If you take that wealth and move it to the average person, even if their fundamental intelligence is equivalent, their experience, education, and exposure is going to be a lot lower.

"They're worried about maintaining a democratic society, where everyone gets roughly an equal say in how things go."

It's an unpopular opinion, but I don't think that everyone should have a roughly equal say in how things go. The average person isn't as well equipped to deal with large problems as the elite are. Everyone has different specialties, and different volumes of abilities. You wouldn't let an intern have an equal say as a senior engineer when designing the core infrastructure. You especially wouldn't let the janitor have an equal say - he's got no experience in desiging such things!

I'm always very uneasy about equality talks because all people are not equally suited to make global policy decisions. Nor are they equally incentivized to make the most informed and rational decisions.

I'm not saying that there isn't a problem or that we shouldn't do anything about it, but I am saying that I disagree with an egalitarian approach. We want the majority of decisions to be made by people who understand what they are deciding and have lots of experience, not to be made by individuals who mostly understand the topic from a single reddit thread. We want to make sure that the incentives of the people in power are aligned with the people who are not in power, but leveling the playing field is not an approach I find valuable.

To really get to the truths behind this opinion, it is important to distinguish one's political goals from the politically implemented policies in pursuit of those goals.

I fully agree with you that the average person is not well equipped to decide on policies. However, the vast majority of people in the elite aren't equipped for that either! Look at somebody like Bill Gross, for example, who was removed from PIMCO after continuously making bad investments based on his misunderstanding of basic economic facts. I wouldn't want somebody like that calling the shots in government.

Honestly, I would expect the connection between wealth and quality of policy analysis to be relatively weak. Education is certainly a confounding variable, but not all education is equal. (A good computer scientist doesn't necessarily make a good economist.) In fact, in certain policy areas such as economics, being part of the elite - which usually means being a high-level executive - is probably a negative for the quality of your policy analysis, because executives see the world from a micro-economic perspective rather than from the macro perspective that is needed in politics.

In any case - I agree that a certain level of "elitism" is probably justified when it comes to the question of policy analysis, though you really have to be very careful who you think the "elite" is in that context.

However, if you leave politics up to an elite, then the goals of politics will also shift to match the goals of that elite, which is probably not a good representation of the goals of the overall population. And therein lies the real crux, because when it comes to deciding what the political goals should be, everybody really does have the same qualification. And this is ultimately the reason why democracy is the right way to go.

The tough problem is to establish institutions that translate democratically established goals into good policy.

Listening to the Walton heirs speak is a good way to be cured of any assumption that the economic elite might actually be smart. (And if you don't like listening to them speak, you can just read about the repeated DWI convictions.) That's 4 of the top 10 richest Americans right there.

You're position isn't all that strange, and it does cut right to the heart of the issue. Do we really want to live in a democratic society?

Part of the problem with addressing this question is that we've generally agreed the answer is, 'Yes'. Even if we're not always willing to fully live that way. No one wants to be labelled as undemocratic, non-westerners get their countries bombed when they get that label.

Another problem with this question is that the other systems of governance we've tried have mostly been worse. When you start trying to figure out how some people can have more say than others based on their merit you inevitably end up picking winners based on something other than general merit.

Who gets to be more important than the rest? How do you hold them accountable as a class if they're the only ones that can ever hold the reigns of power?

I appreciate your honesty about this, but your opinion also scares me. Because there is no way to achieve your perfect world without privileging the rights of some over the rights of others.

I also don't like your comparison of decision making in business to that of decision making in government. In business it is easier to determine good outcomes. If more money is made, we made the right decision. Government involves morality, and outcomes cannot be measured with amoral assumptions of correctness. One person's good outcome in government is another person's bad outcome relative to morality.

You're probably right when you say that the elite are better at holding the reigns of power than the rest of us. It's a very monarchist thing to say, but it's probably right in many contexts.

And like monarchies it's something that I believe we should fight to change. John Dewey recognized this, and made it his prime motivator for compulsory education in the United States. To train citizens for a functioning democracy.

Democracy to me isn't some state that we sit in and relish. It's something we focus on improving through constant education of ourselves and by teaching those around us.

Unfortunately this is so often true in a purely financially oriented point of view however it completely neglects moral obligations which SHOULD supersede financial incentives if need be.

So something that comes up in any discussion like this (economics, politics, global climate change) is that there are several layers of questions to the debate. Some of the questions are matters of preference, some are matters of fact or science. For instance, on the topic of inequality & a wealth tax, we could have these questions:

  * Is a democratic society desirable? (a matter of preference)
  * Does inequality (in wealth) distort the democratic process? (a matter of fact)
  * Does a wealth tax correct the inequality in a way which solves the problem? (a
    matter of fact)
  * Is the wealth tax the best way to solve the problem? (a matter of preference)

Now, to tie this around to your comment, I would clarify that what I mean by "a democratic society" is one where every person has an equal say in matters of preference. In a rational society, these are the only disagreements. I am happy to debate whether, if climate change is happening, we should do something about it. I have neither the desire nor the time to argue whether it is happening or whether it is man-made; these are matters of science and my preference matters not one bit.

The problem we have now is that both matters of fact and matters of preference are up for debate, and the extremely wealthy have a disproportionate say in both.

The usual trouble with this sort of idea is who gets to decide the "elite" that makes the decisions. How do you prevent this group from becoming an insular clique and debar other people from similar opportunities etc.

