Vanity Fair and not the American Economic Review.
onan_barbarian 16y ago
I like the use of the phrases "economic inequality that successful startups yield, and which accounts for a lot of the entries in the Forbes 400" and "evidence that it would be a complement to call ancedotal" in the same sentence. Despite the very visible presence of Gates, Buffer, Ellison, etc at the top of the list the Forbes 400 isn't exactly a startup playground (a lot of mineral wealth, the Waltons, a still-pretty decent whack of inherited $$$). The idea that American inequality en masse has much to do with startups is an idea that, well... let's just say it would be a compliment to call it sensible. I'm sure that the American environment has resulted in great inequalities of outcome among, say, _tech_ firms (e.g. big winners and losers rather than having IBM and the seven dwarves pootle along for decades) but this doesn't translate to a fraction of the effect of, say, big declines in the tax rate paid by the very rich, or changes in the USA's blend of manufacturing or service jobs. Not staking a position here either way, just saying that bringing startups into this is absurd navel-gazing. It's hard to see what you're achieving trying to undermine specific points in an opinion piece ("You didn't show evidence that X" looks a lot like "I think you're wrong about X but am trying to look like the bigger man here") with this rather pointless bit of drive-by snark.

thecabinet 16y ago

It's really difficult to take this sort of article seriously. Whether it's the talk of the top 1% "taking" (which is strange, because everything else in the article is trying to demonstrate ther undeservingness) or this: > While many of the old centers of inequality in Latin America, such as Brazil, have been striving in recent years, rather successfully, to improve the plight of the poor and reduce gaps in income, America has allowed inequality to grow. Wait, is the problem poverty or inequality? If "the plight of the poor" is simply that they're not as comfortable as those in the top 1%, but they still have cars, and TVs, ad microwaves, I'm never going to be impressed by this sort of article.

moultano 16y ago

The more divided a society becomes in terms of wealth, the more reluctant the wealthy become to spend money on common needs. The rich don’t need to rely on government for parks or education or medical care or personal security—they can buy all these things for themselves. In the process, they become more distant from ordinary people, losing whatever empathy they may once have had. They also worry about strong government—one that could use its powers to adjust the balance, take some of their wealth, and invest it for the common good. The top 1 percent may complain about the kind of government we have in America, but in truth they like it just fine: too gridlocked to re-distribute, too divided to do anything but lower taxes. Not only is this paragraph entirely unsubstantiated in the essay, but I doubt that it's even true. Perhaps the author could have interviewed people in this top 1% or cited polling data or something. Instead they went with caricature.

danssig 16y ago
To be fair, I think the US itself is a pretty good citation.

patio11 16y ago

Top 1% in income is, hmm, $500kish? I hate to break it to you, but that isn't a CEO of a Fortune 500 company (that would imply the had 99 employees apiece, right?) or a hedge fund owner. That's like a couple dozen people who post to HN, or someone with a successful medical practice, or a well-rewarded peon who has leverage in an industry made of money. (A quant, for example.) $500k is a lot of money, but it isn't "senators are at your beck and call, own houses in six countries" money. [Edit to add: guesstimate based on misremembered data. Real number closer to 400k.]

moultano 16y ago
250k of household income puts you at the 98.3 percentile, so any two married valley engineers probably qualify, and they probably can't afford a house. http://en.wikipedia.org/wiki/Household_income_in_the_United_States http://en.wikipedia.org/wiki/Household_income_in_the_United_...
- Anechoic 16y ago
  Those figures are from 2005. Does anyone have more recent numbers? (a quick Google search doesn't turn up anything in the same format. Going to bed now, I'll search again in the morning).
- alnayyir 16y ago
  >, and they probably can't afford a house. I moved to the bay area recently, and I'm an engineer. I was kind of wondering how people actually live out here. I came here from New York, so I get how people can rent for their whole lives, but I had thought that there'd be more reasonable home ownership in the bay area. Not so. :\
  - tesseract 16y ago
    I'm a recent (last few months) migrant to the bay area. I have to say, for a city that hates capitalists, San Francisco sure is expensive. (hmm, maybe there's some causation there?)

