Why Startups cause Economic Inequality - and Why that's Good(heritage.org)
heritage.org
Why Startups cause Economic Inequality - and Why that's Good
http://www.heritage.org//Press/Commentary/ed063007b.cfm
24 comments
You're inventing straw men. The writer isn't advocating that people only get whatever wealth they produce. That would mean leaving the severely ill to starve.
"It's like taking a Chinese class with a bunch of Chinese students and you're the only one who doesn't know the difference between Mandarin and Cantonese."
But the answer to that isn't to give you all the same grade regardless of how good your Chinese is, is it. The best thing to do is to grade you accordingly, and for you to find some other class to study.
But the answer to that isn't to give you all the same grade regardless of how good your Chinese is, is it. The best thing to do is to grade you accordingly, and for you to find some other class to study.
To carry the analogy further, it'll be if we're only rewarding on mastery of Chinese. For those who are not on equal footing, what other "class" can they take?
"Good inequality", that is, inequality resulting from differing levels of productivity, is only relevant when everyone starts at roughly the same level.
When current inequalities already exist, isolating the productivity variable is very difficult without a social and historical context.
"Good inequality", that is, inequality resulting from differing levels of productivity, is only relevant when everyone starts at roughly the same level.
When current inequalities already exist, isolating the productivity variable is very difficult without a social and historical context.
"To carry the analogy further, it'll be if we're only rewarding on mastery of Chinese. For those who are not on equal footing, what other "class" can they take?"
Whatever class they like (Math, science, etc.). Preferably one they are better at than Chinese.
""Good inequality", that is, inequality resulting from differing levels of productivity, is only relevant when everyone starts at roughly the same level."
So you're saying that since people are born with differing abilities then they should all get paid the same?
You understand that one of the chief ways to motivate people to be more productive is to pay them for it. Who would be willing to work start up hours if you only got paid the same as someone who worked 40 hours a week?
Whatever class they like (Math, science, etc.). Preferably one they are better at than Chinese.
""Good inequality", that is, inequality resulting from differing levels of productivity, is only relevant when everyone starts at roughly the same level."
So you're saying that since people are born with differing abilities then they should all get paid the same?
You understand that one of the chief ways to motivate people to be more productive is to pay them for it. Who would be willing to work start up hours if you only got paid the same as someone who worked 40 hours a week?
That's not what I'm saying.
Like all things, though, some moderation is probably a good idea. Even if this argument makes perfect logical sense, it makes apes unhappy to see other apes getting way more bananas than they are, and if you start to talk politics rather than simply economics, this has practical consequences. Better to balance things out a little bit before things get out of hand and the apes with few bananas vote in someone with truly bad ideas about redistributing wealth.
I once saw a not-really-serious idea by a center-left economist that having money is good and just, as the article says, but perhaps what should be taxed are the very visible bananas (fancy cars, "bling") that the better off apes use to flaunt their wealth.
I once saw a not-really-serious idea by a center-left economist that having money is good and just, as the article says, but perhaps what should be taxed are the very visible bananas (fancy cars, "bling") that the better off apes use to flaunt their wealth.
Is taxation an appropriate venue for implementing and enforcing cultural norms? Flaunting wealth is a cultural phenomenon, and demarcating it as wrong is an entirely subjective decision.
I think following the "we should appease others to keep the masses from taking everything" argument we end up creating a world far too similar to Ayn Rand's Atlas Shrugged. Actually, the entire argument is very much Objectivist. I wonder if there is a connection.
I think following the "we should appease others to keep the masses from taking everything" argument we end up creating a world far too similar to Ayn Rand's Atlas Shrugged. Actually, the entire argument is very much Objectivist. I wonder if there is a connection.
The popularity of this argument depends almost completely on who you choose for your examples.
Most people seem to agree when you talk about Sergey Brin and Larry Page? They started a company from nothing, added trememdous value to the world, and pocketed some big bucks for themselves. Rock on, those are the kind of guys who make you feel fine, even positive, about income inequality.
Next in line come the CEOs who take over an existing company and help themselves to some of the wealth. Some of these CEOs do such a good job generating growth that most people feel fine about it (Google's still a good example - nobody seems to feel that Eric Schmidt's weath is undeserved). But Grasso's payday (what was it, $160M?) upset a lot of people. And Semel's severance package is truly bewildering to me.
And lastly, we do have some of the genuinely worrisome wealth (mabye worse than the 17th century England or Saudi Arabia kind) in the US. This is what PG wrote about when he discussed the intersection of wealth and political power. For example, I heard about the CEO of a large military contractor. He was elected to the second highest office in the land, where he used his influence to start a war and destroy another country's infractructure. Later, he awarded no-bid contracts to his former company - but he refuses to say who he met with and when.