Power, imho, has a tendency to be self-propogating; people who achieve it hold on to it far after it is useful and tend to bestow it on their proteges, irrespective of their suitability to the task etc. (Anyway it is an opinion; you may disagree)

There are a lot of broken incentives. If one of the elite comes to the realization that they are no longer the most useful person for the job, can we trust that they'll step down? Or will they hide this fact from everyone else and continue to enjoy their position of power?

These types of problems are not solved and it's important to keep looking for better solutions. I just don't think that "all people have equal say" is a better solution.

The problem is a basic political systems one: at some point, you need the consent of the governed. There are no stable systems on the record where a majority of those governed dislike the leadership. Either the oppressed are a minority (colonial Europe, slavery in the US) or the gov'ts are short-lived and unstable (on an order of 50-100 years, in the short term these can work). The most stable regimes that don't have majority support are ones that suppress free speech, which is hard to argue is operating "in everybody's best interest".

So, if you want a stable oligarchy that preserves some free speech, you need a group of "elites" that the whole society agrees is fit to lead them. I don't think the average voter believes themselves to be in the best position to run the country -- that's exactly why they vote for somebody else to do it.

But if you take voting out of the equation, you're trying to build a system where you have an elite that has support of the majority, without consulting the majority. At best, you have a system of guesswork that results in something similar to democracy (because the oligarchy are people the majority supports anyway). At worst, you have an unstable government.

As reference, the concept of integrated information was developed by Giulio Tononi but I applied it in a different field.

But representative democracy breaks down when moneyed elites take control of the voting system. Then it's just elites all around with no input from the population.

Forget money as some sort of concept that breaks democracy by allowing people to game the system. The bigger problem you have to worry about is the smooth-talkers, the influential leaders and all their legions of followers. Their single influential vote, counts a whole lot more than yours, or ours, and that single vote means no equality.

Besides, having read the history of Athens, direct democracy can be described as mob rule, and there the problem of 51% of the population votes to kill off the 49% others was a very real problem. Every American probably can imagine the problems guilds created in medieval Europe, right ? Athens was a state where the equivalent of guilds could literally and legally decide to kill the competition (which they did, several times).

Besides, let's not lose sight of reality here. America would be a near-theocracy if it was a direct democracy.

Switzerland seems to work pretty well by direct democracy.

I do recall reading up on that recent referendum they had about the capping of CEO wages that didn't go through. But thanks for the heads up, I'll look into what they have going on over there with their flavor of democracy.

Wealth redistribution doesn't necessarily mean taking money/wealth, literally, from wealthy and giving it away to poor. It includes, among others, subsidized education, free access to basic health care, nutritious food, potable water, eradication of epidemics, decent housing, decent retirement income and so on.

This is the problem I see in societies that are highly unequal (read US :-)) where in a democratically elected government is reduced to make way for capitalists. All or most of the above are controlled by multinational corporations whose sole motive is higher profits. So what ends up happening is that even a middle class family is just one calamity away (e.g., death of bread earner, a high cost health problem) from being pushed below poverty line. Even education for that matter has gotten privatized to an extent where only wealthy can afford good education; as various studies have shown education does make a significant difference when it comes to money earned over longer period. Or take 2008 recession where pension corpus of millions was reduced to zilch for no mistake of theirs.

Wealth distribution, at least in my mind, means that ensuring that most of the citizens are on level playing when it comes to basic necessities. Over and above that of course one must be rewarded as per their contribution to the society and hard work.

Poor are poor not just because they don't have money but also because they are unable to get out of it. They have to go through unspeakable ordeal just to get one meal a day and this places enormous cognitive load on the entire family. So of course children of poor, more often than not, remain poor as their basic intelligence itself gets suppressed due to lack of nutritious food, cognitive load etc.,

The book, "Poor Economics", was an eye opener for me in this regard. I once used to blame the poor for their situation but this book changed all of that. I would highly recommend it; to the extent that this should be made a mandatory reading in all colleges :-).

> We want to make sure that the incentives of the people in power are aligned with the people who are not in power.

This is really a tough ask. Unless decision makers, i.e., those in power, are accountable, every single day, to those not in power, decision makers will soon align themselves with private, capitalist corporations. You have a multi billion dollar arms manufacturer, oil corporations funding millions to election campaigns of US presidents. And then you have US citizens who get to vote once in five years; we also know that the voting itself can be rigged, public opinion can be swayed and etc., Now, whom do you think would the president side with? Oil corporation or US citizens? The answer is obvious! And so you will end up having Iraq war which is yet another way to funnel massive amount of tax payer money to private corporations; the cruel irony is that most of foot soldiers who are fighting the war and dying come from poor, disadvantaged families.

Democracy as it's played out in US (and India) today is a complete farce. The fact that executive powers and policy making is concentrated in so few a hands in itself is indicative that this isn't democracy. Instead of giving power to the few and somehow hoping that their interests are aligned with rest of the citizens what needs to be done is build strong institutions.

Democracy is fundamentally about strong institutions (court of law; education system; health care system; labor friendly laws) which are run and maintained by common citizens. Elected representatives' main job is do minor tweaks to the policies. This way the executive power remains with the commoner.

What has been happening is a very systemic eradication of these democratic institutions; privatized education, private health care; private police force; private fire fighters and so on. Once you have hallowed the core of democracy by privatizing it you are left with just a handful of elected representatives who wield enormous power over rest of the citizens. They of course end up serving private corporations. US is run and controlled, more or less, by just a handful of private corporations which are in turn owned by a hundred individuals. Election, democracy etc., is just to keep the citizens believing that they have a say in the way the society is run when the reality is completely opposite. India, following the foot steps of US, is getting there really fast.

