>I worry that if we don't acknowledge this, we're headed for trouble. If we think 20th century cohesion disappeared because of few policy tweaks, we'll be deluded into thinking we can get it back (minus the bad parts, somehow) with a few countertweaks. And then we'll waste our time trying to eliminate fragmentation, when we'd be better off thinking about how to mitigate its consequences.

A few people making rules didn't cause this to happen. It was the entire world reacting to things the entire world did for the past hundred years. A few people making rules can't stop that kind of force, even if they have good intentions for everyone else.

>What we're looking for is just more equality in economic opportunities and esp capital and that distribution of capital to be more fair across all the classes and not to be a privilege only for rich people and highly connected people... That's how we envision the solution to fix this problem

He mentions this:

>You can mitigate this with subsidies at the bottom and taxes at the top, but unless taxes are high enough to discourage people from creating wealth, you're always going to be fighting a losing battle against increasing variation in productivity.

I think you're looking at a lower scale than pg. From how I read it, he's saying that yes, you can do a little bit to ease the inequality, but you're not going to fix it unless you stop all technology from happening or you stop paying people their market rate. He's saying income inequality is a feature of technology allowing people to be paid their market value and that you can't 'fix' that; the most you can do is take from people at one end and give to people at the other end.

The thing that I worry about is whether this feature is destroying the conditions that allowed it to become a feature in the first place.

He mentioned the example of Apple and IBM, which I see as illustrative in another way. Would personal computing devices have become popular in a highly fragmented world? According to Wikipedia, the Apple II cost over $5k, accounting for inflation. Absent a healthy middle class, which was created by the era of conformity and relative income equality, would there have been enough consumers to create a market for a $5k computer? As we see income inequality rise, are we not also going to see the opportunity for wealth creation diminish as capital congregates in the hands of a class that largely conserves it?

I think we're already seeing this. As an exercise, try to think of something non-niche that costs around $5k, the price of the Apple II, for which there isn't some form of financing (auto/home/college loans and such). I'm hard-pressed to think of something and I believe it's because there's an increasingly small number of people that can afford such a product. We're already losing the conditions that allowed Apple to introduce the personal computer. There's a long ways that this trend can go before it becomes untenable, but the end result of income inequality will be an environment where it's quite difficult to get paid your market value because the market that funds the employment market will have dried up.

And on that, as on so much else, he's more than a little wrong.

Apple and Microsoft simply couldn't have happened without the mega-corps - not least HP, but also IBM, and Fairchild and its spin-offs - which only existed because of post-war military and civilian "socialist" state support for technology.

By the mid-70s that support had been influencing economic policy for more than forty years.

Apple was a product of that system, not a cause of it. Companies like Apple do not happen in a pure deregulated neoliberal market paradise because markets don't have the kind of strategic intelligence that can fund projects like Whirlwind, TX-0, and the original Arpanet - all of which are essential steps on the road to making an Apple or a Google.

>Absent a healthy middle class, which was created by the era of conformity and relative income equality, would there have been enough consumers to create a market for a $5k computer? As we see income inequality rise, are we not also going to see the opportunity for wealth creation diminish as capital congregates in the hands of a class that largely conserves it?

And this is why they can't happen. You can't build your economy by impoverishing your customers with hand-wavey idealism about "market rates." If you try that, at best you run out of customers, and at worst you get a violent revolution.

The smart way to understand the economy isn't as a number of acquisitive centres for a vague thing called "money", but as a way of amplifying collective intelligence and distributing the gains as widely as possible. Status games for their own sake - which include most purely speculative and acquisitive activity - are the opposite of collective intelligence because they concentrate acquisition instead of distributing it.

You can get localised negentropic blips in a speculative economy, but the overall trend will still decrease collective opportunity over the medium/long term rather than increasing it.

Companies like Apple do not happen in a pure deregulated neoliberal market paradise because markets don't have the kind of strategic intelligence that can fund projects like Whirlwind, TX-0, and the original Arpanet - all of which are essential steps on the road to making an Apple or a Google.

Going even further, corporations themselves do not happen in the absence of regulation, and I think that the granddaddy of entitlements -- liability limitation -- is necessary in order to gather enough capital to form great ventures like chip manufacturing.

The book Doing Capitalism in the Innovation Economy [1] really hammers in this point. I highly recommend it to people who have an interest in this. I wrote a review that captures a lot of my reflections on the book itself and the subject matter [2].

[1] http://www.amazon.com/Doing-Capitalism-Innovation-Economy-Sp...

