Inequality Talk Is About Grabbing

The US today has about 425 billionaires, over 1/3 of the world’s total. Many folks say these billionaires are unfairly unequal, and so we should tax them lots more.

People usually become billionaires via having “super-powers,” i.e., very unusual abilities, at least within some context. But what if most billionaires had super-powers of the traditional comic book sort, like x-ray vision or an ability to fly, etc.? That is, what if people with physical super-powers earned billions in the labor market by selling the use of these powers? Would folks be just as eager to tax them to reduce unfair inequality?

My guess is no, most would be less eager to tax billionaires with physical super-powers. And I offer this prediction as a test of my favored theory of expressed inequality concerns: that inequality talk is usually a covert way of coordinating who to maybe grab stuff from. Let me explain.

As I’ve discussed before, while people usually justify their inequality concerns by noting that inequality can make lower folks feel bad, that justification can apply equally to a great many sorts of inequality. Yet concern is actually only voiced about a very particular sort: financial inequality at a given time between the families of a nation. The puzzle in need of explaining is: why is so little concern expressed about all the other sorts of inequality?

My favored theory is an application of homo hypocritus: our forager ancestors developed the ability to express and enforce social norms, and then developed rich and subtle abilities to coordinate to evade those norms. One of those norms was that foragers weren’t supposed to grab stuff from each other just because they wanted the stuff, or just because that stuff was easy to grab. But they did have norms favoring sharing and equal treatment, and so it was ok to talk about who might be violating such norms, and what punishments to apply to violators.

But they all knew, at least subconsciously, that some groups would be quite effective at retaliating against such suggestions. The accused might physically resist the attempted punishment, or might retaliate with contrary accusations. So foragers needed ways not only to overtly accuse folks of violating norms, and to officially propose to take stuff away as punishment, but also to covertly discuss who might have especially nice stuff to take, and who they could most easily get away with grabbing from.

I suggest that most talk about the problems of inequality actually invokes this ancient hypocritical ability to covertly discuss where to find lots of nice easy-to-grab stuff. We don’t discuss inequalities across time, because it is hard to grab much more than we do from the past or the future. We don’t much discuss the inequality of rich foreigners, because it is much harder to grab their stuff. We don’t much discuss inequality of those with unusual artistic abilities or sexual attractiveness, because we can’t directly grab their advantages and while we might try to grab their material goods to compensate, they don’t have that much, and the grabbing would be hard. (Also, such folks have more social status to resist with. For foragers, status counted lots more than material goods for influence.)

A few people within our nation who each have lots and lots of material goods, however, seem to make a great target for grabbing. So people discover they have a deep moral concern about that particular inequality, and ponder what oh what could we possibly do to rectify this situation? Anyone have an idea? Anyone?

But if those few very rich folks had real physical super-powers, we would be a lot more afraid of their simple physical retaliation. They might be very effective at physically resisting our attempts to take their stuff. So somehow, conveniently, we just wouldn’t find that their unequal wealth evoked as much deeply felt important-social-issue-in-need-of-discussing moral concern in us. Because, I hypothesize, in reality those feelings only arise as a cover to excuse our grabbing, when such grabs seem worth the bother.

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  • Jess Riedel

    To clarify: is it true that when you say

    > inequality talk is usually a covert way of coordinating who to grab stuff from.

    you mean “inequality talk is the result of human tendencies (which developed in the ancestral environment) to try and grab stuff even if, in the present case, this talk isn’t an effective means to those ends”? Because, per Caplan and the Myth of the Rational Voter, any individual has negligible chance of influencing national policy (through either talk or voting) in a way that gets them stuff.

    If this is what you mean, then your observation may be interesting but it probably wouldn’t sway the moral argument too much. *All* of our moral intuitions are likely the result of such ancestral adaptations, and we don’t typically use those origins as a reason to ignore them.

    So really, this is an argument to be more consistent in our morality, right? Other things being equal, we might (in light of your observation) choose to enforce all forms of inequality to the same degree. But this is *not* an argument against redistribution per se.

    • http://juridicalcoherence.blogspot.com/ Stephen Diamond

      you mean “inequality talk is the result of human tendencies (which developed in the ancestral environment) to try and grab stuff even if, in the present case, this talk isn’t an effective means to those ends” Because, per Caplan and the Myth of the Rational Voter, any individual has negligible chance of influencing national policy (through either talk or voting) in a way that gets them stuff.?

