Why Paul Graham’s (Not Even) Wrong About Inequality

Reality check. Extreme inequality isn’t good. Here’s why.

Recently, the striking claim has arisen that extreme inequality is a necessary good (or evil) for progress, and that should we seek to ameliorate extremes of inequality, we ourselves will suffer from a loss of innovation, technology, or opportunity (for example, by Paul Graham, here). In this short essay, I will refute this claim, weak and trivial at best, by disproving it, and suggest that there is indeed such a thing as too much inequality. Further, I will conclude that it is (far) more beneficial for a civilized society to achieve a desirable level of inequality than it is to have a tiny number of people growing super rich by producing gadgets and apps and corporation and innovations that don’t add much to, or may subtract from, human life — what I will call “low technology”. As ever, for obvious reasons, I’m reluctant to write this essay, yet I hear few voices of reason amidst the growing drumbeats of illogic. Therefore, let us begin.

James get wearily into his sleek self-driving car. It’s not really his, to be sure, in the sense of ownership — it’s merely been personalized for him this morning, having already downloaded his favorite apps, setting the temperature just so, adjusting the seats to his liking, playing the music just the way he prefers it. The car speeds off, and James checks his screen. What does Steven want from his butler today? This for lunch; that suit; such and such for dinner, and a tux to wear; he makes quick mental notes, working furiously. The car drops him off at Steven’s mansion, and he strides in, adjusting his tie neatly, just as the clock strikes 6:30.

There is something that repels us about the above scenario. It leaves us uneasy, apprehensive, morally uncomfortable — not excited, astonished, amazed. But we cannot say quite what it is that makes us so uneasy. It is a vision of a future…that resembles the past. One in which human bondage appears to ground social order, even while shimmering technology beckons. And thus, baffled by such a paradox, it’s difficult to pin down just what it is that’s so repellent about the utopian future above — the very one which we are told we should want lately.

To draw out precisely why such a vision repels us, let us then shed our prejudices, and build not merely theoretical castles in the sky, but look at the evidence regarding inequality — for that is what the relationship between James, the butler, and Steven, the master is, unequal— such as it exists on earth.

Here is a short list.

Greater inequality is linked to unhappiness.

Greater inequality is linked to slower economic growth.

Greater inequality is linked to quicker death.

Greater inequality is linked to poorer health.

Greater inequality is linked to less social mobility and poorer education.

Greater inequality is linked to greater stress.

I could go on. But the point is already clear.

What the abundance of evidence above tells us is this. Inequality is not an unalloyed good — or bad. Instead, the question for societies is: what is the optimum level of inequality? For precisely no one is contending that there should be no inequality.

What, then, does “optimum” mean? That is a question for societies to answer. Perhaps it is the level which maximizes growth, or life expectancy, or happiness. But any reasonable person must admit this much: the optimum level of inequality that we desire cannot merely be that level which maximizes profits, gadgets, apps. Why not? Because an economy is not merely any of those.

What is an economy? It is a subtler creation entirely. It is the sum total of human prosperity. And it is precisely because an economy is composed of human prosperity — not just gadgets, apps, or paper chits, that inequality must be considered in broader terms than its effect on those. Thus, we mustn’t merely settle for the flimsy, tendentious argument that inequality is good or necessary merely because it gives us gadgets.

How, then, should we think about it?

Consider James’s story above again. What is it that is morally repellent about it? Now that you are armed with an intellectual lens, perhaps the reason is clearer to you. James may realize convenience here and there from technology. The car makes his journey easier and more pleasant. But James’s life has improved only in the narrowest of terms.

The truth is that despite whatever conveniences and pleasures technology gives to James…James is still a butler. His journey may be more pleasant — but he is working the whole way. What is he working on? Curing a great illness? No. He is merely arranging another man’s wardrobe, and organizing his meals.

What has technology failed to do for James?

To let him reach his potential. In fact, it has ultimately thwarted him and prevented him from doing so. In his world, there are few advanced jobs, opportunities, careers left. Mostly, there are servants. To whom? The owners of the technology, the inventors of the gadgets, that make James’s lif easier. Thus, James is entrapped. He cannot reach his potential because the gadgets that make his life easier are enriching those who create them to the point that there is little work left except to serve them.

Here, technology may have “succeeded” in the most naive financial sense — to amplify profits to the few. But it has failed in every other sense — economic, social, cultural, and human. Yet, it is these senses which are more fundamental. Why? Because if a thing enriches us financially, but impoverishes us economically, socially, culturally, it is merely paper which is cheating us of life itself. It is not letting us live up to our potential, which is precisely the great challenge of every life.

It is high time that we distinguished between high and low technology. Low technology is stuff that pollutes our worlds — economically, socially, culturally, informationally. Hence, it drives the inequality which makes us unhappier, unhealthier, dumber, angrier, a little more dead on the inside and the outside. High technology is stuff that actually benefits us in real human terms. And thought a tycoon may grow rich by selling low technology, he is little different from an oil baron or an arms dealer and should probably be regarded as such. It is those who create high technology that are humanity’s true benefactors, for they are those who expand the boundaries of human potential.