[1] http://www.ted.com/talks/lawrence_lessig_we_the_people_and_t...

What? How could you possibly describe it any other way? You take cash from a wealthy person, and you give it to other people, either in dirk react payments or sbisized/free services.

Argue about whether that is the correct/incorrect thing to do all you lie, but don't indulge in Orwellian doublespeak that says true is false.

If you disagree with someone, then reply to their post and try to have civilized discourse, don't just immediately try to censor them.

The herd instinct is getting stronger, and the rush to censor unfashionable opinions increases on HN. Which is funny, because one of the best essays by pg is 'what you can't say'. Closely followed by 'mind the gap'. Which essentially says that inequality is a sign of a healthy society, because lack of inequality shows the innovators and risk takers have gone elsewhere or closed up shop.

Maybe it was my tablet spelling mistakes in my post.

Your views about these things aren't at all unfashionable on this site or in American society at large, and many who disagree with them still think they are reasonable and worth discussing. Your comment just didn't express your perspective very well!

If you can, I encourage you to edit it.

Edit: also, your argument adscribing the "Orwellian" adjective to the previous post is very strong and can generate negative reactions (like a downvote).

You could describe it in the many thoughtful ways in which the rest of the comment did describe it, for a start.

The comment it was in reply to also made it seem like the idea is to take wealth from a single wealthy individual and bestow it upon a single poor individual, noting that the newly wealthy individual probably doesn't know what to do with it (like many lottery winners). That is clearly not the intention of literally anybody who is in favor of some redistribution of wealth. Rather, they propose many different ways (some of which were mentioned by your parent comment) that wealth would be spread across many less wealthy people.

To then complain about "orwellian" use of language in the next sentence is just taking the piss.

That seems like it should be true intuitively, but if it were true, you'd expect higher benefit levels to correlate with higher rates of getting out of poverty. The data points to the opposite happening.

For example: http://www.manhattan-institute.org/html/cr_17.htm

Methinks that given the political bias of the study and the fact that it takes a particularly period for the American economy, that there's not much to learn from it.

Also, the fact that single mothers who were on welfare are now working is not actually a good indicator for me. I want the single mothers to have to raise their children in decent environments though maternal leave and good family policies, instead of seeing them work full-time out of necessity.

[0] http://www.rightwingwatch.org/content/manhattan-institute-po...

[1] http://www.manhattan-institute.org/southparkconservatives/

[2] http://en.wikipedia.org/wiki/Talk:Manhattan_Institute_for_Po...

Things have gotten better in countries which have reduced inequality: https://www.youtube.com/watch?v=cZ7LzE3u7Bw

Don't confuse persons with populations. They are not the same thing. A person is very different from a population.

Obviously we don't live in a world nearly static enough for this to occur. If so then the Zuck never would have made FB nor Carnegie would have left Ireland and we all would be worse off for it. Yes, these are historical issues. Lets try a future one.

Assume that Pablo is a UPS driver. Pablo notices that many times when he has to turn left to make a delivery, he spends a lot of the time waiting at a red left turn arrow light. Pablo, needing to make his metrics, decides to cross intersections and make Uturns and rights and all other sorts of maneuvers. Pablo shares his insights with his co-workers and friends. Everyone benefits from Pablo's insights, more packages are delivered, the company spends less fuel idling, everyone makes their metrics, etc.

Now in a world where the path was designed by Paco up at headquarters, Pablo could not make those alternative turns. If he did, he would have violated the paths that Paco designed and he would have faced repercussions. Why? Because Paco knows more than Pablo and Paco is the one responsible for designing the routes. You assume Paco has superior know how and experience and will be better. But Paco is just a man like everyone else, he makes mistakes and didn't see what Pablo was doing was beneficial. Not through malice, but just because Paco looks at google maps all day, not actual light cycles. It wasn't Paco's fault, nor was it Pablo's. It was just an oversight.

But in a world where we do not assume that the most experienced are also flawless, Pablo took it upon himself to fix the problem, and everyone is ok with that.

Multiply this example by thousands and you have a sense of what is going on out there. Also, sprinkle in some greed, malice, lies, sex and drugs, and all the other deadly sins and you get why we need democracy. It's because we all screw up, but if we screw up at least we can get each other out of it.

There is an excellent piece by Yvain that goes into deep details of those problems[0], so I won't be repeating him here much, but the world is full of such problems, and apparent stupidity of institutions and markets are usually result of inability to coordinate.

I'm not saying to give up democracy. But we have to appreciate that it has very troubling failure modes and that they're not theoretical.

Real-life democracy tends to be extremely impotent. It has tremendous operating costs (think of all the resources wasted in a zero-sum game of political campaigning), and in the end people still can't agree on things like building infrastructure (NIMBYsm) or creating laws that benefit the population. Again, I'm not saying "ditch democracy". But there is a huge trade-off between security of decentralization and effectiveness of centralization.

There's also the case that central planning doesn't suck that much - it sucks when done for humans by humans, because central planners operate at human speed. But consider that instead of Paco setting up routes, there is a computer named PCO, tasked with collecting real-time data from all drivers and optimizing routes. PCO may alter some of instructions it sends to drivers to explore the solution space, and it will quickly figure out that doing only rights leads to less fuel used. And then it may stumble upon other optimizations, like shifting delivery times in different parts of the city depending on traffic patterns - things that are impossible to figure out by Pablo, because they require global view.

I think that central planning got a bad name because of Soviet implementation, but with modern computing, maybe we should re-evaluate its costs and benefits.

