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"Technological progress should cause increasing economic inequality" Does that mean you are unfazed by growing inequality, and view it as an unavoidable byprod

by portman 15y ago

"Technological progress should cause increasing economic inequality" Does that mean you are unfazed by growing inequality, and view it as an unavoidable byproduct of progress? Or do you believe economic inequality is a negative externality (like pollution) that needs to be remedied?

nicholasjbs 15y ago
pg's thoughts on inequality: http://paulgraham.com/inequality.html http://paulgraham.com/inequality.html
- vacri 15y ago
  From that link, it's clear that pg likes inequality because otherwise it's 'taking money from the rich and giving it to the poor, which adversely affects VC' But the main article talks about 30 years where money has been taken from the poor and given to the rich - that is, everyone has not increased together, and the poorest have lost ground. This article doesn't really answer that.
- leot 15y ago
  Well put, as pg's essays usually are. But I think there are rather large gaps: 1) He glosses together reduction of income inequality with elimination of it. The zero inequality thing has been tried and failed. 2) one of his arguments is that better education of the poor will increase wealth inequality, because it will increase the number of customers and the number of possible entrepreneurs. While the premises are no doubt true, the conclusion isn't. There are other inequality-decreasing factors that might well have a stronger impact. At the very least, a better educated population might have the wherewithal to organize and vote for increased taxes on wealthy people. Less cynically, better educated people need less stuff to get by (e.g. their cars last longer), and they are savvier consumers. And empirically, if one excludes the U.S., the best educated countries tend to also have the lowest income inequality. 3) pg neglects the costs of U.S. monetary policy on risk taking. The past 20 years have seen low inflation. When inflation is low, there is less need for money to be invested in order to preserve wealth. With higher rates of inflation, investors have no choice but to try and extract greater value out of the wealth they have if they want to keep up. 4) A related point: pg's argument is that high taxes reduce the large rewards founders get, causing them to take smaller risks. Yet there is nothing intrinsic about taxation that necessitates the burden fall primarily on the recently wealthy. PG's argument doesn't easily apply to "old money" -- would the decrease in upside of a wealth tax outweigh the incentives to invest imposed by a wealth tax? From a tech progress/startup perspective, wouldn't the elimination of capital gains in favor of a tax on wealth cause exactly the right kinds of incentives for starting companies?
  - Roboprog 15y ago
    Replacing the income tax with an incremental property/savings tax probably would go a long way towards motivating people with wealth to use it or lose it. That idea is dead on arrival in today's heavily lobbied climate, I'm afraid.
    - ericd 15y ago
      It's not just DOA due to lobbying - a great many people just don't agree that rich people should be forced to use or lose their wealth. Why should the govt. have the power to impoverish someone with a lot of money just because they're not generating more with it? That seems to me to be a fairly substantial abuse of their rights.
      - leot 15y ago
        Who said anything about impoverishing anyone? What does "impoverish" mean, exactly, to you? In France, the wealth tax is 0% under €800k, increasing to a maximum of 1.8% (once the person gets to ~€17 million). How could this lead to impoverishment when even relatively conservative asset management averages returns of >5%? Even in this case the party's wealth is still increasing (especially since the proposal is to offset the wealth tax by eliminating all capital gains taxes, which are already extremely difficult to calculate). And it's hardly an abuse: property taxes (a kind of wealth tax) are already levied, and while many complain, few claim it is government overreach. Government policy that favors a small and already powerful minority would seem to be a much greater abuse. The bigger question is: why do most governments tax people for creating value, instead of taxing people for failing to?
pg 15y ago
I don't automatically assume it's a problem, as so many people seem to. I don't assume that all economic inequality is the medieval type, where the rich are the winners of a zero sum game. At the high end of the scale it doesn't seem to be a problem. I've seen a lot of people go from middle class to rich when their startups succeeded. Most live pretty quietly. I would guess most of the damage done by economic inequality is at the low end. I don't think there is much debate that societies should try to mitigate that.
- forensic 15y ago
  >I don't think there is much debate that societies should try to mitigate that. You haven't been reading HN then, and you haven't met the Tea Party. There are a lot of people here who believe that poor people deserve their lot and should wallow in it. In my opinion society needs to use tax dollars to ensure a basic standard of living for all citizens. This idea (the welfare state) is deeply unpopular in contemporary America.
  - learc83 15y ago