      Another example of how the distinction is important here is that it’s by no means obvious that the billionaires are easy pickings, although someone in the primal environment who gathered comparable wealth would be easily toppled if it’s even conceivable. Even if you could pass taxes, while the media they control, like Fox, blast defamatory propaganda charging “fascism,” tax codes are weapons in arms races where the billionaires hold the upper hand.

    • http://overcomingbias.com RobinHanson

      Yes I refer to ancient evolved habits that need not be as effective or relevant today. For example, very rich folks today likely have better social means to resist grabbing efforts than they likely did for our distant ancestors.

      • Jess Riedel

        OK. In that case I encourage you to make your language more clear on this, because I think it trips up a lot of people consistently, including me.

        Sometimes when you say “person P does action A to get goal G” you are using an operational/revealed-preferences outlook (i.e. “We infer A is to get G because when you take away the opportunity to get G, P no longer performs A”) and sometimes you are using an evolutionary perspective (i.e. “A and G are similar to A-prime and G-prime in the ancestral environment, and P does A because G-prime increased fitness”). These two interpretations give very different predictions.

        Also, I’ll try one more time: please get rid of the advertisement inserted when copying text! It makes it very annoying to quote your post in a comment. John Gruber describes my frustration well (although he focuses on Tynt, which you don’t use): http://daringfireball.net/2010/05/tynt_copy_paste_jerks

      • http://overcomingbias.com RobinHanson

        Those two explanations are usually tightly coupled. We explain why people do particular things today by referring to an evolved habit of doing such things to achieve ancient ends.

      • Jess Riedel

        But they lead to different empirical predictions, so you must clearly state what you mean. “People take the on-ramp to get to the highway” and “People talk about inequality to grab resources” are completely different. Demolish the highway and people will stop taking the on-ramp. But put people in a nation 10 million times larger than the tribes of the ancestral environment (diffusing their individual ability to influence group decisions) and they still talk about inequality.

  • http://juridicalcoherence.blogspot.com/ Stephen Diamond

    Inequality talk is inherently more than just coordinating grabbings, (How else to enforce a ban on inequality except by forced redistribution?) The telling point against your claim is that the inequality invoked always has to do with an inequality in a particular attribute. If we had a means of redistributing intelligence, maybe it would seem reasonable to redistribute it, but it sounds ridiculous to the human ear that we might redistribute wealth to, say, certain very physically ugly people who are actually wealthier than the ugly people, to establish a more abstract equality. The point is telling because it shows that the norm provides strong constraints on how “inequality” is construed, rather than being an all-purpose justification for easy redistributions.

    Still, the point is insightful that inequality talk is invoked preferentially to coordinate easy (downward) redistributions, even if, once stated, it seems obvious.

    • http://overcomingbias.com RobinHanson

      We are trying to explain why some things “sound ridiculous to the human ear.”

      • http://juridicalcoherence.blogspot.com/ Stephen Diamond

        Right. My point is that your theory doesn’t explain why the redistribution to the ugly/wealthy does sound ridiculous. Why shouldn’t people try to redistribute based more abstract inequalities? It can’t be simply that it isn’t possible to redistribute ugliness because what we’re talking about is redistributing wealth (to compensate for ugliness). It isn’t that the poor/not ugly don’t have anything worth taking; not infrequently taking increases material inequality, but the point is that such takings aren’t coordinated through inequality talk.

        The anti-inequality norm must itself have some very constrained nature because it’s invoked only when the inequality applies to a single attribute. I don’t think you explain that or can explain it

  • Mark W

    “…people usually justify their inequality concerns by noting that inequality can make below average folks feel bad…”

    If that’s the most common argument you’ve heard against wealth inequality, then you’re talking to the wrong people. Justifications I hear usually revolve around the ethical problems associated with impoverished people, and the suffering that results (within or across nations, both are common laments). Maybe that’s what you mean, but “feeling bad” isn’t really in the same league as starvation.

    It seems like you’re suggesting that, instead of inequality concerns coming from evolutionarily adapted altruism (such as kin altruism that has been culturally co-opted, or another way to get to genuine altruistic feelings), peoples concerns about inequality instead has its roots in subconscious collaboration to rob the better-off. Why then do so many people concerned about inequality put their efforts into social work or philanthropy? Are they just confused about how to get to the goal?