[0] - http://slatestarcodex.com/2014/07/30/meditations-on-moloch/

Do you have any empirical data to back that up? The lack of old money that Gates alludes to in his article seems to suggest otherwise.

Even with the advantages that simply having large amounts of wealth gives you (better education, easier access to seed capital for new ventures, better access to other influential people etc), surprisingly few of the modern day mega rich in the US started out with large amounts of wealth.

There's also plenty of evidence (such as http://www.businessweek.com/articles/2014-07-22/for-ceos-cor...) to suggest there's little, if any, correlation between how much a CEO earns and the success of a company.

> The average person isn't as well equipped to deal with large problems as the elite are.

I would agree that not everyone is equally well equipped to deal with large problems, but I don't see much evidence to suggest that there's much correlation between wealth and ability to successfully tackle the myriad problems facing the average society. Is a multi-millionaire businessman automatically better placed to decide on education policy than a teaching professional, or on the structure of a nations health service than medical professionals etc?

Gates looked at a list of the very wealthiest people and asked how many inherited their wealth. Even if the answer is 0%, we could still ask about other brackets. Eg, how likely are Gates' descendants to be in the bottom income bracket? How likely are the children of someone in the bottom bracket to be middle class?

>I'm always very uneasy about equality talks because all people are not equally suited to make global policy decisions. Nor are they equally incentivized to make the most informed and rational decisions.

I completely agree with this, however I don't think the guiding principle behind having a democracy in the first place, is that you'll arrive at optimum (or even good) policy decisions, provided you give everyone a say. Rather, the franchise is supposed to serve as a check on the wealthy and the ruling class, so that they can not monopolize political power. If the disparity in wealth and power grows too great, they can circumvent even that, which is what we're seeing happen in the West now.

What is the proper alternative? I mostly agree that designing government by committee is unlikely to succeed, but the problem of choosing competent people for government roles is something we largely haven't solved in all our history.

Just because a policy maker is capable of convincing the public that something is in their best interests, does not always mean that it is.

However the fact that they have to works enough of the time that democracy is working better than other systems of government so far by many measures.

You are assuming the elite are far wiser and more ethical than the broad masses. That is not at all well-evidenced.

The fundamental attribution error is very pervasive.

This is part of why (as dumb as the average person is) I'm not down with the "elite ruling class" idea, even if we're basically stuck with that now whether we like it or not (except the elites aren't really individuals but large corporate interests who essentially own large swaths of government actors who supposedly represent citizens).

I tend to disagree but I guess it depends on your definition of "Elite". If I define "Elite" as wealthy people than you are wrong. Most rich people, especially if the wealth is inherited, have little to no idea how to solve "large" problems and what are the problems in the world.

I give you two quotes to think about. Both quotes are not meant condescending but just shows how out of touch they were with the common people.

Finally I recalled the stopgap solution of a great princess who was told that the peasants had no bread, and who responded: "Let them eat brioche." (Queen Marie Antoinette)

"An ancient Chinese emperor who, being told that his subjects didn't have enough rice to eat, replied, 'Why don't they eat meat?' (何不食肉糜？)Emperor Hui of Jin in Zizhi Tongjian.

Recently, capitalists aren't the ones disrupting the economy in the US, here in Brazil, in the PIIGS, or any other place that I looked. That position is always held by people with power, but little capacity of creating wealth themselves. At general, I think Bill Gates is right, and there's little scrutiny over the distributive phenomena in an economy.

If I had to choose, I'd tax consumption (with a VAT) and redistribute a fixed rate of it by a basic income. But that's mostly because of procedural simplicity and resistance to corruption. I don't think Piketty's ideas are complete enough to base a taxation system upon them.

Any time you're considering a tax system you have to consider the incentives it creates for people.

If you have a "wealth tax" then we have to consider how the rich will try to avoid it. First, people will convert from savings and investment to consumption. You ordinarily want to tax wasteful consumption and create an incentive for wealth creation, so that's doing the exact opposite. Second, people will convert wealth into forms that are either easy to hide from the government (e.g. gold bullion in a foreign bank vault) or are not considered wealth by the tax code or that have indeterminate market value. None of that is good.

Most importantly, the only way that a wealth tax is going to do what Piketty wants is if the rate is higher than the typical rate of return on capital. If it's lower then the effect can be no more than it would be by fiddling with the tax rate on capital returns. But if it's higher then the economic incentives it creates are catastrophic. It literally becomes more profitable to hoard cash in a mattress than invest it in anything that would disclose its existence to the government, or to move it all into foreign investments and take whatever steps necessary (up to and including renouncing citizenship) to eliminate any claim the country imposing the wealth tax has on it.

> If I had to choose, I'd tax consumption (with a VAT) and redistribute a fixed rate of it by a basic income. But that's mostly because of procedural simplicity and resistance to corruption.

This is actually a very strong alternative. VAT has an unintuitively strong similarity in effect to corporate income tax with the exception that it's much harder to avoid by diverting income to foreign subsidiaries because the VAT applies the same to imported goods as domestic. The existing corporate income tax is effectively a huge subsidy for goods imported from countries that have no or less corporate income tax.

And a basic income does exactly what you want in order to reduce the concentration of wealth: It gives people at the bottom and in the middle the ability to take the risks that promote upward mobility without having to worry about starving or freezing if it doesn't work out.

Note that one important reason why Piketty wants a wealth tax is that this would lead to much higher quality data on the wealth distribution (I haven't read the book, but he says so very clearly in his TED talk).