[2] http://www.amazon.com/review/R2SCHS5SXNDF30/ref=cm_cr_dp_tit...

While I can agree that private entities/markets lacked the capability to fund transformative projects during most of the 20th century, I'm hard-pressed to reasonably apply that to the modern context.

It seems that the most forward thinking, transformative ideas are indeed coming from the private sector markets (e.g. SpaceX), and with the enhanced abilities that our technological age affords to solo individuals, it seems that even small teams may be able to create the next transformative, paradigm-shifting project.

Because technology enables small teams to make big changes that were once only within reach for large entities like the government, the idea that markets don't have the strategic intelligence to do big, long-term thinking, just seems bunk to me. Also, look at the AI lab announced by Altman and Musk, or look at YC's new long-term research lab project. These could conceivably produce the next Arpanet, don't you think?

40-50% of funding from NASA contracts. Yes, this isn't necessarily the same as a direct subsidy, but, in fitting with the article:

"Many of the mid-century oligopolies had been anointed by the federal government with policies (and in wartime, large orders) that kept out competitors."

http://www.pewsocialtrends.org/2015/12/09/the-american-middl...

As for 5k products, like fancy drones, 3d printers or high end bicycles, was the apple II non-niche?

What has happened is instead technology allowed some luxury products to be commodized and available to everyone. I doubt multi-billionairs build their own OS-es, cell phone towers, hardware, batteries, support from scratch. They buy an iPhone. Someone on food stamps could concievable save money and still get an iPhone. They both have a luxury product so to speak. But this is a cool anomaly. It doesn't happen with cars, housing, job opportunities, healthcare, clothes, safety, free time, food, etc.

So I think looking what kind of tech products are avaiable to everyone doesn't work as an argument regarding inequality. What about inflation adjusted salary, isn't that a better metric to look at? Or say the cost of healthcare or housing as percentage of wages... defintely not the type of computer and printers people can get.

http://www.census.gov/prod/2008pubs/h150-07.pdf

Of course, this is tangential to curun1r's claim, which is that somehow an inability for consumers to purchase new technologies would hinder innovation.

The figures are as follows (all in thousands):

14,157 units below the poverty line (12.7% of all units)

5,566 of those Owner occupied (39.3%)

3,191 of those owned "free and clear" (22%)

So his 45% claim isn't even true to start with. It falls to 22% when you consider full ownership.

Seeing yummyfajitas make factually incorrect claims is disappointing but not surprising.

First of all, owning "free and clear" is hardly the expected meaning of ownership in the context of cars or especially houses in the US. I have a mortgage and I still say I own my house. When I told friends I was buying my house, I expect >90% of them assumed I was getting a mortgage. The government reported "homeownership rate" certainly does not exclude households with mortgages.

Second of all, ignoring semantics, the original context was a conversation about whether a significant number of households being unable to afford technology like a $5K computer would stifle innovation. Innovation probably doesn't care whether customers are in debt or not, so this is still perfectly decent evidence to cite about the spending capacity of poor households.

"Disappointing but not surprising". Sigh.

If so, do you also consider the Census (whose terminology I used) to be making "factually incorrect claims"?

Citing any sort of statistics like that without at least breaking it down by age band is pretty pointless, in my experience.

So, I get your overall point.

The other thing to recognize is that being poor is MORE EXPENSIVE than being rich. This fundamental fact is often missed by richer (or just middle-class) folks who think that poor people could do better by saving and being frugal etc. Well, if you have no liquid cash at all, you can't even take advantage of quantity discounts or other opportunities, but you still need to eat and have clothes. A decent amount of wealthier people in our system get wealthy via taking advantage of the desperation of poor people, and until that changes, some amount of criticizing the personal financial decisions of poor folks is just victim-blaming.

If you have enough cash to buy a car and enough left to be an emergency buffer and cover other needs and don't have something to do with that cash which promises a higher investment return than the interest on a car loan, then it does not make sense to get the financing. It doesn't matter that the value of the car to you is spread out over time. Buying the car outright is better unless you needed the money for something else or didn't have it or had some investment that would outpace the interest on the loan.

Can you elaborate please on what kind of force at work? Market forces?

Also, do you have any idea why he's bringing up the subject of "social cohesion" repeatedly throughout the piece? Is social cohesion a hot button issue in the US now that warrants more attention from the general public?

Because I believe that as long as the country is not at war with or in a national state of emergency or in other words, citizens are facing any kind of existential threat, the talk about social cohesion is meaningless and could be divisive as the term is tainted with not so favorable concepts from nationalism, nativism and the likes.