    To be sure, there are people who bitch about rich people and how it seems unfair, and maybe this is who you’re talking about. But most people I’ve ever talked to who discuss concerns about “inequality” seem to have genuine altruistic feelings underlying their concerns.

    • Jess Riedel

      > Justifications I hear usually revolve around the ethical problems associated with impoverished people, and the suffering that results (within or across nations, both are common laments). Maybe that’s what you mean, but “feeling bad” isn’t really in the same league as starvation.

      Essentially no one is starving in the US, but they are around the world. Yet people are vastly more likely to support redistribution within the US than from the US to poor countries.

      The poor in the US now are materially better off than the middle class was in the 60′s. Many very smart people do, in fact, justify redistribution based off of inequality concerns rather than suffering concerns (e.g. Krugman: http://www.slate.com/articles/business/the_dismal_science/1996/12/the_cpi_and_the_rat_race.html ).

      And some (e.g. Frank: http://www.nytimes.com/2007/08/05/books/review/Gross-t.html?pagewanted=all&_r=0 ) of the more sophisticated of these recognize that social status is a huge determiner of happiness and largely a zero-sum game, i.e. making people feel bad.

      • Mark W

        Those articles present some interesting points, thanks for posting them. Part of what bothers me here is the idea that it is hypocritical to advocate for reducing wealth inequality because we all have a covert selfish reason. The line between conscious rationales/feelings and the explanation for their evolutionary origin is blurred. While the argument is explicitly about the latter, the word choice and tone implicate the former. Or maybe I’m just reading too much into it?

        Anyway, the whole argument in the article is based on the dubious assumption that people would indeed be less likely to support wealth distribution in the case of wealthy superheroes. Pragmatically speaking, wealthy people do have superpowers, and i don’t mean smarts or ruthlessness. Money itself affords incredible powers, and is constantly being wielded by the rich to defend their interests against those threatening their wealth (including through physical means). Besides, the battleground isn’t usually physical, it’s legal, and you better believe the money wielders have more power there than the guy with laser eyes. Bottom line – I don’t see any reason to believe people would be less likely to feel the urge to take away an outrageously rich superheroes money.

      • http://overcomingbias.com RobinHanson

        If you disagree with my prediction, care to offer betting odds (and amount)?

      • Joe Teicher

        How in the world would you settle that bet?

      • BenGolden1

        Say we present survey respondents with two scenarios:

        1) Jim is a talented businessman. Over his life he has earned $50B by building companies and working as an executive. He conducts little philanthropy and spends most his money on luxury goods for himself. While his wealth affords him considerable power, he is ultimately subject to a democratically elected government, which can tax him as it chooses.

        2) Bill is a superhero. Over his life he has earned $50B by creating and selling valuable materials that he created using his superhuman talents. He conducts little philanthropy and spends most his money on luxury goods for himself. While he lives in a democratic country, his powers are so strong that the government cannot effectively force him to do anything, including pay taxes.

        Q1) Should the government raise Jim/Bill’s tax rate?

        Q2) Is Jim/Bill behaving immorally?

        Robin, it seems your prediction is that respondents will be more likely to answer “No” to both questions for Bill than for Jim.

      • gjm

        Probably best not to use the term “superhero”, which arguably means not only “person with superpowers” but “person with superpowers who uses them for fighting crime, saving the world, etc.”.

      • Alexander Gabriel

        Your point about social status is well taken, but what’s that you say about the poor today?

        Just skimming random sources:

        “From 1967 to 2009, the real mean household income of the top quintile increased by 71 percent, meaning the rich became much richer. Over the same period. The real mean household income in the bottom quintile increased by 25 percent.”

        http://www.learnliberty.org/videos/is-there-income-mobility-in-america

        25 percent is middle class?

        And Figure 3.5 doesn’t inspire confidence either:

        http://www.theatlantic.com/business/archive/2011/10/why-workers-are-losing-the-war-against-machines/247278/

      • Jess Riedel

        Nothing you cite conflicts with my claims.

    • http://juridicalcoherence.blogspot.com/ Stephen Diamond

      Kin altruism doesn’t involve concerns about inequality. You favor your brother even if he’s better off than you.

      • Mark W

        I was referring to altruism being extended to suffering people. It doesn’t have to be directly related to inequality.

    • http://overcomingbias.com RobinHanson

      Talking about keeping the poorest folks from starving is usually pretty separate from talk about how bad it is that a few people are very rich.