> But if it's higher then the economic incentives it creates are catastrophic.

Frankly, this sounds much too alarmist. First of all, the talk is always about a progressive wealth tax in the first place. That is, few people would be affected by the highest tier.

Second, if you think about the steady state, it's clear that wealth up to the level of the highest tier of taxation wouldn't be accumulated in the first place. [0] Yes, people would try to evade taxes, but they are already doing this today. [1] More likely, this would create incentives for donations.

As a final thought, the idea of using a VAT to finance a basic income is nice, but it doesn't help against wealth inequality, because poor people generally spend a much higher fraction of their disposable income on stuff on which VAT is paid.

[0] My intuition for this comes from income taxes: During the time when highest marginal rates were much higher than today, executives didn't bother bargaining for the ridiculously high salaries that they get today, and so few people really paid those highest rates.

[1] And if you're worried about people renouncing citizenship: I think we should grow a pair and get serious about exit taxes.

The problem with this argument is that it's based in the same fantasy land where people always report all of their out of state and internet purchases to their state of residence and pay sales tax on them.

> Frankly, this sounds much too alarmist. First of all, the talk is always about a progressive wealth tax in the first place. That is, few people would be affected by the highest tier.

That actually makes it worse. All the bad still applies to the people in the highest tier, but then you have the incentive to create criminal conspiracies for the purposes of tax avoidance, because putting assets in the name of someone with fewer assets will dramatically lower the tax rate. This creates a highly profitable arbitrage opportunity except for the fact that it would presumably be illegal, leaving an opportunity for criminal enterprise to step in.

> Second, if you think about the steady state, it's clear that wealth up to the level of the highest tier of taxation wouldn't be accumulated in the first place.

> My intuition for this comes from income taxes: During the time when highest marginal rates were much higher than today, executives didn't bother bargaining for the ridiculously high salaries that they get today, and so few people really paid those highest rates.

Those numbers are very misleading. The times when the highest marginal tax rates were higher also had dramatically different tax codes. In particular, "benefits" largely weren't taxed, so instead of a higher salary you would be provided with an expensive company car and whatever else necessary to provide the required level of compensation. It's the same principle as the existing corporate income tax: High nominal rates but the majority of large corporations don't pay those rates because there are widely known ways to avoid them.

It was also much more common back then for the executives to be the owners or their friends/relatives, so their "salaries" were only coming out of their own pockets anyway.

> Yes, people would try to evade taxes, but they are already doing this today.

Because the taxes we have today are also poorly conceived. What you want is a tax which applies to a very broad base and is difficult to avoid. VAT acquits itself very well on that front.

> And if you're worried about people renouncing citizenship: I think we should grow a pair and get serious about exit taxes.

Exit taxes are hopeless. Even putting aside how easy they are to avoid, the incentive that creates for the owners of growing businesses is extremely perverse: Renounce your citizenship now before you get any bigger and owe even more.

> As a final thought, the idea of using a VAT to finance a basic income is nice, but it doesn't help against wealth inequality, because poor people generally spend a much higher fraction of their disposable income on stuff on which VAT is paid.

This is a common flaw in thinking about taxation. What you spend the money on is just as important as how you raise it. Taking $50 from someone with a thousand dollars and $10 from someone with a hundred dollars but then giving them each $30 back is progressive notwithstanding that the effective tax rate on the person with a thousand dollars is much lower. At the end of the day the person who started with $100 now has $120 and the extra $20 came out of the pocket of the person with a thousand dollars. "Effective tax rate" is a totally meaningless number without "effective government benefits."

Comparing this to the current so-called progressive system is illuminating. For example, if a person making $500K makes an extra $5000 then they pay $1750 in taxes but don't lose eligibility for any benefits they were previously eligible for. If a person making $25K makes an extra $5000 then they pay $750 in taxes but also lose eligibility for more than $1000/year in need-based programs. In practical effect the marginal rate on the person making $25K is higher. Depending on what (and how many) programs they were previously eligible for, the rate can actually exceed 100% by simultaneously eliminating eligibility for multiple independent programs.

Using VAT to finance a basic income is only useless for redistributing income if income is already well distributed[1]. Otherwise, rich people will pay the majority of it (regressive or not) and poorer people will get better off. You are right that there's always a certain income that (if rich people do really invest it all) the combination will be regressive, but it can always be made big enough that it does not matter.

Also that's ignoring all the other benefits of both the VAT and basic income, in that they are cheaper than the alternatives to administer and easier to control, offer a safety net that actually works, incentive risk taking, creates no barrier for improvement at any level...

[1] Of course, the actual numbers will depend on the VAT rate, and the amount redistributed.

He then thinks that this would lead to changes -- because his data, no matter how good you think it is, is arguable and possibly wrong.

Add to that that the few people in power that do understand how data can improve policies normally have an idea what kind of improvement they'll get, and don't like it (they are in power, if they liked it, they'd already do it). While tax evasion is understood by everybody and weaken they power right now, in visible ways.

Also, the transparency is a benefit, but so is the tax revenue. We should at least cover the expense of the program and consider if there are other taxes that should be reduced.

I've only read people writing ABOUT Piketty's book, and haven't seen anyone put it this way.

I'm from Brazil, and with the upcoming elections people have been all sorts of crazy down here, throwing around whatever "facts" they can find on the internet. One of the main points of disagreement between the two presidential candidates is income distribution, so "data" about it has been all over the news and conversations.

This kind of tax, if only to shed the faintest light on the matter, would definitely help. Even considering that the really wealthy people would not declare everything they have, there's only so much you can hide.