yewweitan 16y ago

This is a good time to reflect again upon PG's essay 'Mind the Gap' - http://paulgraham.com/gap.html http://paulgraham.com/gap.html

rradu 16y ago

NYT piece from a few days ago shows trends of top income earners over the last 90 years - http://economix.blogs.nytimes.com/2011/03/30/inequality-is-most-extreme-in-wealth-not-income/ http://economix.blogs.nytimes.com/2011/03/30/inequality-is-m...

gentschev 16y ago

We all agree the article's dumb and pretty poorly written. Many lower income people pay no income taxes at all. I think that's rightly so, but it seems silly to write about a lack of redistribution in the US. In fact, the top 50% of households in income paid 97% of income taxes in 2008. What is troubling, and what the author ignores, is the changing distribution of returns in our economy. There's no point in trying to legislate it away, but more and more work is becoming automated. We're in the middle of a second industrial revolution, and many kinds of work that people rely on for income and identity will go away over time. Will we end up in a society where 90% of us, who don't have the skills to be productive, are subsidized by the remaining 10%? That seems like an awful outcome from a social perspective, but I'm not sure how we should respond to it. From a policy perspective, I would like to see a higher short-term capital gains rate to limit the attractiveness of financial instrument trading, and I think carry income (on VC and private equity) should be taxed as income, not at the lower rate for capital gains. But apart from those areas, we need to address the long-term trend of growing income inequality as a society, not with legislation.

yaks_hairbrush 16y ago
You get a pretty skewed version of the facts when you talk about income tax shares. Payroll taxes hurt quite a bit at lower income levels.
mark_l_watson 16y ago
Tax all financial transactions: a very small tax, but just enough to keep trading systems that do many transactions quickly become less attractive. I believe that this type of high speed trading does not generate value for society. I am thinking of something similar to proposals that would make people pay $0.000001 per email to make spamming none cost effective.

hootmon 16y ago

Just consider this. Most tax money goes toward providing defense, Which is just a nice word for protecting the property of the wealthy. The more property you have, then the more value you receive, thus the more, not less, you should pay. Its called welfare for the rich. Our taxes go towards securing their position and goods. Say hello to that boot rushing down on you.

varjag 16y ago
Perhaps that is taking defense too literally. In this day of age, there is very little threat to people's property from Mexico or Canada.
- stellar678 16y ago
  However, there is ever-present threat to the interests abroad of American individuals and companies.
cagey 16y ago
> Most tax money goes toward providing defense It seems like (FY2010) 20% of Federal expenditures go toward defense, and 58% go to entitlement programs (which (I speculate) the 1% wealthiest do NOT receive disproportionate benefit from). Source: http://globaleconomicanalysis.blogspot.com/2011/03/usa-incorporated-grim-look-at-financial.html http://globaleconomicanalysis.blogspot.com/2011/03/usa-incor... second graph
- gersh 16y ago
  From that chart, it appears the problem is the healthcare industry is getting too much money. Medicare is expensive along with the tax deduction for health insurance. If we could get down healthcare costs, it would solve the problem.

rudiger 16y ago

The top 1 percent of American income-earners account for ~25% of the nation’s total income every year. The top 1 percent of American wealth-holders account for ~40% of the total wealth. I hear statistics like this all the time but I never understand... What is the "correct" amount? The top 1 percent of anything by definition are going to hold some larger share. There are compelling theoretical reasons for wealth and income distribution to follow a power law (ie. Pareto distribution). Why should these numbers be as they were 25 years ago, or as they are in other countries now?

dot 16y ago
Because the bottom X% are starving.
henrikschroder 16y ago
The main criticism isn't that "the rich" have a lot of the income and assets, or that their share is increasing, it's that the rest of the people are getting less. The american society as a whole is getting richer, but the majority of the members of that society are getting poorer. Is that really the way things should be? On the other hand, this piece only talks about inflation-adjusted net income. If you compare the quality of life or purchasing power I think that everyone is still better off with each year. Even though a typical middle-class family has less money now than 30 years ago, they can have mobile phones and a flat-screen TV and a computer and internet and one or two fuel-efficient comfortable cars, and none of those things existed 30 years ago.
- lusis 16y ago
  Wealth isn't a fixed pool of stuff. Me having more wealth isn't taking away from someone else.
  - chairface 16y ago
    Nor is that what henrikschroder is claiming. I understand him to be saying that the majority of Americans have declining incomes, adjusted for inflation, over some recent period of time. Could be true, but I'd like to see numbers.

