Treating the symptoms or the disease?

It’s interesting to examine why Paul Graham’s essay on Economic Inequality irritates many people. I don’t think the irritant is as much the content per se, as the sense of disreputable rhetorical technique.

That starts of course with the already well identified “strawman argument” which is deeply ingrained in the essay. If you didn’t have time to read the essay, a short summary of the core point would be “if you people eliminate inequality, the start-ups will take their marbles and go home and you will miss us, because we need the quest for wealth to motivate entrepreneurs”. Well, duh — we already know that, and for that and many even more important reasons, I’ve never met anybody who really wants to eliminate all economic inequality.

The issue under discussion is what degree of inequality is functional and what degree is dysfunctional — for the economy, for the society, for the humans affected. We would be in real trouble without differential reward for talent, skill, creativity, wise risk taking, and hard effort.

But that doesn’t mean that more inequality is always better. Excessive inequality of wealth and especially the highly interwoven power that accompanies wealth, have corrosive effects on democracy, not just on poverty. Where is the balance, with enough differential reward to bring out the best in people, but not so much as to bring out the worst?

Yes, we can agree that some people work harder if they have a hope of becoming wealthy (even if that’s not their only motivation). But does a talented person become 100 times smarter or work 100 times harder if they hope to make a billion dollars versus 10 million? Does that extra incentive (100x as much wealth if you succeed) have any measurable effect in terms of positive outcomes, much less producing more positive benefits for the society than the negatives from the concentration of power that enormous inequalities produce?

Mr Graham’s framing in terms of absolutes (“eliminate inequality”) leads him to feel hunted. He thinks the hunters are confused about whether or not they want to kill him — but I think this is more of a case of unnecessary defensiveness, unless he really does believe that the more inequality of wealth and power the better the society (which I doubt). If both sides agree there can be too much or too little differential reward, then we can meaningfully discuss where the sweet spot on the curve is.

If he was just trying to suggest that start-ups need a reasonable degree of differential reward, he’d be forging common ground and would not imagine being in the cross hairs (even if there was disagreement about the optimal point on the curve). There would be room for common ground. He already agrees that some “other” methods of increasing inequality are not OK.

Perhaps absent that defensive mindset, his intelligence could help brainstorm real solutions. As long as he’s tilting at the windmills of (fearfully) imagining that people want to “eliminate inequality”, it distorts his thinking.

For example, he loves his “pie” analogy. In his binary thinking, either there is a zero sum game where the rich and the poor are dividing up a fixed pie, or there is no pie and no connection at all between the poor getting poorer while the rich get richer (in money or power). He’s way more comfortable with the latter visualization, unsurprisingly. In practice, there is a growing pie which under the right circumstances could benefit everybody AND an ever smaller number of people are controlling an ever larger portion of that pie. There’s nothing automatic about which trend will win out; the dis-empowered cannot just trust that the pie will forever grow so fast that the portion which those in power have left for them will also grow. So they are asserting their desire for a society which also meets their needs, and where the benefits of living together as humans are not excessively biased towards those with increasing money and power.

Unfortunately, Paul Graham has (so far) offered little of substance to forward that discussion in this essay. I am reminded of the old parable of the person looking for their lost keys by the streetlight, rather than in the alley where they were dropped, because “the light’s better here”. Paul seems to want to solve specific social ills (like poverty) more individually and directly rather than through challenging excessive inequality, which sounds good superficially; but when excessive and ever increasing inequality of wealth and power becomes a sacred cow (aka the dark alley rather than the conveient street light), then one winds up sometimes ineffectively trying to treat a symptom because the underlying cause is off limits. Massive inequality is not the the root of all social ills, but neither can it be given a free pass from fair examination of its real world role as part of the problem, just because “going to the opposite extreme” would also be bad.