We need to distinguish between good inequality and bad inequality, and there's still plenty of the bad kind out there. The key is to fight corruption, not wealth.
Most people seem to agree when you talk about Sergey Brin and Larry Page? They started a company from nothing, added trememdous value to the world, and pocketed some big bucks for themselves. Rock on, those are the kind of guys who make you feel fine, even positive, about income inequality.
Next in line come the CEOs who take over an existing company and help themselves to some of the wealth. Some of these CEOs do such a good job generating growth that most people feel fine about it (Google's still a good example - nobody seems to feel that Eric Schmidt's weath is undeserved). But Grasso's payday (what was it, $160M?) upset a lot of people. And Semel's severance package is truly bewildering to me.
And lastly, we do have some of the genuinely worrisome wealth (mabye worse than the 17th century England or Saudi Arabia kind) in the US. This is what PG wrote about when he discussed the intersection of wealth and political power. For example, I heard about the CEO of a large military contractor. He was elected to the second highest office in the land, where he used his influence to start a war and destroy another country's infractructure. Later, he awarded no-bid contracts to his former company - but he refuses to say who he met with and when.
We need to distinguish between good inequality and bad inequality, and there's still plenty of the bad kind out there. The key is to fight corruption, not wealth.
"...who wouldn't want to swap paychecks with them..."
I wouldn't want to. They have very low salaries :-)
I wouldn't want to. They have very low salaries :-)
I agree cglee. im all for capitalism but cannot stand it when privileged conservatives use few remarkable examples of immigrant success to gloss over the inequalities of opportunity that are entrenched in and still plague American society.
What inequalities of opportunity are entrenched in America? I'm not American so I am genuinely interested to know.
One of the worst is schools. Public schools in the US are not very good. Rich people tend to go to private ones.
Pretty near zero representatives' and senators' kids go to DC public schools, for example. Whether they're liberal or conservative, they seem to draw the line at that. And there seems to be an unwritten rule they won't criticize one another about it.
In theory this inequality ends at college, because the best colleges will take you for free if you're poor. But in practice it doesn't, because (a) the good colleges do "legacy admissions" and (b) the private schools are much better at coaching their students to get into good colleges.
Pretty near zero representatives' and senators' kids go to DC public schools, for example. Whether they're liberal or conservative, they seem to draw the line at that. And there seems to be an unwritten rule they won't criticize one another about it.
In theory this inequality ends at college, because the best colleges will take you for free if you're poor. But in practice it doesn't, because (a) the good colleges do "legacy admissions" and (b) the private schools are much better at coaching their students to get into good colleges.
I don't even think the inequality ends with college, even theoretically. Colleges use the lack of income as leverage to raise the quality of their students, which means you can only apply to a school substantially worse than you would be capable of reaching if you had greater financial resources (this line gets blurred at the top, because the students getting full ride are above the standard student at the institutions, but there isn't anywhere better they could go anyway).
I don't think legacy admissions are a huge problem, colleges are very lenient about admitting any student who can pay their full way, regardless of previous connections (this is more true for private schools where the full yearly tuition + board can be 35-50k).
On the other hand, I think your point b is crucial. The quality of private schools, especially after 1st grade and before high school, is not consistently better than public schools (this is anecdotal evidence from personal experience, which I suspect the statistics would contradict, but there are so many confounding factors that the statistics seem of dubious quality). Instead, it is the connections the private schools have, and the quality of their college admission counselors that are fundamental.
At my school we were hounded relentlessly to submit college applications (we could be detained at school if we missed completing certain goals by certain days). It was literally harder not to apply to college than it was to apply to college. They proofread all admission essays, and gave personalized advice on where to apply, which institutions we had strong connections, etc. This sort of thing simply doesn't exist at public schools, and its the biggest advantage I experienced from a private high school.
I don't think legacy admissions are a huge problem, colleges are very lenient about admitting any student who can pay their full way, regardless of previous connections (this is more true for private schools where the full yearly tuition + board can be 35-50k).
On the other hand, I think your point b is crucial. The quality of private schools, especially after 1st grade and before high school, is not consistently better than public schools (this is anecdotal evidence from personal experience, which I suspect the statistics would contradict, but there are so many confounding factors that the statistics seem of dubious quality). Instead, it is the connections the private schools have, and the quality of their college admission counselors that are fundamental.
At my school we were hounded relentlessly to submit college applications (we could be detained at school if we missed completing certain goals by certain days). It was literally harder not to apply to college than it was to apply to college. They proofread all admission essays, and gave personalized advice on where to apply, which institutions we had strong connections, etc. This sort of thing simply doesn't exist at public schools, and its the biggest advantage I experienced from a private high school.
Depends on where you go for college. The ivies I am familiar with separate the applications and financial aid process the issue of 'leniency' is not there (except when there are very large sums of money involved).
