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An open letter to Paul Graham

Dr. Mr Graham:

You’re a smart man. I would love to read a revised essay from you on income inequality that takes into account four facts you seem to have failed to include in your analysis of the situation:

  1. Literally no one in America, save for a very few on the fringe, is talking about “eliminating income inequality.” People are seeking to and talking about reducing income inequality. No one believes that there should not be rich people. They do not want to “kill” you, literally or metaphorically.
  2. What people are talking about is a progressive income tax to reduce inequality. Amazingly, your essay on inequality only uses the word “tax” in the body of the essay a single time. If a billionaire is taxed 80% on the year he or she earns that billion, they will still be worth $200 million. And they are still free to start businesses and pursue wealth. They are still rich. They have not been “hunted” or “killed.” The crux of your argument — that “Ending economic inequality would mean ending startups” — is both a straw man (no one’s advocating eliminating income inequality completely) and untrue (people can still pursue whatever they want — they just have to pay more taxes on it.) No one wants to take the money you have away. You could still pursue being rich, and, indeed, you could still get rich. I don’t know TONS about your wealth levels, but if I extrapolate them from my own, and the successes you’ve had, I am willing to wager a large amount of money that in the world these people (including myself) envision, you would still be very, very rich.
  3. People want to take that money from the taxes and provide services so that everyone in America can get the same public services that — to extend your example — Larry Page got growing up in East Lansing, Michigan. You are partially correct when you say that “It’s not economic inequality per se that’s blocking social mobility, but some specific combination of things that go wrong when kids grow up sufficiently poor.” The “specific combination” is no mystery. For many of them, it’s that they also live in areas that are poor, and have low tax bases, and cannot provide the education and services at the same level as rich neighborhoods. So by taxing the wealthy and spending it on services, we can better ensure that the level playing field you allude to continues to exist.
  4. The pie metaphor you speak of is not crazy. There are different ways of looking at the “pie:” National income accounts (growing), money supply/purchasing (the money supply’s gone up, sure, and the value of money is relatively stable,) and the GDP-based purchasing power parity. So by one measure — the one you are presumably speaking of — the pie is growing. By a GDP measure, however, it is growing less and less every year. We haven’t had 5% GDP growth in over a decade. It’s been over 30 years since it hit 10%. Most economists believe that high-level GDP growth is a thing of the past, and we’re looking at 2–3% growth from here on out. So, by this completely rational view of the “pie,” it is, in fact, trending towards a zero sum game. This is not an irrational view.

Finally, here’s a piece of general advice: if you are feeling like a hunted animal for who you are from a large group of people, we essentially have three choices: accept it outright, reject it outright, or investigate it honestly, giving the opposing view point the benefit of the doubt. Try to concoct THEIR argument, not your own. See if it holds water. Speak their language. In your case, I suggest writing an essay using the actual arguments and suggestions for improvement people are really discussing, not a straw man. No one is “hunting.” No one is seeking to eliminate income inequality. Is it really so hard to grasp a bell curve? That there may be an optimum level of inequality for a functioning society and we are on the other side of that? There is complete logic — from this other point of view — that the pie is not growing. (You’re a smart man — I’d LOVE to hear your reasoning why the national incomes pie is more valid than the GDP/purchasing power pie. Personally, I don’t know yet). Take your strange argument about bankers going into startups if they can’t be bankers and look at it through eyes of the people making these wacky arguments. “Okay, so, they go and create jobs, and then we tax them on their excess wealth. HOW ON EARTH IS THAT A BAD THING?” I would genuinely love to know your thoughts on this, in the world people are actually advocating. I’d love to know if anything in a tax-excess-wealth-and-spend-it-on-services world actually would negatively impact productivity because I sure as hell can’t see how.

Consider writing THAT essay. What is wrong, Mr. Graham, with REDUCING income inequality by taxing EXCESS wealth, and spending it on public services to maintain or even (gasp) improve social mobility? Because that’s what those “hunters” are really talking about.

Edit: Paul Graham has written a follow up (a “shorter version”, and I have written one too.