    Just because I might disagree with your methods of equalizing income, doesn't mean I "believe poor people deserve their lot and should wallow in it." You've turned a political disagreement about the methods to accomplish some desirable goal do so into a moral argument. You've decided that if I think there is a better way to elevate the poor than your way, I must want them to stay poor and thus must be evil. Why do you feel you need to frame the argument as such?
    - forensic 15y ago
      Politics and morality are intimately related. There are SOME free market ideologues who believe that unrestrained corporations will enrich the poor, however I believe they are in the minority. You may be one of them. The majority of libertarians believe that individual property rights are sacrosanct and that it is wrong to forcibly redistribute wealth to prevent poverty, hunger, suffering. This is the argument of the Tea Party to my knowledge. Am I wrong? Right now the excess wealth is in the hands of the rich, especially the top one-tenth-of-one-percent (0.1%). Society is presented with a choice: (a) we can take it from them and redistribute it to the bottom 80%, or (b) we can let them keep it and allow people to suffer. (a) is a moral statement, that the poverty of the poor trumps the property rights of the rich. (b) is a moral statement, that the property rights of the rich trump the poverty of the poor. Almost all proposed actions in this situation amount to either (a) or (b). The wealth of society can increase over time, but at any single point in time it is a fixed quantity whose distribution is intimately related to whether poor people exist or not.
anamax 15y ago
> Or do you believe economic inequality is a negative externality (like pollution) that needs to be remedied? I'm pretty sure that you're not measuring inequality in a reasonable fashion. Larry Ellison has a lot more resources than I do, but the net worth ratio is far greater than the opportunities ratio. Yes, he could afford his own space program, but we both can afford to go diving. He can't drive his (much more expensive) car on 101 any faster than I can. And so on. I'm actually running into this problem. I'm trying to get someone to help with a project. One of the sticking points is that the potential reward, while "huge" by some measures, won't significantly change what he can do. Since your model predicts otherwise, it's clearly wrong. How about you figure out how to measure the actual "problem" before proposing solutions?
- william42 15y ago
  The gap between what you can do and what Larry Ellison can do isn't as relevant as the gap between what you and Larry Ellison can do and what your average single mom living in welfare in Durham can do.
  - forensic 15y ago
    This is exactly the point that HN seems to be oblivious toward. HN people live in a bubble and seemingly have never met anyone who is in real poverty -- they think because in college they had to eat Ramen they were poor. They are clueless. Real poverty is being illiterate, being malnourished in the womb, being raised in a crime-zone, growing up without dental care.
    - OstiaAntica 15y ago
      This type of "Real Poverty" has massively increased since the government launched its "War on Poverty" in the 1960s. The dropout rate is higher, crime is higher, more families are broken.
      - forensic 15y ago
        The War on Poverty was launched in the 1930s, and before that it was the mission of various religious organizations. The increase in the "Real Poverty" is due to economic factors like giving all the jobs to China, dumbing down education, and civil rights/feminist revolutions which led to social destabilization and people falling through cracks. Sweden and Norway and France and Holland are not having issues with "Real Poverty." And they all have big welfare states. The welfare state concept is sound. It lifts segments of the population in Real Poverty out of poverty. The problem in the USA is that for every social program helping a family out of poverty, there are 10 programs putting them back in their place.
cjy 15y ago
Inequality can be a bad thing without being an externality. Externality has a precise economic meaning. Pollution is a negative externality because the byproduct of my voluntary transaction to buy gas and burn it in my car is that you have to breathe the exhaust. You are an external third party that is hurt without compensation. What external third party is being harmed when one person produces a lot and gets rich and another person doesn't? One economic argument against inequality is that it results in people spending a lot of resources on guard labor. If I live in neighborhood with lots of inequality I have to spend lots of resources keeping the poor people from stealing my things. Therefore, reducing inequality via income distribution can create a public good in the form of less crime (and less resources wasted on protecting property). Thus, you can argue that redistributing income makes sense on the same grounds that having public police makes sense. That is an efficiency argument for reducing inequality.
bbuffone 15y ago
inequality is freedom. equality is not! So... if you believe in a free society and open markets then inequality is neither good or bad, it is what happens.
- msellout 15y ago
  I'm not convinced that inequality is freedom, or that equality prevents freedom. Can you explain what you mean by freedom? Imagine that a group of people, a nomadic tribe perhaps, wanted the freedom to live in a non-hierarchical society. If someone imposed inequality--that the best hunter/gatherer in the group should receive a "fair" share of resources--that would be restricting the freedom of the people, would it not?