> unless taxes are high enough to discourage people from creating wealth

I don't want to discourage rich folks from creating wealth. I just want them for now to pay their fair share of taxes and close all the loopholes that fuel this income inequality gap and distribute more resources to the least privileged and most disfranchised groups in the society to alleviate their situation.

As for technology has an inequality bias to it, I have to disagree with this assertion and point out that the availability of capital or lack thereof is the main catalyst in this equation not technology.

You mean if you can't afford a computer and an AWS account you can't get started? Sure, maybe not, but it's a far cry from the capital you needed in the 1960s to get started. I bet a lot of the readers of this forum know people personally that have made a million dollars or more with their laptop (to a first order approximation).

The point you're making about tech startup costs is true, of course, although it looks like statistically speaking the chances of hitting it big are only slightly better than 'will become a famous singer' or 'will play for the NBA.'

But even if we assume that an average human with a laptop and AWS can now make it big, it seems like in the meantime so much of the other things that working-class people had going for them in the 1960s -- being able to support a family on construction wages, for example -- are gone.

But he argues before that point that tax rates and tax receipts are very weakly correlated. This would seem to be a limiting factor governing how effectively a government can flatten inequality through wealth redistribution.

The capital gains rate under Eisenhower was only 25%, while the top bracket was 91%.

And the corporate tax rate under Eisenhower was only 50%.

Very few of the great sources of dynastic wealth in America were built by accumulating wages under normal income rates.

This is not correct. If you read "Capital in the Twenty-First Century", the book most lefties are pushing nowadays, you'll see there is a chapter with recommended solutions.

The recommended solutions are things like government control of CEO salaries, confiscatory taxes on the rich (e.g. not taxes to pay for something, taxes to specifically change their status from rich to middle class, something the author even says wouldn't even bring in useful income for the government because there are so few rich to confiscate from), etc.. So their are central planning policies being recommended indeed.

To the extent they aren't being argued for (I won't comment on whether they are "longed for" except to say that you don't seem to have read many leftist writings), that's because they are now the norm, so the burden of argument is now on those who want to change them.

For example, it is now considered the norm that the government will mess with the money supply and the banking and financial system whenever it feels like it, in order to implement centralized control of the economy. Nobody has to argue for it; the burden of argument is on those who aren't sure things like the Fed printing money are a good idea (and most of the time their arguments aren't even heard, they're dismissed as crackpots, even though the worst depression in history occurred after the Fed took control of the money supply).

Also, it is now considered the norm that larger and more centralized government is better; the US Federal government, the EU, etc. People talk about a single world government as though it were a natural next step. Nobody has to argue for any of these things. The burden of argument is on those who think centralization of power has done more harm than good (and again, most of the time their arguments aren't even heard, they're dismissed as crackpots).

> What we're looking for is just more equality in economic opportunities and esp capital and that distribution of capital to be more fair across all the classes and not to be a privilege only for rich and highly connected people.

And Graham's point is that, even in a perfect world where economic opportunity and access to capital was perfectly equal, there would still be huge variations in wealth, simply because there will be huge variations in how well people take advantage of economic opportunity and access to capital in order to create wealth. And the more technology advances, the larger the variations will be, because technology amplifies the differences in productivity between people.

So by all means, fight for a fairer world in which there is equality of opportunity. But don't measure your success by equality of outcome. Unfortunately, equality of outcome is exactly how "success" is measured by basically everyone. And we have "lefties" to thank for that.

> That's how we envision the solution to fix this problem of "fragmentation" as he put when it exactly is more like a "segregation" problem but not based on racial or cultural factors but on economic one into two completely separate societies between the haves and have-nots, between the 1% and the 99% of the population and it's getting worse and uglier by the day.

This kinda reads like word salad to me -- I have absolutely no idea what concrete policy changes it's meant to imply.

To start, SS taxes apply to all income levels. Next, you can't avoid capital gains by donating appiceated assets. Further, capital gains is taxed at the same rate as all other income.

And my personal favorite, there are zero corporate tax breaks of any kind.

U.S. politics has gotten strange, people complained about welfare mothers not working when that's shat the system was designed to do. IMO, hand out a small fixed amount every month, then flat tax everything last that point and get the government out of micromanaging the economy. Upside, no tax breaks makes everyone's taxes easy, downside would never get implemented.

> Other evidence points indirectly to a strong role of market power. At this point, for example, there is an extensive empirical literature on the effects of changes in the minimum wage. Conventional supply-and-demand analysis says that raising the minimum wage should reduce employment, but as Reich notes, we now have a number of what amount to controlled experiments, in which employment in counties whose states have hiked the minimum wage can be compared with employment in neighboring counties across the state line. And there is no hint in the data of the supposed negative employment effect.

