Mind The Gap is actually among my least favored essays, since I think that Paul Graham, coming from the position of someone who’s made all his money working with startups, isn’t giving adequate consideration to the ways in which business leaders can accumulate money without being high overall wealth producers. Also, he suggests that great income disparities in first world countries are positively associated with the health of those societies, but those first world nations which score best on various quality of life metrics tend to be those with lower income disparities, and even if the higher levels of income equality aren’t driving the difference in quality of life, it suggests that higher levels of income inequality aren’t driving improvements in overall quality of life either.
he suggests that great income disparities in first world countries are positively associated with the health of those
societies
And being in a hospital is positively associated with being sick. Quoting random associations is a stupid rhetorical trick. Sadly, lots of otherwise smart people use this trick. See also: http://xkcd.com/925/
I agree, the wealth transfer vs wealth generation distinction is an important one, but a single essay targeted at the economically disinclined can only cover so much ground.
Graham correctly notes that producing useful things can be a source of wealth, and also incorrectly takes it to be be the only source of wealth. Large sums of money can be acquired by inheritance, unproductive activities like playing stock markets, and luck. (It is ironic that he uses Bill Gates as an example. According to legend, Gates got his big break because Gary Kildare went hanggliding)
Everyone is familiar with the idea that there is a relationship between productivity and deserved income, because everyone has been told that if they want a rise, they must work harder. And that’s a large part of the reason people object to 100x income gaps: no amount of sweat could justify it. Markets don’t respond to productivity in the sense of effort: top actors don’t make 100x the films of struggling actors. I don’t think people are stupidly adopting the wrong theory, I think the effort theory is being constantly promoted by people who think it doesn’t apply to them.
There is some evidence that equality is beneficial. The point was argued in a book called the Spirit Level, which has generated considerable debate. I am not sure what the right answer is, but Graham is too sure it that inequality is harmless.
Some of the people who object to inequality and want to tax the rich are aiming to close the gap, but many more want to see something socially useful done with the money.
Pre industrial societies were very unequal, but but not very innovative. The kind of inequality Graham likes, the meritocratic kind, is not possible without a supply of educated people. Taxing the wealthy and spending the money on education is a feedback loop that keeps the whole thing going.
Trading in the stock market in a way that leads to positive returns is a productive activity. Basically, a combination of improving capital allocation in the economy and soaking up risk so that others don’t have to bear it. But of course there are many forms of genuinely unproductive and damaging rent-seeking, so your overall point might be said to be correct.
Top actors do make 100x the films of struggling actors, in a sense. Or rather, their films have much higher popularity and exposure, in a way that’s highly correlated to their ability. (Top films may well be an ‘O-ring’ industry, where you need many different inputs to be high-quality if you want to achieve at a high-enough level. Including, yes, actors.)
Caution, this field is one where a lot of evidence gets refuted as more recent data becomes available.
Some people would argue that we’ve been plowing a lot of money into the education problem, with fairly dismal results. It’s not clear what the solution is, but it’s more likely to come from genuine innovation (MOOC’s?) than just throwing good money after bad.
4.3 If it is really a case if throwing good after bad, “we” should stop funding it, and if we think we should not stop funding it tomorrow, we should stop saying it is that bad compared to some unspecified alternative.
I am not unfamiliar with the string of complaints you repeated, I just think it belongs to the 99% of political diatribe that’s barely coherent.
Mind The Gap is actually among my least favored essays, since I think that Paul Graham, coming from the position of someone who’s made all his money working with startups, isn’t giving adequate consideration to the ways in which business leaders can accumulate money without being high overall wealth producers. Also, he suggests that great income disparities in first world countries are positively associated with the health of those societies, but those first world nations which score best on various quality of life metrics tend to be those with lower income disparities, and even if the higher levels of income equality aren’t driving the difference in quality of life, it suggests that higher levels of income inequality aren’t driving improvements in overall quality of life either.
And being in a hospital is positively associated with being sick. Quoting random associations is a stupid rhetorical trick. Sadly, lots of otherwise smart people use this trick. See also: http://xkcd.com/925/
I agree, the wealth transfer vs wealth generation distinction is an important one, but a single essay targeted at the economically disinclined can only cover so much ground.
Graham correctly notes that producing useful things can be a source of wealth, and also incorrectly takes it to be be the only source of wealth. Large sums of money can be acquired by inheritance, unproductive activities like playing stock markets, and luck. (It is ironic that he uses Bill Gates as an example. According to legend, Gates got his big break because Gary Kildare went hanggliding)
Everyone is familiar with the idea that there is a relationship between productivity and deserved income, because everyone has been told that if they want a rise, they must work harder. And that’s a large part of the reason people object to 100x income gaps: no amount of sweat could justify it. Markets don’t respond to productivity in the sense of effort: top actors don’t make 100x the films of struggling actors. I don’t think people are stupidly adopting the wrong theory, I think the effort theory is being constantly promoted by people who think it doesn’t apply to them.
There is some evidence that equality is beneficial. The point was argued in a book called the Spirit Level, which has generated considerable debate. I am not sure what the right answer is, but Graham is too sure it that inequality is harmless.
Some of the people who object to inequality and want to tax the rich are aiming to close the gap, but many more want to see something socially useful done with the money. Pre industrial societies were very unequal, but but not very innovative. The kind of inequality Graham likes, the meritocratic kind, is not possible without a supply of educated people. Taxing the wealthy and spending the money on education is a feedback loop that keeps the whole thing going.
Trading in the stock market in a way that leads to positive returns is a productive activity. Basically, a combination of improving capital allocation in the economy and soaking up risk so that others don’t have to bear it. But of course there are many forms of genuinely unproductive and damaging rent-seeking, so your overall point might be said to be correct.
Top actors do make 100x the films of struggling actors, in a sense. Or rather, their films have much higher popularity and exposure, in a way that’s highly correlated to their ability. (Top films may well be an ‘O-ring’ industry, where you need many different inputs to be high-quality if you want to achieve at a high-enough level. Including, yes, actors.)
Caution, this field is one where a lot of evidence gets refuted as more recent data becomes available.
Some people would argue that we’ve been plowing a lot of money into the education problem, with fairly dismal results. It’s not clear what the solution is, but it’s more likely to come from genuine innovation (MOOC’s?) than just throwing good money after bad.
4.1 Who:s we?
4.2 Dismal compared to what?
4.3 If it is really a case if throwing good after bad, “we” should stop funding it, and if we think we should not stop funding it tomorrow, we should stop saying it is that bad compared to some unspecified alternative.
I am not unfamiliar with the string of complaints you repeated, I just think it belongs to the 99% of political diatribe that’s barely coherent.