by portman 15y ago

nicholasjbs 15y ago

pg's thoughts on inequality: http://paulgraham.com/inequality.html http://paulgraham.com/inequality.html

vacri 15y ago
From that link, it's clear that pg likes inequality because otherwise it's 'taking money from the rich and giving it to the poor, which adversely affects VC' But the main article talks about 30 years where money has been taken from the poor and given to the rich - that is, everyone has not increased together, and the poorest have lost ground. This article doesn't really answer that.
leot 15y ago
Well put, as pg's essays usually are. But I think there are rather large gaps: 1) He glosses together reduction of income inequality with elimination of it. The zero inequality thing has been tried and failed. 2) one of his arguments is that better education of the poor will increase wealth inequality, because it will increase the number of customers and the number of possible entrepreneurs. While the premises are no doubt true, the conclusion isn't. There are other inequality-decreasing factors that might well have a stronger impact. At the very least, a better educated population might have the wherewithal to organize and vote for increased taxes on wealthy people. Less cynically, better educated people need less stuff to get by (e.g. their cars last longer), and they are savvier consumers. And empirically, if one excludes the U.S., the best educated countries tend to also have the lowest income inequality. 3) pg neglects the costs of U.S. monetary policy on risk taking. The past 20 years have seen low inflation. When inflation is low, there is less need for money to be invested in order to preserve wealth. With higher rates of inflation, investors have no choice but to try and extract greater value out of the wealth they have if they want to keep up. 4) A related point: pg's argument is that high taxes reduce the large rewards founders get, causing them to take smaller risks. Yet there is nothing intrinsic about taxation that necessitates the burden fall primarily on the recently wealthy. PG's argument doesn't easily apply to "old money" -- would the decrease in upside of a wealth tax outweigh the incentives to invest imposed by a wealth tax? From a tech progress/startup perspective, wouldn't the elimination of capital gains in favor of a tax on wealth cause exactly the right kinds of incentives for starting companies?
- Roboprog 15y ago
  Replacing the income tax with an incremental property/savings tax probably would go a long way towards motivating people with wealth to use it or lose it. That idea is dead on arrival in today's heavily lobbied climate, I'm afraid.
  - ericd 15y ago
    It's not just DOA due to lobbying - a great many people just don't agree that rich people should be forced to use or lose their wealth. Why should the govt. have the power to impoverish someone with a lot of money just because they're not generating more with it? That seems to me to be a fairly substantial abuse of their rights.
    - leot 15y ago
      Who said anything about impoverishing anyone? What does "impoverish" mean, exactly, to you? In France, the wealth tax is 0% under €800k, increasing to a maximum of 1.8% (once the person gets to ~€17 million). How could this lead to impoverishment when even relatively conservative asset management averages returns of >5%? Even in this case the party's wealth is still increasing (especially since the proposal is to offset the wealth tax by eliminating all capital gains taxes, which are already extremely difficult to calculate). And it's hardly an abuse: property taxes (a kind of wealth tax) are already levied, and while many complain, few claim it is government overreach. Government policy that favors a small and already powerful minority would seem to be a much greater abuse. The bigger question is: why do most governments tax people for creating value, instead of taxing people for failing to?

pg 15y ago

I don't automatically assume it's a problem, as so many people seem to. I don't assume that all economic inequality is the medieval type, where the rich are the winners of a zero sum game. At the high end of the scale it doesn't seem to be a problem. I've seen a lot of people go from middle class to rich when their startups succeeded. Most live pretty quietly. I would guess most of the damage done by economic inequality is at the low end. I don't think there is much debate that societies should try to mitigate that.

