Comment by darawk | Hacker News Reader

Comment by darawk | Hacker News Reader

Parent Full thread

That is true, but the numbers are probably higher than you think. At least for me, I think wealth at least (as distinct from income) makes a non-trivial difference to me up until I can afford to live the rest of my life comfortably without continuing to work for someone else.

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.

> 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.

This is called the hedonic treadmill and is pretty much built into all humans. Spoiler alert: it never ends.

Indeed it is. And on a personal level, that can be a tragedy. But on a social/economic level, it's great for raising everyone's living standards, which is the point of this paper.

> up until I can afford to live the rest of my life comfortably without continuing to work for someone else.

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.

Totally, but the point of this paper isn't the people who already have $10mm. It's the people who want to get there, and what they're willing to sacrifice to do it. Building a massive business like say, Amazon, takes enormous personal sacrifice and risk. The high incomes that result from it incentivize that sacrifice/risk. They cause the person who currently has relatively little, to risk what they do have to produce something great, something that we all benefit from.

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?

Considering that Bezos derives the vast majority of his wealth through capital gains as opposed to income, I'd say yes.

That's avoiding the issue. If the tax code were such that capital gains and all other income was captured, your parent's logic holds. The loopholes of the current tax system doesn't affect theoretical considerations.

Regardless, the theoretical considerations are a straw man. No serious progressive tax scheme results in a hard cap of income at something as low as $10m.

Ok, and how does the soft cap change the argument?

It means the ordering remains monotonic. It means if you’re on top of the world, you remain so with all the psychological trappings, just on a slightly lower mound. The scraps that come from slightly lowering your absolute position (but keeping relative position the same) will go to addressing externalities and common goods.

> the ordering remains monotonic

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?

> It means the ordering remains monotonic

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.

I'm struggling to think of a progressive tax scheme that calls for 99.9% tax rate even on the highest bracket. $1 vs $1000 is such a bad straw man I'm not sure why you'd weaken your argument with it.

> 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?

> I'm struggling to think of a progressive tax scheme that calls for 99.9% tax rate even on the highest bracket. $1 vs $1000 is such a bad straw man I'm not sure why you'd weaken your argument with it.

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?

Why do you equivocate progressive taxation with "truncating" income at a certain level? It's not a low-pass filter.

Just because it's easier to state. The same reasoning applies for a progressive tax rate system with extremely high top marginal rates.

> 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?

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.

Exactly. I would argue that the existence of giant, monopolistic companies like Amazon leads to increased income inequality and social instability. We shouldn't be figuring out how to order our economy to make more Amazons, we should be trying to reduce the harm of the current ones with stronger employee protections, stronger consumer protections and stronger anti-trust enforcement.

> The unexamined premise of this question is that society at large benefits from the existence of Amazon

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.

> Swap in Google if you prefer, or any other successful company.

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

> The unexamined assumption in this statement is that giant multinational megacorporations are good and we should encourage them.

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.

Reply on news.ycombinator.com