Reducing economic inequality is merely a lesser form of eliminating it. I think the tough question people should consider here is whether relative inequality or absolute standard of living is the more important metric. If absolute standard of living rises faster as economic inequality increases, why should we try and limit economic inequality?

I would posit that the extreme levels of economic inequality we see today is actually putting downward pressure on economic growth.

Various reasons, but one of the most compelling in my view is that a society with a (relatively) increasingly wealthy elite eventually becomes unstable - money generally correlates with political power.

I think absolute standard of living rising faster is a hypothesis that has not been proven. If I "grow the pie" by $999 and give you only $1 of that growth, what you will find is that merchants are now charging $2 for the same goods as before because they will find people willing to pay that price. This didn't work out well for you, the $1-receiver (and the question then becomes whether the $1 receiver looks like most of the population or the minority of the population).

In short: in capitalism, sitting still means sliding backwards if the economy is growing.

Incidentally, "Reducing economic equality is merely a lesser form of eliminating it" is also an unproven hypothesis if you're speaking about effects. If you're not speaking about effects, then my response would be "A small amount of elimination may bring benefit where a larger amount would bring ruin."

A lot of people are jumping into an argument with you, but I think your point of "inequity vs standard of living" is a really smart distillation of concepts and deserves credit for being insightful.

I don't think that's insightful. That's a typical neo conservative argument, repeated over and over for decades. Thatcher is famous for using that argument. The problem is the if in the ... "what if everyone was better off, yet with more inequality". We're not sure at all about that if. In fact data seems to say, probably no, people aren't better off when there's more inequality.

What if, actually, high inequality countries (with no free health care, no free schools, no financial sector regulations, and more tax on the poor than on the rich) shoot themselves in the foot? This is what the data seems to show, if anything.

A lot of people agree that a healthy middle class was important for progress in the west. I think they are right. I think the Thatcher argument is going in the wrong direction. Now that doesn't mean you want to waste taxpayer money on random hopeless bullshit. Not all socialist countries spend their money wisely. But taxing and spending wisely, to help the middle class, with schools and hospitals and smart regulations, is probably good for generating innovation and for the economy in the long term. The middle class can be pretty resilient in some countries, with still a lot of resourceful smart people, you can throw a lot at them and they will still survive. But it's probably better to help them a bit. It's probably better, for example, to significantly increase the number of truly smart kids that go to college in a country (there's more poor or low middle class smart kids than rich smart kids, in raw numbers, even if rich kids are more likely to be smart, on average).

The Thatcher argument really is a good example of a purely rhetorical argument, not based on any data, that was spread by neo conservatives, media owners in particular, to their strict advantage. It's an O'Reilly-no-spin-zone worthy argument. It's pretty insidious, a masterpiece of a meme. It basically amounts to accusing poor and middle class people of being jealous jerks for wanting free health care, free schools, wall street regulations and less tax on them than on the rich. Of course it seems to make a lot of sense at first sight. That's why the media uses that over and over again.

It's like saying "Be happy with what you have, because if we had free health care and free school and wall street regulations and taxes on the rich ... you'd be worse off". Well, that's just not true, according to the data. Countries with high inequality are generally the ones where nothing happens, in innovation or in anything else, there's no middle class, and it's sad.

There's nothing worse than dumb people voting against their own interest. That's the recipe for a dictatorship.

If you disagree I'll be happy to hear your opinion. I'm ready to change my mind. Thanks!

The ironic thing is that the wealthiest now try to live a rather stoic, normal life with a focus on whole, local foods and simple agrarian pleasures. Sure, they don't fly coach, but honestly, they don't exactly live extraordinary lives when compared to that of the middle class in America.

Reminds me of a Warhol quote:

> What’s great about this country is that America started the tradition where the richest consumers buy essentially the same things as the poorest. You can be watching TV and see Coca-Cola, and you know that the President drinks Coke, Liz Taylor drinks Coke, and just think, you can drink Coke, too. A Coke is a Coke and no amount of money can get you a better Coke than the one the bum on the corner is drinking. All the Cokes are the same and all the Cokes are good. Liz Taylor knows it, the President knows it, the bum knows it, and you know it.