forensic 15y ago
>I don't think there is much debate that societies should try to mitigate that. You haven't been reading HN then, and you haven't met the Tea Party. There are a lot of people here who believe that poor people deserve their lot and should wallow in it. In my opinion society needs to use tax dollars to ensure a basic standard of living for all citizens. This idea (the welfare state) is deeply unpopular in contemporary America.
- learc83 15y ago
  Just because I might disagree with your methods of equalizing income, doesn't mean I "believe poor people deserve their lot and should wallow in it." You've turned a political disagreement about the methods to accomplish some desirable goal do so into a moral argument. You've decided that if I think there is a better way to elevate the poor than your way, I must want them to stay poor and thus must be evil. Why do you feel you need to frame the argument as such?
  - forensic 15y ago
    Politics and morality are intimately related. There are SOME free market ideologues who believe that unrestrained corporations will enrich the poor, however I believe they are in the minority. You may be one of them. The majority of libertarians believe that individual property rights are sacrosanct and that it is wrong to forcibly redistribute wealth to prevent poverty, hunger, suffering. This is the argument of the Tea Party to my knowledge. Am I wrong? Right now the excess wealth is in the hands of the rich, especially the top one-tenth-of-one-percent (0.1%). Society is presented with a choice: (a) we can take it from them and redistribute it to the bottom 80%, or (b) we can let them keep it and allow people to suffer. (a) is a moral statement, that the poverty of the poor trumps the property rights of the rich. (b) is a moral statement, that the property rights of the rich trump the poverty of the poor. Almost all proposed actions in this situation amount to either (a) or (b). The wealth of society can increase over time, but at any single point in time it is a fixed quantity whose distribution is intimately related to whether poor people exist or not.

anamax 15y ago

> Or do you believe economic inequality is a negative externality (like pollution) that needs to be remedied? I'm pretty sure that you're not measuring inequality in a reasonable fashion. Larry Ellison has a lot more resources than I do, but the net worth ratio is far greater than the opportunities ratio. Yes, he could afford his own space program, but we both can afford to go diving. He can't drive his (much more expensive) car on 101 any faster than I can. And so on. I'm actually running into this problem. I'm trying to get someone to help with a project. One of the sticking points is that the potential reward, while "huge" by some measures, won't significantly change what he can do. Since your model predicts otherwise, it's clearly wrong. How about you figure out how to measure the actual "problem" before proposing solutions?

william42 15y ago
The gap between what you can do and what Larry Ellison can do isn't as relevant as the gap between what you and Larry Ellison can do and what your average single mom living in welfare in Durham can do.
- forensic 15y ago
  This is exactly the point that HN seems to be oblivious toward. HN people live in a bubble and seemingly have never met anyone who is in real poverty -- they think because in college they had to eat Ramen they were poor. They are clueless. Real poverty is being illiterate, being malnourished in the womb, being raised in a crime-zone, growing up without dental care.
  - OstiaAntica 15y ago
    This type of "Real Poverty" has massively increased since the government launched its "War on Poverty" in the 1960s. The dropout rate is higher, crime is higher, more families are broken.
    - forensic 15y ago
      The War on Poverty was launched in the 1930s, and before that it was the mission of various religious organizations. The increase in the "Real Poverty" is due to economic factors like giving all the jobs to China, dumbing down education, and civil rights/feminist revolutions which led to social destabilization and people falling through cracks. Sweden and Norway and France and Holland are not having issues with "Real Poverty." And they all have big welfare states. The welfare state concept is sound. It lifts segments of the population in Real Poverty out of poverty. The problem in the USA is that for every social program helping a family out of poverty, there are 10 programs putting them back in their place.

cjy 15y ago

Inequality can be a bad thing without being an externality. Externality has a precise economic meaning. Pollution is a negative externality because the byproduct of my voluntary transaction to buy gas and burn it in my car is that you have to breathe the exhaust. You are an external third party that is hurt without compensation. What external third party is being harmed when one person produces a lot and gets rich and another person doesn't? One economic argument against inequality is that it results in people spending a lot of resources on guard labor. If I live in neighborhood with lots of inequality I have to spend lots of resources keeping the poor people from stealing my things. Therefore, reducing inequality via income distribution can create a public good in the form of less crime (and less resources wasted on protecting property). Thus, you can argue that redistributing income makes sense on the same grounds that having public police makes sense. That is an efficiency argument for reducing inequality.

bbuffone 15y ago

inequality is freedom. equality is not! So... if you believe in a free society and open markets then inequality is neither good or bad, it is what happens.

msellout 15y ago
I'm not convinced that inequality is freedom, or that equality prevents freedom. Can you explain what you mean by freedom? Imagine that a group of people, a nomadic tribe perhaps, wanted the freedom to live in a non-hierarchical society. If someone imposed inequality--that the best hunter/gatherer in the group should receive a "fair" share of resources--that would be restricting the freedom of the people, would it not?