  • Paul Gowder

    There are about a hundred objections I want to make to this, but let me start with just one: if the hypothesis were true, wouldn’t we see only people who wanted to grab complain about inequality? Yet we see lots of people with high incomes argue that inequality should be reduced, even though the policies they espouse would make them the grabbed-from rather than the grabbing. (Now, you might say they do so for some kind of signaling or status reasons, but there’s no reason to believe that being pro-redistribution accords greater status than being against it.)

    • http://overcomingbias.com RobinHanson

      I didn’t say all people who talked about grabbing would personally benefit from it. I said it is a coordination, meaning that a supporting coalition is recruited.

      • VV

        Your claim is unfalsifiable.

      • http://overcomingbias.com RobinHanson

        Since you give an invalid email in your comments, I have to tell you this publicly: you are violating the OB comment frequency rule. See the About page.

      • VV

        Is this a new policy? Anyway, sorry for the barrage of posts, I will now pay attention to the frequency.

    • Sam Dangremond

      “there’s no reason to believe that being pro-redistribution accords greater status than being against it.”

      Um, you’re kidding right?

      Everyone from Warren Buffet to your run of the mill “Occupy” protester gains increased status from being pro-redistribution.

  • Navin Kumar

    Actually, some of them (and I’m one) are more or less explicit in why we should tax the rich: the utilitarian idea that the money has diminishing marginal utility, and that the pain of raising money for whatever public purpose is minimized if you focus on the rich (although that doesn’t automatically justify progressive tax rates.)

    “It’s really easy” is another way of saying “the administrative overhead is low” and that actually seems like a good argument to me.

    • Grant

      The rich tend to invest their money wisely. Those who end up with their tax dollars may not invest so wisely.

      Using consumption taxes might make more sense as they would not fall upon investments.

      • Kirk Holden

        Yeah, that’s why Bernie Madoff never got his scheme to rip off rich people off the ground. Got hindsight bias much?

      • Grant

        There are plenty of anecdotes to throw around, but I don’t think doing so is helpful. I would rather my country’s wealth be in the hands of the people who manage it best. If people are growing wealthy by more harmful means than wealth creation (e.g. Madoff), I’d prefer that be dealt with as its own problem.

        I don’t get any dis-utility from billionaires I’ll never meet. If other people do, I would find more progressive consumption taxes preferable to wealth taxes. Wealth isn’t what lets the rich have nicer things than the rest of us, consumption is.

      • Kirk Holden

        I am channeling Taleb’s Fooled by Randomness argument. I have an unfair advantage in a lottery if I can purchase a quantity of tickets that matches or exceeds the odds of winning. What these undeserving richians have is the ability to make far more stupid guesses.

      • M_1

        “I have an unfair advantage in a lottery if I can purchase a quantity of tickets that matches or exceeds the odds of winning.”

        Assuming (a) nobody else also purchases a winning ticket and (b) the cost to purchase that many tickets doesn’t exceed the prize (particularly after your beloved taxes are applied).

      • VV

        Why do you think that rich individuals can manage their wealth better than professional investment organizations such as banks?

      • http://extropolitca.blogspot.com Mirco Romanato

        Because it is their wealth, so they are more prudent. And if they are wrong, they pay for their mistakes.

        Professional often manage their wealth better than other’s wealth.

      • VV

        A bilionarie that loses 50% of their wealth in a bad investment, is still extremely rich. Due to sub-linear utility of money, they would hardly percieve the difference.

        A professional investor that loses 50% of their customers’ funds, ends up out of business and possibly in jail.

        In general, middle class/moderately wealthy people who invest collectively (through banks, pension funds, etc.) are much more risk averse than very wealthy people w.r.t. the same amount of invested money.

        I think that if wealth was more equally distributed, the increased risk aversion would make the world financial system much more stable.

      • http://www.gwern.net/ gwern

        This is just the old jam tomorrow/’inequality is justified because it increases economic growth!’ claim. Yet, Scandinavia seems like a pretty nice and wealthy area to live in.

      • Andrew Rettek

        I’ve heard that this isn’t true from Michael Vassar after he visited.

      • http://www.gwern.net/ gwern

        That’s nice for Vassar, but why does anyone else care?

      • Alexei Sadeski

        Scandinavia has a less progressive taxation system than does the US.

        Scandinavian nations have either zero or extremely low inheritance taxes, as well as extraordinarily high consumption taxes.

      • http://www.gwern.net/ gwern

        And yet, what do the respective Gini coefficients look like?

