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Comment by mynameishere | Hacker News Reader

As for the poverty threshold, our lawyers and bankers fixed it at £22,000. But that sum was just under median earnings, which meant they regarded ordinary wages as poverty pay. Mistakes such as these should disqualify the wealthy from pontificating about taxation or redistribution

Presumably, a person who thought <£22K/year defined poverty would be amenable to the idea that such levels of income should not be taxed heavily, or should receive additional moneys through redistribution. The authors willfully reverse that interpretation. At any rate, your caricatured "Scrooge" character would likely have put the poverty level at 2 quid a day, with anyone making more being disgustingly overpaid.

As always, the fundamental mistake is the evident belief that the economy is zero sum. The rich can only get that way by taking from someone else. Of course, with redistribution, that actually becomes the case...

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Just an observation, but societies with vast disparities of wealth tend to be poorer overall and to have flatter economic growth.

They also tend to be subject to catastrophic social events.

They also tend to be subject to catastrophic social events.

It would be interesting to actually quantify that. I suspect that the main catastrophes that occur involve rich people being robbed and/or murdered.

Don't forget kidnapping.

(I'm serious. I've had friends who were from wealthy parts of Latin America where kidnapping was a real concern.)

Increased crime and lawlessness are also symptoms of vast disparities of wealth, yes. Your point?

Yes, but of course no one here is going to agree with you.

They're correlated, but it's hard to say which is cause and which is effect.

>Just an observation, but societies with vast disparities of wealth tend to be poorer overall and to have flatter economic growth.

I would love some numbers to back up that claim. I know that poor repressive governments tend to have high income disparity while the Western world tends to have less. However the last time I looked at the numbers I don't think the data showed that income disparity is a major causal factor in making a country poor or rich. It sounds to me like that is the dream of envious leftists, one of many unquestioned assumptions that they like to bring up in every debate.

There's a difference between a third-world country where the favored friends of the state are well-off while everybody else starves (see Zimbabwe) and a rich country where everybody is well-off but some are more well-off than others (see Britain). I question the "if you don't give us more money, we'll riot and break stuff" justification for income redistribution in a rich first-world country.

Also, third-world countries should be focused on getting rich, not redistributing what little wealth they have. I am highly skeptical of the benefits of income redistribution under any circumstances.

OK, this thread is degenerating;

I'd like to apologize to every one in the hacker news community for having participated in it.

This is obviously not a topic it's possible to have an intelligent public discussion about.

Correlation != Causation

Many African countries (i.e. Zimbabwe) are extremely poor overall and have great wealth disparities. But it seems highly unlikely that there's a direct causal relationship (it's more likely that there's a third cause behind both conditions, i.e. government corruption).

If we throw out the bad datapoints and restrict our search to countries with relatively stable or well-established governments, I suspect you will find that the reverse is true, on the whole. Most U.S. economic growth happened during the oil boom and/or Rockefeller and/or train monopolies and/or ... Even recently, the first .com bubble coincided with Microsoft/antitrust. Contrast these periods with the relatively slow growth of Iceland, a stable country with low economic disparity.

Iceland is probably a great place to live (never been there). But I'm guessing they still put gas in their cars and use Windows and buy pharmaceuticals from the US.

You have a point, although there again, it could be that what you are seeing is a wave of technological change which enhances the earning power of the rich first and then diffuses out to the rest of society.

I do think that the hypothesis that wealth disparities in the US are a product of massive corruption is not one to be dismissed lightly given the ongoing socialization of the costs of bailing out failing banks...

I would agree with you, on the whole, that some wealth disparities in the US are the product of government corruption.

Of course, in order for a government to become corrupt it must first become powerful enough to be worth corrupting. It is my observation that governments most rapidly gain power as a reaction to perceived economic disparity: the New Deal, SOX, the IRS, the SEC. These were all once government 'solutions' to economic inequality and remain today some of the most powerful (and arguably, corrupt) organizations in the world. I would argue that almost any time you find a corrupt organization generating illicit wealth, you will also find a well-meaning person who proposed the creation of that organization to 'solve' economic disparity.

It is true that there are wealth disparities that are created through government corruption, especially in the short term. But historically that corruption is ultimately enabled (perhaps accidentally) by those overly concerned with the problem of wealth disparity.

Really? Within the US, Silicon Valley has among the greatest disparities of wealth, and it is probably the richest and fastest growing region in the country.

Basically, it depends whether the disparities come from founding Google, or being the dictator's brother.

Chile also has huge wealth disparities, but in the last twenty years the Gini coefficient stayed the same and the GDP per capita has grown 3-fold.

Thanks for bringing up the Gini coefficient, I had not heard of it before.

Just an observation, but societies with vast disparities of wealth tend to be poorer overall and to have flatter economic growth.

PG makes a good argument otherwise. Read the last paragraph for the concise version of the essay.

http://www.paulgraham.com/gap.html

Of course, with redistribution, that actually becomes the case...

Redistribution is a necessary evil, though. It's zero-sum* in the immediate term, but it's a necessary upkeep measure for the long-term health of society.

Money is essentially a device for allocating resources to those who have put them to good/profitable use in the past. The problem with it is that there are so many degeneracies, such as crime and dumb luck, that also influence the flow of money. Foremost among these degeneracies is the way money is filtered through large corporations. Large companies profit or fail on account of reasonable market forces, but then go ahead and distribute the money in a manner that has 100 times more to do with office politics than actual productivity. Inheritances are also an enormous corrupting influence, in that they bequeath large amounts of capital to individuals who are entirely unworthy of the influence that it provides.

I tend to think of money and capitalism as shoddy (but the best we have) AI algorithms that need to be continuously tweaked in order to avoid divergence. If you start from an initial state where everyone is roughly equal, and allow capital to flow via a money economy, you'll have a system where more productive people have more control of the resources, and progressive improvements will result. Eventually, though, the degeneracies take over, and it starts to erode society; an elite selected not on merit emerges, and uses its influence to restructure society in its favor further, much in the way a cancer starves a body.

(* edit: I'd actually even argue against redistribution being "zero-sum" in any meaningful sense. From a utilitarian perspective, it's arguably positive-sum so long as we accept that the utility curve of material wealth is concave.)

but then go ahead and distribute the money in a manner that has 100 times more to do with office politics than actual productivity.

Of course, the alternative to this (i.e. distribution by a government) would be the distribution of wealth that has an infinite number of times more to do with _actual_ politics.

Office politics is at least distributed, i.e. there are several companies that distribute their own individual wealth according to some non-perfect system. But some will be more perfect than others, and hopefully natural selection will reward those more than others.

Government redistribution does not have that characteristic. But not only is it missing the only piece of redeeming value in any distribution system, it is not in essence any different than the private redistribution system. That is, there are still people deciding how to spend money. It is true that people are flawed; but they are no less flawed because we call them government. In fact they are more so: we have removed the only incentive to improve redistribution that they may have had.

But then it is not easy to silence the voices of those who ask whether it is not paradoxical to entrust the nation's welfare to the decisions of voters whom the law itself considers incapable of managing their own affairs; whether it is not absurd to make those people supreme in the conduct of government who are manifestly in need of a guardian to prevent them from spending their own income foolishly." - Ludwig von Mises

When the US government engaged in redistributing money for the common good(investment in commons), with minimal political influence, as for example, ARPA pre-Mansfield and the interstate highway system, the returns were high enough that any VC doing as well would be very happy.

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