That’s the title of a recent piece by Paul Graham, who’s often pointed-to here and who I think is one of our greatest living essayists, and since ongoing’s full name is ongoing fragmented essay, that’s a strong claim. Inequality and Risk, and this is a compliment, is deeply wrong, but made me stop thinking about all the other things I was thinking for quite some time about because I had to think about it. Herewith remarks on Inequality and Public Policy; but first, go read Paul’s essay.
He makes two big mistakes. First, he postulates someone who “wants to get rid of economic inequality”, and argues against that position. Second, his arguments go off the rails when he tries to transition from generalities to mathematics.
Ending Inequality? · So who, exactly, wants to end inequality? Well, I used to, back when I was 18 years old and briefly an actual card-carrying Communist, until I found out they really meant that scary bullshit about supporting the Soviet Union and the Dictatorship of the Proletariat. Old-line Marxists used to fantasize about the end-game: “To each according to his needs, from each according to his ability”. Well, it’s not like that because people aren’t like that, and while the Marxists had some pretty useful critiques of where capitalism can go awry, none of their ideas about What Comes Next turned out to be any good at all.
So, I don’t know anyone who believes for a second that you could end inequality, or even that it’s worth trying. It’s simpler than that; we want to minimize poverty. Ye have the poor always with you said Jesus (Matt 26:11) but we can hope he was wrong. It doesn’t really need justification: poverty which need not exist is profoundly immoral and unaesthetic and suboptimal and should be corrected. But if you want justification, here it is: some people seem to deserve their poverty, having brought it on themselves; but their children don’t.
Once you clear away this bullshit about wanting to end inequality, you can have a useful argument about reducing poverty. I’m enough of a realist to acknowledge that one of the best ways of doing that is to encourage a vibrant, free, open, unobstructed marketplace. But I also think that progressive taxation is, in moderation, good macroeconomics and good policy.
Proportionality · And here’s where Paul really goes off the rails. Search forward for “applies proportionately”, and you encounter this astounding assertion:
This argument applies proportionately. It’s not just that if you eliminate economic inequality, you get no startups. To the extent you reduce economic inequality, you decrease the number of startups.  Increase taxes, and willingness to take risks decreases in proportion.
Oh, really? There’s a smooth mathematical relationship extending off to infinity in both directions? That’s what “proportionately” means, last math course I took. Let’s grant that economic inequality is a useful driver to creativity, hard work, and the creation of wealth that everyone gets to share in. But let’s not kid ourselves that this—or really much of anything in the social sciences—looks like a smooth O(N) curve. Yeah, give people a chance to get ahead and they will. But if they already have a Lexus and a 2-story lodge in Aspen, will the chance at a Maybach and a 3-story lodge really drive them to go through all the startup bullshit again? Well, yes, it will; but only for those people who live for that startup adrenaline and for doing deals; but those people would be doing it anyhow, because that’s the kind of people they are.
Call me old-fashioned, but here in Vancouver the streets are stuffed (on the pavement) with Mercedes and BMWs and Porsches and, and on the sidewalk, there are street people begging for their bread, and kids dropping out of high school to take care of their siblings because their parents aren’t making it.
I want to help those people on the sidewalk, and if a bit more progressive taxation will help, that’s OK by me. What we don’t need is pseudoquantitative assertions that can be used by the Dubyas of the world to justify slashing taxes on the the top 1%, and then doing it again and again. People aren’t that simple, which means that politics isn’t either.
[Disclosure: I’ve also tried pretty hard to get rich, and not done as well as Paul Graham, but OK.]