      • Alexei Sadeski

        Are you arguing that progressive taxation causes MORE wealth inequality?

      • http://www.gwern.net/ gwern

        I am pointing out that there’s a lot of complex details to societies which can easily vitiate a narrow point like ‘taxes when defined in this technical way loosely satisfy another technical definition “progessive”‘, and that a simple overall metric like Gini is a good corrective to myopic counter-objections. If Sweden is more equal despite a supposedly more progressive taxation system, well, then perhaps one’s fact is wrong or an incomplete view.

      • Alexei Sadeski

        As you obviously have zero knowledge of what you speak, perhaps some education is in order.

        This is a subject on which I have read extensively, and the following are all facts:

        Overall, the taxation system of Sweden is dramatically less progressive than that of the US. There is no technicality here. I am speaking holistically.

        Overall, the distribution of income in Sweden is not much different from that of the US: http://en.wikipedia.org/wiki/List_of_countries_by_income_equality#Gini_coefficient.2C_before_taxes_and_transfers

        The OECD uses a set of adjustments to their GINI measurements which distorts their post T&T numbers dramatically “in favor” of high consumption tax jurisdictions (Europe & Canada) and dramatically “not in favor” of others (the US, basically).

        The simple fact of the matter is that the US doesn’t have particularly high income inequality relative to Scandinavia, nor to the EU in general – in fact it’s likely quite a bit less than many EU nations once one accounts for the stricter tax compliance of the US (and thus more accurate numbers in US stats vs Italy for instance).

      • http://www.gwern.net/ gwern

        > Overall, the distribution of income in Sweden is not much different from that of the US: http://en.wikipedia.org/wiki/L

        “before taxes and transfers”. Gee, that’s not a important qualifier at all!

        > The OECD uses a set of adjustments to their GINI measurements which
        distorts their post T&T numbers dramatically “in favor” of high
        consumption tax jurisdictions (Europe & Canada) and dramatically
        “not in favor” of others (the US, basically).

        So in other words, it is a ‘fact’ that you have to dismiss the OECD’s numbers as biased because they don’t come out as you want them to come out. You may be ‘well read’ in this topic, but you know who I trust more than an insulting supercilious person online who dismisses numbers they don’t like by professionals and link to blatantly cherrypicked numbers? The OECD.

      • http://extropolitca.blogspot.com Mirco Romanato

        Scandinavians are a small group of people and they are a lot homogeneous.

        There is a reason they had eugenic sterilization going until the ’70 and they impose a lot of conformism on their people.

        So when the government elite decided that it was “enlightened” to import a lot of M.O, africans and others, they did it in droves. But they never assimilated them, for the same reasons. A lot of them ended (self)segregated, unemployed (because they are unemployable (for various reasons) and on the government dole.

      • KP

        (A) we don’t have a capital shortage in the developed world. We are well past the point of diminishing returns in terms of incentivizing investment. If you know of ready-to-explode markets just thirsty for investment you can become a billionaire yourself, so don’t tell me, but go start a hedge fund right now.
        (B) even if we did have a capital shortage, market makers like GS are demonstrably more successful at profitable investing (i.e. asset allocation) than wealthy individuals.
        (C) that’s because they have unfair advantages in terms of information asymmetries.
        (D) most of the super rich did not make their fortunes through savvy investing.
        (E) the rich consume much less of their income, and any tax on consumption would be regressive. I realize that may not problematize it to you. You may prefer regressive taxes. But let’s not pretend it would shift the tax burden anywhere but down the SES spectrum.

      • VV

        The rich tend to invest their money wisely. Those who end up with their tax dollars may not invest so wisely.

        I suppose the world financial collapse of 2007-2008 was caused by the foolishness of blue collar workers, wasn’t it?

      • IMASBA

        Grant

        “The rich tend to invest their money wisely. Those who end up with their tax dollars may not invest so wisely.”

        There is no such thing as a an unwise investment outside these people’s personal lives. For macroeconomics it really does not matter much if a millionaire buys $1 million worth of Wal Mart stock or a thousand working poor each spend $1000 buying potato chips at Wal Mart. Rich people take better care of their own financial situation but they do not really grow the economy more than poor people spending their money do, unless you’re convinced that the private yacht industry is inherently more valuable to humanity than the plastic chair industry.