Thank you for this comment.

http://www.nakedcapitalism.com/2014/05/pikettys-wealth-tax-r...

What we say is simple - if you have a million dollars and 100 people to share it - rather than 1 person have 990,000 and the remaining 10,000 divided among 99 we want the 1st person to have 800,000 and the remaining 200,000 to be divided among the 99. That way, the first guy can have his $5,000 wine without paying any extra tax while we have our $50 wine. In the first scenario, the first guy still gets his $5,000 wine but the remaining can barely afford two meals a day.

The wealthy are obsolete and dangerous; we need to move on as a society from the forms that enable them.

Many of them used rhetoric about redistribution to placate the masses, yes. But there was little different but names in the methods for allocating capital in Czarist Russia and the Soviet Union: The decisions were in both cases taken by a privileged elite insulated from the effects of their decisions.

Any mechanism of government can and will be abused. Some such mechanisms like those of centrally planned economies are not only more likely to be abused, but more easy to abuse. Worse, they are so very often employed by the same people who think on the matter and decide we're just going to have to kill the people who don't agree with us.

The only thing that makes us better is if we take those lessons from history as a warning and prioritize liberty first. These mechanisms prioritize equal outcome, which is a fools errand. Doubly so in a leaky economy.

Devil's advocate: the vast majority of productive people do the important everyday work, but don't perform major improvements in the state of the art. What about the inventors of life-changing technology? Would the vast majority of them invest years of their life in it if it only paid the same as getting a normal job?

Empirically, given that academia pays much less than working in the industry, yes.

> the vast majority of productive people do the important everyday work

I beg to differ. Most productive people do completely irrelevant everyday work: optimize or sell ads, or play wall-street poker with other people's money. Very few people do the actually important work (e.g. garbage collectors, farmers, scientists, teachers).

It seems in my experience that most people who invent life changing technology don't do it for the money; they do it because they like to create. Humans have an innate drive to create new things. While I think it makes sense to reward people who contribute to society, those rewards don't have to be unlimited.

How your ideas could operate in other than a totalitarian state is not clear to me because you'd certainly never be able to implement them otherwise - thank goodness.

I know you are just throwing out hypothetical numbers but what kind of wealth distribution would you actually want? Wealth is already much more evenly distributed than the numbers you said you want.

http://en.wikipedia.org/wiki/Distribution_of_wealth

I'd go the other way in fact, if you are interested in redistributing wealth, you should encourage rich people to blow money on labor-intensive consumables. Using legal or social pressure to keep the rich from buying luxuries seems counterproductive to me.

Just FYI, the line of thought of Gates here is probably based on the idea that you need "capital" in order to have a productive work force. If the rich spend all their money for consumption, then there will not be enough capital available - or so the argument goes.

I personally don't buy the argument; I believe that it goes too far into abstract models, confuses finances for the real world, and (like so much of economics) ignores the existence of banks. If Bill Gates were to sell shares to finance frivolous consumption, this would obviously not cause the physical destruction of factories and machines etc.

At the same time, it would encourage the companies he buys from to expand their production and invest. Now, some people may wonder what investors/financiers those companies can find if all the rich guys sell their investments to consume. Well, those companies can always go to banks, which have an essentially unlimited capacity for funding real-world investments.

Spending money doesn't make it go away, it just gives it to someone else. If everyone spent all their money for consumption, and no one invested, that would probably be a bad thing, but short of actually punishing investment compared to other uses of money, its hard to see how that would happen.

Heck, its particular hardest to see how it would happen with the rich, anyhow. Simple declining marginal utility means that past a certain point, the additional present consumption that people find useful drops off and the value of securing an adequate future support base by investing money now vs. consuming more now increases with increasing income. The idea that we need to tax-favor investment even more than we currently do by taxing only consumption (rather than taxing income, but taxing the income from investment favorably compared to "ordinary income" and particularly favorably compared to labor income) seems to be based on a conception of human behavior that has no support at all in how humans, and particularly the rich, actually use their money in the status quo system.

You should be FAR more afraid of all the incompetent "big shot" politicians who somehow have access to power but, due to their insecurity and low IQ, only use it to benefit by taking from others. These are the plutocrats that rule America, Russia, Europe, regardless of your illusion of democracy. These are the people you should be worried about.

Well of course a government that attempts to do all that will be very powerful. And, of course people will spend large amounts of resources to influence a government with that level of power.

Once they have gained control over an industry, let's say steelworking or railroads, they become like feudal lords in that industry, setting wages and prices however they wish.

Power is subject to a positive feedback loop, whether it's political power or economic power. Having power makes it easier to gain more power. That's why it will always tend to concentrate in the hands of the few.

Government power in a democracy comes from a game of "artificial equality": elections in which every person has one vote, regardless of their power "in real life". (This is different from the economy, where your power is proportional to your wealth.) For this reason, it can act against the natural tendency towards concentration of power.

They're all in it for themselves. The key is to ensure that there isn't a big enough state to corrupt so they can consolidate and entrench their power.

A small state prevents monoloploies from being formed and from using those wielding power to consolidate their power. And then it doesn't matter how evil the guy who gets the top job is, because he just can't make a big difference.

At the heart of all this is how England managed to keep its Anglo-Saxon self-government traditions even after the continental Norman invasion and takeover. Because the Normans could only ever wield limited power at the state level, they could never fundamentally change the way the content was run at a local level. So citizen assemblies and English common law continued and was never replaced with continental law, the final iteration of which is based on napoleanic code. Thus in England, and her spun-off colonies, you're fundamentally free to do your own thing unless there is a specific law against it, while most other places state that you can only do something if there law explicitly states it.