James’s world is a world where low technology has overwhelmed high technology. In another world, James might have been an engineer, building great things. He might have been a professor, writing great books. Or he might have been a doctor, curing great illnesses. And so everyone would have been better off. But in the world James lives in, he can only be a butler. And so everyone is worse off. Even those whom he serves. For they too do not benefit from what James might have invented, created, built. That is what it means to stunt and diminish human potential. The question in James’s world is this: who will create the technologies that allow him to be a engineer, doctor, or professor — not those that limit him to being a butler? That is, who will create high technologies, not just low technologies? For while low technologies may increase our pleasure in the short term, we should not desire them overmuch, for they will diminish and reduce us in the long term. And that is precisely the question in our world, too.

In all these senses, what I have called low technology — technology that amplifies inequality past the social optimum — is undesirable. That is not the same as saying all technology is bad. Here is what that means: not all technology is created equal. We should, if we are reasonable people, rightly prefer cures to cancer or great books to apps that adjust music in our self-driving cars. For only one will save lives, increase our health and happiness, and so on. But the other will prevent precisely investment in the first. Thus, just as inequality is not an unalloyed good or bad, neither is technology. And in reducing it to an all-encompassing term in which all the boundless marvels of human invention are reduced to a time-saving app, we make the fatal mistake of misunderstanding the possibility of technology — and the truth of prosperity — entirely.

Through my little story, I have told you a limit case. One in which by equating cures for cancer with gadgets that adjust music in self-driving cars both as equivalent kinds of “technology”, society regresses into a Neo-Victorian state: a tiny number of super rich who have gotten wealthy by making low-grade technology which adds little to human prosperity, served by legions of butlers and maids — whom are the lucky ones, for even those jobs are scarce, and the miserable, filthy many struggle for subsistence entirely. That may sound absurd to you. But that is precisely what too much inequality is — and why there is such a thing as “too much” of it in the first place.

In the limit case, that we understand the flimsiness of the advocacy for inequality. If all that technology does is regress the social order back to an era of human bondage, it will have reversed the course of freedom. It will have been a net negative for human progress, precisely because it will have subtracted from real human prosperity. Not in the sense that it makes us worse off than yesterday — but in the sense that it thwarts us from reaching our potential. The converse is also true: if ameliorating extreme inequality costs us infinite amounts of low technology that does not benefit us anyways, which prevents us reaching our potential, so much the better.

We are all better off when each of us reaches our potential. This is the central and greatest insight modern economics has to offer the world. Why? Not just because we are happier, healthier, and longer lived thus. But because we are each more likely to contribute most to all when we reach our potential. When James is a butler, his contribution to the world is merely arranging Steven’s wardrobe and meals. If James were a doctor, his contribution to the world might be as small as healing the sick — or as historic as curing a deadly disease. In either case, James’s contribution to the world as a doctor is far greater than it might ever be as a butler.

That is why freedom and prosperity are intertwined. The responsibility freedom obligates us to is to make the most of ourselves. It is no easy task, and many of us struggle for most of our lives with it. But that is precisely how and why freedom ennobles us — why it is worthy. Human bondage, on the other hand, does not merely limit each of us — it limits all of us from contributing to the sum of us. And thus is bondage less desirable than freedom. It diminishes not just who each of us is — but what all of us may become. That is why the number of societies who have reached the heights of prosperity through human bondage is precisely zero.

Runaway inequality is not a path to prosperity. The merest glance at evidence, and the smallest use of our reason, both tell us so. It is more, as Yeats once wrote, a widening gyre. Once started, past a critical point, it is probably hard to stop — yet it is not something we should desire. Too much in the hands of too few, though it may give us low technology that titillates and tickles us, results in general unhappiness, impoverishment, immobility, stagnation. In Yeats’ words, the centre that cannot hold. The most likely social order under extreme levels of inequality is one of servitude, not freedom; and thus is is one in which human potential is suffocated, not ennobled, expanded, and nurtured. That order is undesirable precisely because it represents the very opposite of prosperity, which we may say is simply the ability of every life to reach its potential.

The most that we can say about advocates of inequality, who are often not uncoincidentally involved with advancing low technology, is that they are, as Wolfgang Pauli once famously said, “not even wrong”. That is, their arguments tend not just to ignore evidence — but to be grounded in faith, not reason. Their faith, like all faiths, is eschatological: either technology will yield us salvation, or we will surely be damned. But I do not think life, people, or prosperity are so simple.

The question before us is not: should we progress? Technological progress is inevitable. The question before us is this: what kind of progress do we believe is desirable? Are we foolish enough to continue equating cures for cancer with butler apps? That is, do we confuse, from the very beginning, human bondage with human potential? If we are unsubtle enough to make that mistake, then the fault, as ever, lies not in the stars — but in ourselves.

January 2016