    • Weaver

      Some additions to your overhead then:

      1. Decreased incentives for the very rich to produce, with deadweight loss

      2. Incentives for the very rich to avoid or evade tax, with deadweight loss

      3. Your redistribution decreases incentives for the poor to produce, with deadweight loss.

      4. Your redistribution increases consumption from investment, lowering long term growth.

  • Grant

    Subsidizing jealously might produce more jealousy. If we distribute benefits based on subjective mental states, we cede control of those benefits to anyone who can produce or fake those states in themselves.

    Redistribution based on physical needs seems like a better argument to me.

  • Jokah Macpherson

    I agree with the thoughts about why people focus on financial inequality but not any other types, but do billionaires really have “super powers”? As far as I can tell they tend to be relatively innovative and have good business sense but not to any mind blowing extent. I think most original billionaires obtain their wealth by identifying an emerging market niche and building up a business that becomes one of very few major players in that niche – basically building a monopoly. It takes certain skills but a lot of luck as well.
    If Bill Gates could actually cure malaria just by touching people, that would be orders of magnitude more amazing than any particular talent he actually possesses in reality.

    • Glen Raphael

      Steve Jobs fits the “superpower” model pretty well. One could argue about which exact attributes were core to Jobs’ power set – maybe some combination of “perceptive” and “charismatic” and “focused”. Whatever magic he did, it was *repeatable*. Across multiple products and multiple industries, and really not based on “building a monopoly” – most of his successes never owned a majority of the relevant market.

      It does seem a bit harder to make the case for billionaires in general.

      • IMASBA

        Actually I think Steve Jobs is a bad example (he didn’t really design or engineer anything and he surely wasn’t solely responsible for Apple’s PR success in tapping into illogical mental biases), then agains every billionaire is a bad example because there simply is not a single human being alive who really “earns” billions of dollars.

      • Jokah Macpherson

        I actually think Steve jobs is one of the best examples of the superpower model and he still doesn’t fit it very well. Despite batting .750 on business ventures (Apple, Next, Pixar, and Apple part 2), Wozniak was the real technical genius that got him into the game in the first place. I think it’s an example of survivorship bias to attribute too much to his success since out many CEO’s at least one of them was bound to have a string of successes at various ventures.

      • IMASBA

        Yes, it is survivorship bias and even if it wasn’t (if Jobs really was a superman) we wouldn’t be able to establish that fact because we have only 4 events in our sample, you can’t do statistics with only 4 events (heck, there are so many CEOs in the world that even a 10-event winning streak through pure chance is plausible).

        Now here’s the $1 million question: why does Hanson (who writes about biases on this blog which is called overcomingbias.com) ignore survivorship bias? Is he really on the Koch pay roll like another commenter claimed?

    • http://juridicalcoherence.blogspot.com/ Stephen Diamond

      Kahneman on luck and business success:

      “Because luck plays a large role, the quality of leadership and management practices cannot be inferred reliably from observations of success. And even if you had perfect foreknowledge that a CEO has brilliant vision and extraordinary competence, you still would be unable to predict how the company will perform with much better accuracy than the flip of a coin.”

      Also, “A very generous estimate of the correlation between the success of the firm and the quality of its CEO might be as high as .30…”

      The halo effect is an extremely powerful bias. Is Robin subject to a marked halo effect he evaluates very high status persona, such as billionaires?

      • IMASBA

        “The halo effect is a powerful bias. Is Robin subject to a marked halo effect when he evaluates very high status personae, such as billionaires?”

        Obviously so, which is strange for someone who has writing about mental biases as a hobby (someone like that should know how mental biases allow snakeoil salesmen to become very rich), but then again it’s not really surprising for someone who’s dream of the future involves slave races and regular genocides under an ultra-capitalist system.

    • Ben Southwood

      “If Bill Gates could actually cure malaria just by touching people, that would be orders of magnitude more amazing than any particular talent he actually possesses in reality.”

      This rankles. I’m not sure this is true at all. It would take him thousands of hours to physically touch even a small fraction of malaria sufferers and lead to risks (etc.) even if those visiting him were streamlined into a sort of production line.

      Compare his ability to turn lots of mental effort into a gigantic pile of resources with which he can, with a reasonable probability, cure tens of millions with malaria. Having the superpower of “designing popular and useful computer OSes” seems much better and more impressive than the superpower of “curing malaria by touch”.