> Why not? One leading hypothesis is that firms employing low-wage workers—such as fast-food chains—have significant monopsony power in the labor market; that is, they are the principal purchasers of low-wage labor in a particular job market. And a monopsonist facing a price floor doesn’t necessarily buy less, just as a monopolist facing a price ceiling doesn’t necessarily sell less and may sell more.

http://www.nybooks.com/articles/2015/12/17/robert-reich-chal...

There's also something similar to your subsidy idea today called the Earned Income Tax Credit [https://en.wikipedia.org/wiki/Earned_income_tax_credit]. Guaranteeing a minimum income does seem like a promising idea, but it will probably have to be tried elsewhere before the U.S. will adopt it (if ever).

The theory is that the buyers of labor in these cases will simply buy alternatives - specifically low-labor alternatives, like automation. Think of automated checkout stands at retail stores, but applied to fast food.

Time was, fuel filling stations all had attendants. Drivers didn't get out of their cars when they purchased gas. They drove up and were greeted by an attendant who operated the pump and took payment. We don't do that anymore - now that attendant job doesn't exist. There's nothing stopping that same kind of transition for many other service jobs.

https://en.m.wikipedia.org/wiki/Tipped_wage_in_the_United_St...

My guess: Relax, what you want is well on the way. The biggies now, in Silicon Valley and Wall Street, are on the way to a land of commodity products, fungible work, high competition, and low profit margins.

Why? Because really powerful innovation they will need but don't much have.

The opportunity? For now, more in innovation.

The opportunity? Be the only guy who knows how to bake really good bread in a land of suddenly huge quantities of just dirt cheap wheat. Or, computer cycles, data storage bytes, data communications data rates per dollar are through the roof, and operating system, infrastructure, and OSS are all just dirt cheap. So, the challenge and the opportunity is to be innovative and make use of this dirt cheap wheat.

Or, 15 years ago, a Web server might have been on one or several single core processors with clock speed of 90 MHz. Now, for much less money can get an 8 core processor with a clock speed of 4.0 GHz. Let's take that ratio in performance:

      8 * 4000 / 90 = 356

Find something really good for the new computers to do, guys!

And what non lefties are asking is how do you solve income inequality without those policies?

And more fair? Fair by what metric exactly?

The solution is to 1) roll back the corrupt laws (like the preferential tax treatment of carried interest and high-speed trading) and 2) get rid of the absurd legal doctrine established by the Citizens United decision that money=speech and hence the First Amendment applies to bribery.

Unfortunately it's not that simple. The immediate question at hand in Citizens United was about a group of private citizens being prevented from releasing a movie criticizing a Presidential candidate during an election. A movie costs money to produce and requires a large number of people to coordinate, inevitably shading over into a corporate legal structure... just like, say, a union, or a political party, or a newspaper. So how are you going to decide which corporate legal structures are making "legitimate" political speech, whatever that means, and which aren't?

Personally, I would have had no problem with CU if it had remained the narrow decision that John Roberts originally wanted it to be. Clearly, if the First Amendment protects Michael Moore's right to make and show a politically charged film close to an election then it protects Citizens United's right to do the same thing.

The problem came when this narrow decision was extended to a broader one that included for-profit corporations and labor unions. (For-profit) corporations and labor unions are legally "persons" in that they can act as legal entities in their own right (no pun intended) independent of any individual human. And they ultimately consist of groups of humans. But they are not humans. They are human constructs. They are technology. And treating them as if they were humans, entitled to human rights, leads to problems.

So personally, I would advocate retract CU protections (and Hobby-lobby protections for that matter) from for-profit corporations.

I'd also re-instate the historical lower limits on direct contributions to political campaigns.

No, it's the speech of the management. The shareholders only have indirect control. The only power they generally have is to replace board members. And sometimes they don't even have that. Google, for example, is completely controlled by Larry and Sergey. Facebook is completely controlled by Zuck.

If you want "truth" commissions, go right ahead with removing CU, but unless that, this was a great decision.

Assuming that you do come up with a plausible way of drawing a line here, you also need to have general trust that this power will not be abused. Given the heavy politicization of regulatory agencies in the United States, a large portion of the population is worried -- not without substantial justification -- that "is this speech opposed to the party in power" will be one of the factors used to draw that line.

