Have you ever subjected yourself to clueless actors and actresses weighing in on issues like democracy, justice, legal systems, capital punishment and what not just because theirs is a face people like to see on screen? No? You should watch at least one such interview to feel what reading Paul Graham on income inequality is like.
Paul graham is the ultimate startup thought leader and I have grown up on startup Kool-Aid. So, no disputing what he is and where he can make sensible arguments. But hearing him on a broad policy-making issue like income inequality with his startup tunnel vision – no, make that software-and-internet-driven-startup tunnel vision – is quite like hearing a pretty-faced actor lament that scorching heat is bad for skin, when asked about the lack of rainfall in an agriculture-dependent country where agriculture thrives or dies at the mercy of rains.
He (oops, his article, I mean. Don’t accuse me of ad hominem, okay?) creates a strange picture of the people concerned about increasing income inequality. Apparently these people want to make the rich miserable in their attempt to decrease income inequality. They are misled because they are looking at statistics. You know, those fancy numbers that say that top x% of population owns most of the wealth and bottom y% owns so little. Statistics is apparently vile; economists are idiots for taking them seriously. Why? Because it doesn’t deal with individuals. Which individuals is he concerned about? The startup founders who get rich and are in that top x% of people statistics talk about. Why should they be dealt with separately? Because unlike the real bad guys on that top x%, whose wealth is earned by taking it from others, because they play a zero-sum game like that of the wall street, these founders are not getting rich by taking money from someone else. They are creating (new) wealth and are getting rich with that. It would be a travesty if someone were to even hint that all might not be well with them being rich.
There might be something to be said about that, but very well. Let’s assume that startup-rich are different kind of rich. So, just how much of the wealth with the top x% of population is this startupy wealth, which has been created and not taken from the others? And how much of it stays in the same systems instead of being passed on to wealth managers who – gasp – take it to the wall street to earn more from the zero sum game?
Bah! You are asking for statistics? Hasn’t it already been clarified that statistics is vile and economists are… (And didn’t Zuckerberg just give away his entire wealth to…)
Oops! My bad! But unfortunately, statistics doesn’t become useless just because someone says so, not even if that someone is Paul Graham. If there is any validity in what he is writing, and if the genuinely created wealth is in an imminent danger of being robbed away by income-inequality alarmists, then the first thing one needs to look at is the number I asked for above. There is also the issue of defining what is “created” and what is “stolen” wealth. But I am assuming we will be supplied with a workable definition by Paul.
My guess is that the proportion of this kind of wealth will be minuscule. If not, I must leave the burden of proof with him.
Meanwhile, dear economists and policy makers. It is not a given that you guys have necessarily gotten the income inequality issue right. Do go ahead and keep looking not only for answers, but also for the right questions. Is income inequality the evil or a symptom of something else that is evil (or not evil)? What needs to be attacked, if anything? Explore, but among all the things you have to do, you can safely ignore Paul Graham’s concern that you are hunters out to kill some precious animal.
 With due respect to the actors and actresses who are actually quite clued in to these issues and totally justified in talking about it. I am not talking about you, of course.