This correlation of equality breaks down in regards to the justice system however, where the poor are systematically curb-stomped and viewed as revenue generators for local governments while the rich can literally destroy the world economy through fraudulent mechanisms and walk away scot free.

Not justice, nor healthcare, housing, education, or political influence. But when it comes to sugar water Virginia yes it's true: we're all equals.

No they can't. https://en.wikipedia.org/wiki/Bernard_Madoff

If you have an example of an individual who committed large-scale fraud and got away "scot free", I'd like to see it.

>The ironic thing is that the wealthiest now try to live a rather stoic, normal life w

Erm, maybe some of them. I don't think extravagant displays of wealth have gone extinct just yet.

> So, if economic inequality were substantially reduced, would there still be startups?

There would be - but as the article points out correctly elsewhere, they would be in other countries.

> I believe another piece of common advice in this field is that you should only do a startup if you want to change the world, not just to get rich...

Nobody does it just to get rich, but (as the article also points out...) few founders would go through that pain if there wasn't a chance to get rich. I can assure you from personal experience that working 100 hours/week as a founder is much less attractive if you can live very comfortably from exit money for the rest of your life, no matter how great your ideas are.

> few founders would go through that pain if there wasn't a chance to get rich

I don't understand why should economic system be based on heroism. I frankly don't think anyone should be required to work more than 40 hrs/week (or even less) unless they want to.

And I think basing economic system on these extremes is misguided. So it will take couple more years to invent, I don't know, Snapchat.. what is the big deal?

Exactly.

Warren Buffet has said an increased tax rate would not make him work any less hard.

The desire to change the world is a more powerful motivator than money.

Exactly. There would still be sufficient economic motivations for startups and startup founders in a world where startup founders were taxed at a 75% rate.

When the Beatles found themselves taxed at 95%, they wrote a song about it ("Here's one for you, nineteen for me..."), but they didn't hang up their guitars.

They did break up. Also, many wealthy Britons moved to Barbados to avoid the taxes.

I never heard the theory that they broke up because of the tax rates. Thought it had something to do with Yoko :-)

Tax avoidance is a significant issue that will require some international coordination - but I do think it is a solvable problem.

See for example the Facebook co-founder who had to pay an exit tax to move his assets offshore.

Current share price of Facebook is roughly ~4x what he sold many of his shares at

That is so far away from anything that is likely to happen in even the medium term, it's worth filing under "cross that bridge when we come to it".

In the meantime, making things just a little fairer could help a vast amount of people.

Perhaps, but as the higher the tax rate, the higher the greater the incentive to avoid taxes. As PG mentioned in his essay, when the marginal tax rate was at 90%, there was a lot more tax avoidance and lavish, wasteful benefits companies offered their employees in lieu of wages (health care, housing, first class flights). If the tax rate were high enough, the government would actually bring in less revenue as there is more avoidance but it would also have negative externalities like padded expenses, people fleeing the country, shell companies, etc.

A lot of those lavish benefits would inject money into to the system instead of sitting in an offshore account. That helps everyone.

As Paul Krugman says, "your spending is my income", and visa-versa

I hear this from liberals all the time, often in more extreme form of "even if only a cent of a million is left there will be motivation to make that million!". But wtf are you so sure? I for one am not looking for a smaller bump in salary at 50% tax already as I don't see how additional effort would pay for itself. I imagine a lot of people don't consider an effort to found startups at this rate too.

Because the self-made rich don't stop working. Because hugely productive people work on open source. Because hugely productive people work at non-profits. Because hugely productive, active, socially beneficial people spend their lives in poverty working for the benefit of others.

It's a bizarre mind that can simultaneously believe that you need huge rewards to motivate people AND know that 95% of startups fail.

Startup founders I know well (n=20) are intrinsically motivated and only superficially extrinsically motivated. They don't stop once they get "f-u" money. They do the same thing over again, with a nicer car.

I am sorry, I don't see how it follows. Even if such people exists in statistically significant quantities, a lot of people don't work for free at all.

Trying to put in the effort to get a bump in salary is very different from the kind of creation that is the main benefit of startups to society.

To counter your anecdote with another one, if only half of the characterization of Steve Jobs is true, do you really believe the exact amount of potential financial upside was ever really a question for him?

Sure, if the economic environment had been so extremely bad as to make it impossible to make a living off founding Apple it's likely he would have gone somewhere else. But that's a strawman and you know it.