This fantastic inheritance was all bequeathed to the citizens of those countries with legal systems based on common law precisely because England had a weak central government which reduced the ability of a king to control everyone, especially when that was a foreign king who had invaded.

I do agree that wealth is a potent weapon, but that's why capitalism works best when markets, and politics are well regulated. The degree and form of regulation is a perennial problem, but it's an unavoidable one.

Right now it does. There is far too much money chasing too few investment opportunities. This is causing bubbles all over the place. Money that would have been productively invested were there demand is being funneled into property, gold, the equities market, fixed income & even bitcoin.

>Or do you think the state is a more efficient investor of capital?

Sometimes it is. It's a myth that the state is incapable of efficiently allocating capital and the private sector always does a better job. Sometimes the private sector does an atrocious job (e.g. see the massive overbuild of housing in the last decade).

That being said, wealth redistribution doesn't necessarily need to mean less private sector capital investment. If you take a billion dollars away from someone who would have invested it and give a thousand each to a million people (whether through highway robbery or through raising taxes here and lowering them there), there's no reason they can't invest it all. Hell, they could invest it in a fund managed by the former billionaire, and you'd have the same amount of investment managed by the same people.

That situation is unlikely, but it also discounts the value of investments besides the sort that billionaires tend to make. While some redistributed wealth might be reinvested or 'wasted' on consumption, there are also be a lot of small investments that happen when you share the wealth. Children eat better, which improves their futures in pretty much every way. People start more small businesses, bodegas and farm stands and hair salons and startups. People spend money on education, for themselves and their children.

That sort of investment is also vital to our economic future, no less than the capital liquidity provided by the billionaires.

We do need investment in transport infrastructure, renewable energy, health in the developing world, etc; but that doesn't offer a direct return to the investor as the benefits are distributed. In those cases arguably the state can be better. Provided the money isn't siphoned away. This is more of a rule of law / public trust issue.

Do you have evidence for this claim?

If this is the case, shouldn't the countries with the biggest governments (as a percentage of total economy) also be the ones which grow the fastest, and if not, why? How can states be so efficient when they never admit to making mistakes, (almost never) give up on failed projects, or go out of business like private investors do?

I would also think that a system's efficiency would affect the economy as well as all other indices of interest (though perhaps in varying proportion), as a healthier, happier citizenry or one with more capital goods, and better investments would grow economically as well as in other metrics.

Absolutely! The number of inventions that was created by government investments absolutely dwarfs the number of privately funded inventions. Internet, GPS, cancer research, nuclear power.. I've never heard a logical explanation to why companies should be more efficient than states. Everyone just seem to take it as a given because "everyone knows" that governments are buerucratic and inefficient.

Yet, the majority of important technological and scientific inventions usually come from free-market based capitalistic societies. I don't see countries like North Korea, Russia and China making any scientific and technological breakthroughs, and I think it's easy to argue that they have very powerful governments.

Private sector has and always will drive the majority of progress. How much exactly, usually varies by era and political structure of the global society, but the fact that the free market ultimately drives innovation is indisputable.

When you say "disarm", you really mean "disarm all but the state". That is very scary to any libertarian-leaning people, even if you are using the word figuratively. It makes sense only if you if you believe the government is so nearly perfect that other influence is counterproductive.

Imagine if only the government had enough resources for science? Or worse, nobody could afford to make their political message heard, so only incumbants are viable?

No large state has shown that it deserves that much power. I'd rather see a bunch of ads I disagree with than see no non-state messages. I'd rather that some non-state actors had enough resources to try an ambitious project that is politically unpopular (think stem cells a decade ago).

What should we do about them?

Fighting politicians is like whack-a-mole - even if you get rid of bad ones, the replacements are often just as corrupt as the ones that got replaced.

Fight the corruption first.

How can Americans be so upset at their political situation without even discussing ways in which to change it? Unconstructive complaints is just whining.

I agree inasmuch as it applies to government and media, but when it comes to entrepreneurship I could not disagree more.

Making progress means taking some big risks. It is the nature of big risks that it's difficult to tell at the outset which ones will succeed and which will fail. But the people who are probably best qualified to predict this are the people who have succeeded before.

If people can't take the spoils of previous success to invest in their next idea, we don't get SpaceX, Tesla, or Y Combinator. Would Y Combinator be better run as a government program, run democratically and accountable to the general population? I don't think it would.

Many countries have preferential tax treatments for long term investment vehicles already.

But ignoring that: What is the evidence that this money is best spent by repeat entrepeneurs? Yes, there are some that do well. There's also a vast number of people that succeeds once and never again.

And consider that e.g. Tesla and SpaceX both have benefited immensely from government programs. Maybe society would be better off with wealth taxes were the proceeds were pumped into more programs like these, or even co-investment with private investors with an actual track record track record.

Disagree. The good investor not only puts capital to work and creates wealth for others, he is also taking money out of the system. Since he is not consuming, the net effect of his increased capital hoard is to decrease prices across the board for everyone else. This can change once he decides to spend, but then he will pay consumption taxes like the others.

Yes, "supposed to", but the representation comes through the voting process, and not everyone votes, so they really represent the voters. And I assume you mean the voters are swayed by the advertising that buckets of cash pay for, since outright bribes are illegal.