marknadal 16y ago

This article makes one logical fallacy after another, offhandedly referring to "economists" as an appeal to authority without providing any reference, proclaiming numbers and statistics without any evidence, making bias slurs and assumptions without giving any warrant or citation. It spews Keynesian Economics and a Communistic regard everywhere while blaming Capitalism for the consequences of Progressivism in the last century. That somehow the Recession is the fault of a rich CEO and not hyperinflation and credit expansion. And provides no accountable cross reference to other time periods or governments. It is a great relief to see that this was not upvoted by HN for its content but rather to demystify its preposterous pontification. Worst of all, the author tagged himself in the keywords, now talk about vanity.

stretchwithme 16y ago

Some people work very hard and are very creative. Those who produce more should get more. That isn't the entire picture of how people get wealthy in America, but it is the gist of it. Of course, America has an increasingly corrupt government and a great many people acquiring wealth by using government to scam the rest of us. And we should be railing against that. But the fact that wealth is distributed unevenly is inevitable. Not only are the productive wildly different in their abilities to produce, the ability of the corrupt to steal varies greatly as well.

cheez 16y ago
Your second paragraph is very interesting and reminded me of this talk here: http://www.youtube.com/watch?v=dmzZ8lCLhlk http://www.youtube.com/watch?v=dmzZ8lCLhlk

dctoedt 16y ago

The key section of the article is the last one, about "the erosion of our sense of [national] identity, in which fair play, equality of opportunity, and a sense of community are so important." The author, Joseph Stiglitz [1], doesn't explain how inequality of wealth alone causes such erosion. On its own, inequality very well might not. But other factors might be at work as well. Consider the effects of envy, or more precisely, "relative deprivation" [2]. There's been research indicating that no matter how well off humans are on an absolute scale, we tend to become dissatisfied when we perceive that we're worse off than our neighbors; we tend to believe we're somehow entitled to do at least as well, or even better, than they. (See also "keeping up with the Joneses.") Envy is probably a product of natural selection; it can be a useful motivator, at least when properly channeled. On the other hand, envy might be less adaptive in an era of global mass communications. It's certainly easier today for millions of people to become aware of, and then (perhaps subconsciously) resentful of, others who seem better off than they. So it could be that we have a combination of causes at work: Increasing public awareness of wealth inequality leads to increased envy, which might indeed start to erode the social fabric. If this turns out to be the case, what could we do about it? Some might say humanity should be less envious, that people should just accept inequalities of wealth as natural consequences of their own limitations. History suggests that they -- or should I say, we -- probably won't. [1] Joseph Stiglitz, professor at Columbia, former chief economist of the World Bank, Nobel Memorial Prize in Economics 2001 http://en.wikipedia.org/wiki/Joseph_Stiglitz http://en.wikipedia.org/wiki/Joseph_Stiglitz [2] http://en.wikipedia.org/wiki/Relative_deprivation http://en.wikipedia.org/wiki/Relative_deprivation

Tycho 16y ago

What's the point of taking arbitrary cutoffs like 1%, 20%, whatever%? Just show us the overall plot/curve.

charlieconroy 16y ago

This article is fodder for those 1000 Thoreau is talking about -- "There are a thousand hacking at the branches of evil to one who is striking at the root." Not once did the author submit forth anything of value. I kept thinking I wish I wrote this article and instead of complaining about the troubles focus on WHY? WHY is this happening? I've always come to the same answer: give kids the opportunity to find what they love (or who they are) through education. I dislike the PIE analogy! Anytime they mention pie and those greedy few it gives the wrong idea about wealth generation. I think a growing trend of more educated peoples will fix this inequality over time -- wealth distribution will be more sparse.