People talk about how much they make pre tax. I think past a certain level of income, you gain the same status per marginal dollar and the actual additional purchasing power does not matter...
Now, above that level, there are actually some other emotionally satisfying wealth strata, such as:
- Ability to invest in or personally found/fund companies for ideas that you have
- Ability to found/fund charities that you think would make the world better
I'm not saying that everyone needs to achieve these things to be happy. But I would say that I think it's easy to look up to say, 2-3x your own income and say "how could anyone ever want more than that", but then when you get there, you find that actually there's a lot of interesting stuff that you might be able to do if you made 5-10x more still, and at least for me, it's mostly not about luxury. It's about being able to pursue interesting things with autonomy.
There are probably a few exceptions (i.e. 19 year old superstar athletes who just signed their first major league contract) but I would generally assume that when we're talking about people with annual income in the > $10MM range, then those people already have more than enough wealth to live comfortably forever without working.
The point of this paper is that there is an amount of risk/sacrifice people will make for $10mm, that is different from what they will make for $100mm, and different still from what they'll make for $1b. By truncating the reward distribution at $10mm, you tell those people to pursue something else instead.
Bezos is actually an excellent example. In his career at DE Shaw, he was almost certainly making very high 6 figures or maybe even 7, or certainly on a career track to be doing so shortly. He threw that away to take a massive personal risk to build Amazon. Would he have done that if you capped his potential reward at $10mm? Or would he have stayed in his comfortable finance job, making a bit less than that?
That only holds true if you assume people will act the same exact way and with the same exact outcomes. This is a silly assumption to make when you significantly change both the incentives and the difficulty.
> The scraps ... will go to addressing externalities and common goods.
What world do you live in?
Are you willing to work as hard for $1 as for $1000, even if your relative status remains unchanged?
> The scraps that come from slightly lowering your absolute position (but keeping relative position the same) will go to addressing externalities and common goods.
Yes, but the entire point of this paper is that those 'scraps' are actually worth less than the economic gains produced by the ideas that receive these high top incomes.
> the entire point of this paper is that those 'scraps' are actually worth less than the economic gains produced by the ideas that receive these high top incomes.
I'm not convinced by this. Every successful person who has created immense value for the world stood on the shoulders of not only giants but thousands of little people contributing to society. Those top income receiving ideas mean nothing in a society with no law, infrastructure, education, or opportunities. You think taxes stifle innovation? What would Bezos have accomplished had he been born to an uneducated militant in current day Syria?
Choose your own numbers. I made the argument because the point isn't the numbers, the point is that attenuating the reward distribution changes human capital decisions.
> I'm not convinced by this. Every successful person who has created immense value for the world stood on the shoulders of not only giants but thousands of little people contributing to society.
In what way does the necessity of infrastructure, both social and physical, contradict the point of the paper?
The unexamined premise of this question is that society at large benefits from the existence of Amazon and should want to encourage the creation of similar Amazon-like enterprises.
It's not actually a premise, though. The point is that there are good ideas that take large personal risk and investment to build. Swap in Google if you prefer, or any other successful company.
That being said, Amazon is pretty clearly enormously beneficial. AWS alone has enabled thousands of companies that never would otherwise have been able to exist, and saved other companies millions of dollars on hardware, not to mention saving electricity (by better utilization), etc.
Every time a company gets big people whine and then vote with their dollars by shopping there anyway. Why do they do that? Because it benefits them. People buy things from Amazon because it's better. Amazon makes a profit that is smaller than that value delta - the residual is the consumer surplus, aka the net benefit to you and me.
The unexamined assumption in this statement is that giant multinational megacorporations are good and we should encourage them.
I reject the assumption in your last paragraph that individuals making their own self-interested choices always maximizes positive outcomes for society at large: https://en.wikipedia.org/wiki/Tyranny_of_small_decisions
There is no unexamined assumption. Swap in whatever you want.
> I reject the assumption in your last paragraph that individuals making their own self-interested choices always maximizes positive outcomes for society at large: https://en.wikipedia.org/wiki/Tyranny_of_small_decisions
I don't disagree. But the default assumption always ought to be that it indeed does maximize utility, because it usually does, or approximately does. If you want to make the case that there's some better pareto-optimal equilibrium that Google and Amazon are disrupting, i'm more than happy to listen, but I think you're going to find that case a lot harder to make than you think.
This is called the hedonic treadmill and is pretty much built into all humans. Spoiler alert: it never ends.