The politician who rewards campaign contributors at the expense of voters is thrown out the next election. There's a check or power built into the system, but a lot of the time the new guy is bought off too. Usually the more competition and transparent the industry, the harder it is to buy off a politician. The less power a political office has, the less it will be bought off. There are all sorts of ways to fix this problem without limiting political speech.

Supposed by whom? Certainly, even ignoring ways in which the practice deviates from the overt design, the US government doesn't even pretend to be structured in a way in which all citizens have equal representation.

It's the fat cat guys are the ones that are draggin us all down.

I find this idea of "disarming" rich people for "the safety of us all" to be itself highly dangerous, and a slippery slope. People should be punished according to the law for the illegal things they have done, not the things they could do.

Second, if you believe law should only punish us for actually hurting people and not potentially hurting them, then you are against speed limits.

Third, taxes are not punishment any more than piracy is theft and abortion is murder.

Germany has roads without speed limits, and they're doing just fine.

> Third, taxes are not punishment any more than piracy is theft and abortion is murder.

When did I say "taxes are punishment"? I was responding to the idea that we should take away rich people's money to prevent them from having too much power, which I think is a terrible slippery slope. Direct quote from GP:

> Wealth taxes are about disarming everyone -- good and evil -- for the safety of us all, not about morality.

Edit:

> First, a pretty face, high IQ and physical strength do not translate into power the way, say, a hundred million dollars does. Sure you can hurt people if you're physically strong / attractive / smart, but not that many people.

They do if you go into politics or the military.

So I think the notion of a slippery slope towards eugenics is absurd; that's like saying that dancing leads to lynching because both involve crowds of people and tend to happen at night. That's not to say that there isn't a slope towards, say, absolute communism or radically unfair property seizure, but that's way less scary.

In case you're curious how I came to that conclusion, here goes: in most cases (not involving criminal situations), private property is basically a store of our previously invested time. We spend a portion of our lives on learning skills and then applying those skills to certain ends, such as making money and acquiring property. If we assume that a human lifetime is finite, then reserving the right to redistribute private property and wealth is basically reserving the right to take the most valuable resource humans have - their time on this Earth.

So if I'm working 10 hours a day and I'm being taxed some 40% (through a combination of income, property and consumption tax), then it means I am working only 6 hours for myself and my own personal gain, and the remaining 4 hours in fact belong to someone else. Now, I apologize in advance for this loaded language, but to me, that is a form of slavery. No one has the right to demand, at gunpoint, that people give their time and person to an end that they don't care about and that doesn't directly improve their situation.

I feel very strongly about this, to the point where I left my country of birth (a European country with ridiculously high taxes), for a much better place where the taxes are much lower and more reasonable. It's a clear example of capital flight, on a smaller scale. I know my opinion is extremely unpopular in this day and age, but it is what it is. To me, strong property rights are some of the most basic human rights, no different than freedom of speech or association.

I think the origin of my socialism is that, honestly, I don't trust things. This is a topic that often comes up in Bitcoin threads: there is no such thing as a perfect store of value. There is no thing I can invest my time or money in that will not decay or depreciate over time. Currencies inflate. Houses fall down. Land fluctuates in value and can agriculturally fail. The gold supply inflates at a roughly constant rate of 1.5% as people dig more up. Uranium decays, albeit slowly.

On the other hand, I have a very positive view of social networks. I grew up in the middle of a strong safety net. My parents, my siblings, my aunts and uncles and cousins, we grew up close. If I needed help, they'd give it. If I lost everything today, they'd take me in for as long as I needed. Since then, I've acquired a few close friends who would help me out, with a job or a place to crash.

So even if I cannot trust my things not to betray me, having fifty people and all their resources there to catch me if I fall brings me a great deal of security and comfort. So I like the added layer of protection that comes from a safety net of 300 million people. I don't view taxes as something being taken from me, I view them as an investment I'm making in the only resource which has a chance of holding its own against time, no different than the time and money I invest in my kith and kin.

My issue with the concept of centralized power in the society is that it has a tendency to consolidate over time and if left unchecked, tyranny is almost inevitable. Sure, you trust your government now, but nation-states generally have a very ugly history of oppressing and even exterminating portions of their population every once in a while. I just don't believe that they can be trusted not to do it again. Not everyone is a good person, and many people in the higher rungs of power tend to have psychopathic tendencies.

So at the end of the day, you don't trust your physical assets not to betray you, but you tend to trust the society you live in. My mindset is completely opposite: I don't think that people can be trusted not to do bad things. You mentioned bitcoin, and I think this is one of the elements that it solves almost perfectly: it eliminates the need for trust, if used correctly. Strong gun rights solve the same problem, they almost completely eliminate the need for trust: I don't have to trust the society to respect my property rights, I just have to trust that most people are not crazy enough to try to get themselves shot.

I think socialism is a nice concept and I think that the idea of helping the less fortunate is commendable. The problem is that it has to rely on the coercive element (uniformed men with guns showing up at your door) if you disagree with the system.

Not to drag this out much longer; as someone who strongly believes in non-violence, self-ownership, self-governance and rejects most forms of collectivism, I can't agree with pointing guns at people in order to create a safety net for others. It defeats the spirit of charity and looks more like extortion and robbery. In my opinion, helping the less fortunate should a voluntary act that stems from one's desire to do good, rather than fear of being violated.

Funny, I'd call that a moral imperative, and go on to say that consumption is good. Even when it's on gaudy-ass McMansions, consumption usually means, more or less, that someone, somewhere, is actually having fun with his life. We ought to be encouraging that rather than encouraging nonstop accumulation of liquid financial wealth in the guise of the Virtue of Thrift.