How Paul Graham gets it wrong in “Economic Inequality”
Seth Bannon
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Update:

I’ve taken more time to go back and read Paul’s essay too and click through to a couple of your sited studies/articles on inequality.

  1. It still seems that the more likely cause of problems is lack of income/services and not inequality of income, but I will continue to research this and would love to discuss more in person. I especially find interesting the notion that increased inequality of income makes/allows people to disengage from their community and thus hurt the overall community.
  2. I think Paul Graham has his opinion, as do you, on what inequality of income directly causes, but more importantly I agree with one major tenet of his essay which is the major danger of focusing in on the wrong metric, no matter how correlated or “conceptually adjacent” it seems to be to what we are trying to accomplish. I believe what we are trying to accomplish is to allow a larger and larger percentage of people to have the ability and the tools they need to have a happy and fulfilling life. We need to make very sure that we pick the right metric on this one, as I believe we can change anything we want to. So the larger danger is definitely trying to change the wrong thing, not that we will fail to change it.
  3. I am still left with the feeling that a ton of thought has gone into the problem, but not the solution. The assumption that taxes magically go to the right programs and don’t get siphoned off into tons of things that don’t help low income households, is definitely not in touch with the reality of how taxes are used. This would need to be addressed to even make increased tax a viable solution.

Original:

Question though, and maybe this is more semantic than substantive, but is it the inequality that hinders economic success or the lack of a basic level of economic support? To put in basic US terms, is the person making $15k per year and living in poverty affected adversely by the fact that someone else is making $15 million? Or do we just need to find a way that they can effectively live/earn at a $50k per year level? If it is the latter and not the actual gap that matters, then I would say it is incumbent upon us to find better ways of bringing that person up to that standard than taxation and government redistribution (although that can still play a part). There are two major things that I think slow us moving forward more effectively on this problem:

  1. It is always raised in an Us vs Them construct, which never is a good way to bring people together on a problem.
  2. The government and taxes are always given as the solution. Again taxes are another hero that people have a very hard time cheering for and many people watching government spending on war and other debatable things don’t want to add more money to the pot.
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