As for private schools, I think you may be confused. Many of the leading private boarding schools are much better than almost any public schools in the nation. Counseling programs vary with the school. Schools which frequently send kids to the ivies (or ivy-equiv) tend to have lots of experience with the process. My public school had only a small amount. Some have none (and don't even know when one of their students has beaten the odds and made their way into such a school).
As for private schools, I think you may be confused. Many of the leading private boarding schools are much better than almost any public schools in the nation. Counseling programs vary with the school. Schools which frequently send kids to the ivies (or ivy-equiv) tend to have lots of experience with the process. My public school had only a small amount. Some have none (and don't even know when one of their students has beaten the odds and made their way into such a school).
I tried to avoid slandering top boarding schools with the "especially after first grade and before high school". I am a byproduct of such a boarding schooling.
The quality of the teachers was high, and academically you don't comprehend the gap until you reach college and realize a majority of your classmates can't write, only read for required assignments, but were in the top 2% of their school, and graduated with a gpa 1.0 higher than yours. That said, I have also met a number of well prepared students from public schools (and a large number of poorly prepared students who spent $120,000+ on their high school education, but didn't take advantage of it).
I am a fairly strong believer that the real distinction is within the students (as necessitated by my desire to maintain my self-worth). The most successful students, at any institution, will be those who are self-motivated, have well educated and intelligent parents, a well educated peer group, and are intelligent themselves.
These are the confounding factors I mentioned. Students with parents who have terminal degrees are more likely to be attending these elite institutions. This parental advantage may be the strongest influence in intellectual development, and thus clouds the value of private schools. In addition the wealth of the students attending these schools is much higher than at a public school (its weird when your school has children whose parents are billionaires). This wealth provides numerous more resources for students: tutors, summer classes, camps, et al. These addition resources provided by surplus wealth also confound the true value of these high-end schools.
Counseling programs do vary by school, but my experience is not particularly unusual for a higher end private school. These schools will typically have 100% of their students accepted to a school when they graduate. That doesn't happen by accident.
The quality of the teachers was high, and academically you don't comprehend the gap until you reach college and realize a majority of your classmates can't write, only read for required assignments, but were in the top 2% of their school, and graduated with a gpa 1.0 higher than yours. That said, I have also met a number of well prepared students from public schools (and a large number of poorly prepared students who spent $120,000+ on their high school education, but didn't take advantage of it).
I am a fairly strong believer that the real distinction is within the students (as necessitated by my desire to maintain my self-worth). The most successful students, at any institution, will be those who are self-motivated, have well educated and intelligent parents, a well educated peer group, and are intelligent themselves.
These are the confounding factors I mentioned. Students with parents who have terminal degrees are more likely to be attending these elite institutions. This parental advantage may be the strongest influence in intellectual development, and thus clouds the value of private schools. In addition the wealth of the students attending these schools is much higher than at a public school (its weird when your school has children whose parents are billionaires). This wealth provides numerous more resources for students: tutors, summer classes, camps, et al. These addition resources provided by surplus wealth also confound the true value of these high-end schools.
Counseling programs do vary by school, but my experience is not particularly unusual for a higher end private school. These schools will typically have 100% of their students accepted to a school when they graduate. That doesn't happen by accident.
"Public schools in the US are not very good. Rich people tend to go to private ones"
Nothing unique about the US there. That's been the case in all the places I've lived. (UK, Australia, Japan)
Nothing unique about the US there. That's been the case in all the places I've lived. (UK, Australia, Japan)
In Germany it is rather rare that a kid would go to a private school. State schools used to have a formidable reputation, but things seem to be changing. Parallel to a public discussion about rising inequality that has been heatening up in the last 5 years, the level of kids going to private schools is rising, nearing the 10 percent level.
You're right. I extrapolated to where I sense the Heritage Foundation was hinting at. Word for word, if it came from an apolitical source, there would be nothing to argue against.
Then don't argue against it. Say, "This article is true in and of itself, but I think the heritage foundation is presenting it in order to..."
The merit of an argument is independent of its source: http://en.wikipedia.org/wiki/Ad_hominem
Using the Google founders as the example of "inequality being good" is ridiculous. Most people don't have a problem with rewarding innovative work; people have problems with not providing a baseline for those who can't. In a pure pay for performance society, those who can't perform, won't get paid. Is this fair? On the surface, well yes, maybe. But what if the REASON for their non-performance is based on systematic oppression and lingering effects thereof? Is a pure pay for performance system still fair?
What about the handicapped, depressed, and otherwise ill affected?
The pay for performance (or inequality is good) argument is fine when no one gets hurt, when the low performers, say, will get a 1% instead of 10% bonus. But when we're talking about the lower levels of society, where people can literally go homeless or die of untreated disease, then it's not so easy to come up with these fantasy theories.