>Trying to put in the effort to get a bump in salary is very different from the kind of creation that is the main benefit of startups to society.

Exactly my point. It's a very small effort comparing to running your business. Even by itself it's not much - reply to a recruiter, have some interviews, change direct deposit, insurance, 401k etc.

>To counter your anecdote with another one, if only half of the characterization of Steve Jobs is true, do you really believe the exact amount of potential financial upside was ever really a question for him?

I am not familiar with Mr. Jobs but seeing how he has been extremely well compensated all his life I see no reason to believe he was not financially motivated.

It's flawed logic because people only look at the reward end of the risk reward equation, even if the reward is potentially still higher nobody would bother instead of just taking a regular low risk job.

I'm not sure about that. Work your ass off for four years, successfully exit with equity worth $4 million, and you only keep $1 million? That's about what you could have made at Google.

The interesting thing is that if the potential outcome of founding or working at a startup were less, salaries at Google would likely be lower, too. After all, those Google salaries are so high in part because of competition by startups.

This is the case for any and every startup today, which is why it can be a mistake to work at one, unless you're doing it for reasons other than the theoretical future value of your equity.

It is a straw man.

In general when people worry about inequality, except the most radical commentators, they worry about a trend, not about differences in net worth.

Maybe unconsciously, PG try to sell the idea that this a binary thing, you have 0 inequality or you should leave the market do its thing. This is not true. There is a balance and we have a lot examples that show that.

The pie thing don't pass the smell test, neither.

Is PG denying that the pie is now bigger than in the 70? I don't think he does, actually he is arguing the opposite.

Then why low and medium income people is increasingly in debt and have to worry if tomorrow will have enough money to pay the rent?

When you have a bigger pie, and inequality is the same, you get the rich more rich and the poor more rich. This is hardly what we observe even if we know that the pie is bigger.

So, the pie is bigger but people should to work more hours and should retire latter, and, of course, we can't afford healthcare for everybody.

He says "let's attack poverty, and if necessary damage wealth in the process."

I totally agree there, good luck with that.

I really don't see your point.

Piketty shows (with data, by the way) that, below a percentage of economic grow, capital returns are bigger than labour returns.

The conclusion is that there is a trend (very important, it is a trend) to bigger inequality inherent to the system.

What do he propose? A communist revolution? The abolition of inequality by the proletariat?

No, just tax capital so we can redistribute it to all the society.

Of course, if you are a billionaire (except maybe Warren Buffet), you are always to be in favour of "laissez faire", that is, in favour of not changing anything. We are just right now like we should be. Everything is perfect, we don't want to kill innovation.

How does one tax capital?

I would guess they calculate some amount of tax that you have to pay based on how much capital you have. And you keep paying it until you go below some magical threshold. Or, you don't pay and they just take it from you.

Of course, a bit trickier if you don't have capital, but rather have plenty of tangible goods. In which case, they'd probably ask you to submit your "profit and losses" for every year, keep track of how much you made in each year, and start taxing you based on anything that means your running total goes above the magical threshold.

How can you pay your tax bill with capital? Do I give the government shares in my corporation? Or, am I forced to sell shares every year to pay the bill? What happens if the corporation is private, and there is no liquid market for my shares? In that case, how can you even determine how much capital I have? What happens if the company I own shares in goes bankrupt at the start of the year? Do I still owe taxes on the capital from the year prior?

I'm guessing they would enforce some sort of standard valuation for things like that. Or only when it is possible. So a fledgling business, or shares that aren't publicly tradeable.

Any who, the point is. They will find a way that they will claim is "fair" and consistent but probably has loop holes, and figure out a way to tax capital.

I'm still not sure how the subjective taxation of risk would work. Nor do I understand how it would be better than the objective taxation of success (i.e., income), especially when it comes to reducing corruption.

I have no idea, ask Piketty. I personally don't agree with any taxation at all, just giving you hypotheticals as to how they'd calculate it.

Huh? The question isn't even about whether it's possible to create a "vast internet property". The question is about how much of the money the creator, heirs and descendants get to control personally.

Do you think no labor can occur unless someone owns its product?

I mean, that's the implicit conclusion of bourgeois ideology, but it's ridiculous when made explicit.