For example, right now, you should be allowed to make a movie about how Reagan sucked, but not one about how Hillary Clinton will suck if she gets elected.

And if a citizen notices that all the politicians are lying, he needs to just shut up about it?

Honestly, does it even matter? Everybody knows all politicians are liars. It's common knowledge; it's beyond being a trope and basically a synonym. But then somehow a large part of the population still cares about what politicians have to say. They know that the politician they oppose is full of shit, and yet they feel obliged to engage with said politician's arguments. And they support another politician, conveniently forgetting that... he is a politician too, so he won't make good on their promises.

Basically, everyone got the memo. Those who were to heed it have already done so.

This is something that confuses me about humanity. The amount of denial and cognitive dissonance going on in general population's interaction with politics is so great you could fuel a power plant with it.

It matters because, if Trump says he wants to deport all Muslims, I should be able to say thats a terrible idea without fear of reproach.

Despite the fact that all politicians may be lairs (although I personally believe thats horseshit), there are people who take the word of them very seriously.

>The amount of denial and cognitive dissonance going on in general population's interaction with politics is so great you could fuel a power plant with it.

Bull fucking shit. Just because Obama didn't end up closing Guantanamo, doesn't mean its all a farce. Political groups have a real effect, or we wouldn't be talking about this. Were the people who fought for gay rights for the past 20-odd years, living in denial? Are those pushing for marijuana reform, living in denial? Are the lobbyist pumping billions of dollars into the system living in denial?

Despite the fact that the system moves a snails pace (which may or may not be the intended goal of the system), the system does have very real effects that are caused by the tiniest nudges in certain directions.

But I tend to think that it's not so much that they were planning to con everyone all along, but rather that they tried to push their ideas and failed to convince the rest of the legislature to go along with it. Maybe it died out because nobody cared about it in that year's Congress, and then the politician gets busy with other things while another year passes until the next legislature.

I imagine it's the same mechanism at work in large companies: Haven't you ever had a new manager come on board, go gung-ho on changing a couple widely visible organizational thing and getting everyone's feedback, and then calm down a year or two later once they're busy with their work? I've probably seen that at least 5 times.

However, there's a key difference: In the above situation, I would expect a politician to keep to the same general platform even if he fails to perform some specific action. The simpler statement 'all politicians are liars' leaves open the possibility that he might completely change his platform and starts actively pushing for things that he never mentioned. I don't know that I actually believe that about all or most politicians.

I'm not convinced that content-based restrictions can be easily applied, either, even putting aside one's confidence in the regulators. To take the above example of a documentary attacking Reagan, it would be easy for it to have the subtext of "and don't vote for Mitt Romney this year, he's just like that Reagan jerk."

If you want some major impact on government revenues (which would also open doors to things like public finance of campaigns, subsidized tuition, subsidized healthcare, etc.), remove the mortgage interest deduction and standard deduction, but then you quickly find out that one man's loopholes are another man's "Washington reaching into our pockets yet again".

I don't think any solution that involves politics can work. We have to solve it outside of politics by making it too difficult to use money to influence politics. We have the technology to do this without winning any votes in Congress. Instead, we need to build tools and educate people.

http://meritcapitalism.com

If this condition isn't satisfied, our economic system doesn't work, period.

I believe Paul means that these economic properties are to be expected because they arise naturally and it is not practical to eliminate them.

I almost feel you may change the entire field of economics with committing the naturalistic fallacy under your reasoning ...

I think you 're being deliberately inflammatory here. He's probably well read about the period but there is no "degree of affection" for that kind of capitalism.

It's exactly the opposite, and even acknowledged in the article: on an international scale, the world is getting more equal, not less.

When we apply economic thinking, this interaction is actually not zero sum - antelopes in general benefit from the signal that they need to be faster.

The antelope loses its life. The lion gains nourishment for a week.

Clearly the total number of utils in the system has decreased.

Generating value out of nothing and ripping people off are not necessarily incombinable things.

You can make this statement being true by moving your definition of "nothing" from economics to lay-people common sense, but then we'd be outside of a territory where we can obtain any actually reasonable observations.

> Nature is zero sum

What is "nature"? Observable universe from now to heat death of the universe? Yes. Earth in near hundred years? No.

> Robbery is also an economic transaction, and it can be positive sum if for example you don't notice.

What? How does the outcome of a transaction change depending on whether it's observed or not? Does it involve quantum particles of trees falling in the middle of desolate forests?

> That does not mean it's a good thing.

My comment didn't state anything about good or bad: these are very stupid terms and using them can't bring anything but loud voices and hurt feelings into a conversation.