  • Tony

    Him, I find that many of the most inflammatory examples of inequality end up being cases where grabbing would NOT result in much of a difference. For example, the $200M salary once enjoyed by the CEO of Home Depot, distributed among all employees, isn’t that much of a boost to their income. So I often argue against the importance of that inequality by calling it “jealousy based”, which in turn annoys the pro-equality side even more. I’d be personally more inclined to do something about inequality precisely where redistribution would make a big difference, but in saying that I feel very out of touch with the motivations most other people bring to the table.

    • Alexei Sadeski

      Where would it make a difference? I see very few examples.

      “Redistributing” a $50 billion fortune amongst all Americans would result in a one time payout of $133.

      Bonanza!

      • KP

        This is a great example of bias. Because most people won’t be significantly helped by $133, you’re forgetting that even a tiny minority of 300 million is a lot of people. Spread over the country, this is a ton of people able to make rent or a car payment or pay an electic bill who otherwise couldn’t. It’s a visit to the pediatrician. And because effects snowball, it’s sickness prevented and evictions prevented and repossessions prevented and many people right on the razors edge who tip toward better lives.

        Besides which, fifty billion is arbitrary. Would you say the same if the 400+ billionaires cited in the post lost $400 billion to the rest of the country? That’s $5,000 dollars for every family of four, which is a used car or time at community college for mom or the mortgage payment when dad’s between jobs for a couple months.

        Money really does improve QoL for people, and small amounts go farther the poorer you are.

      • VV

        The US top %1 own about 35% of the country net worth. Redistributing that equally amongst all Americans would result in a one time payout of about $ 83,000.

      • http://juridicalcoherence.blogspot.com/ Stephen Diamond

        Redistributing the 1%’s wealth is a different program from redistributing billionaires’ wealth and is likely to have a different psychological basis (which is what Hanson’s discussing, although many don’t seem to realize that). Programs to soak only the very rich have a demagogic character, which Hanson’s analysis accentuates. (CF Huey Long and tax the millionaires.)

        (Personally, I think the top 5% needs radical redistribution and the top 20% some.)

      • IMASBA

        It’s not just demagogery: heavily taxing the very rich makes people see society as less of a casino and it removes “bond villains” (very rich people who want to buy political influence or use their wealth to exert power through market speculation and “charity”) which strengthens democracy (the people would also get to see the politicians who vote for higher taxes for the very rich are not bought by the very rich).

    • KP

      You can actually show this is wrong with a back of an envelope calculation. Home Depot has, what, about 2000 stores? Within an order of magnitude? Each store employs, what, less than a hundred people? 200 million divided by 200,000 is a thousand dollars each. That may seem trivial, but a thousand dollars is a huge deal to people making 9 bucks an hour, being scheduled for 38 hours a week. It’s a car repair or a month of college or a security deposit on an apartment.
      Bigger principle here is that money is simply more valuable per dollar to poor people. There is no model I’m aware of in which 200 million gives Bob Nardelli more utility than it would give split among all his near-minimum wage employees.

  • brendan_r

    Related to Robin’s claim:

    Many of the folks who most loudly denounce wealth inequality- a grabbable sort of inequality- deny the existence non-grabbable sorts like innate IQ and objective beauty.

    The pattern seems to be:
    -inequality that can be changed through grabbing invokes moral outrage
    -inequality that is irredeemable like innate IQ/beauty tends to cause people to deny its existence- maybe to keep smart/handsome folks from gaining too much status.

    • Alexei Sadeski

      No, the “innate” advantages are denied in order to maintain status, not deny it. Effortless mastery.

    • sleepmon

      Bingo.

    • VV

      Many of the folks who most loudly denounce wealth inequality- a
      grabbable sort of inequality- deny the existence non-grabbable sorts
      like innate IQ and objective beauty.

      Who?

      • brendan_r

        VV, lots of people. Read The Blank Slate, Pinker. Or google “the standard social science model”.

  • Ryan

    Inequality talk is about actual deformities of the economy represented by the unusual concentration of extreme amounts of wealth among a small share of the population.

    When people talk about making the tax code more progressive, they don’t mean billionaires are “unfairly unequal,” they mean a few people (through talent, or birth, marriage, systematic advantage, manipulation of the tax code, what have you) have captured an inappropriately large share of the wealth flowing through the economy, and that some of that wealth should be (a) redistributed, and (b) given over to the government of the country that helped them accumulate that wealth in the first place.

    There’s no reason to believe “inequality talk” is attributable to some ancestral social pattern that we have no evidence even existed. That argument imbues a purely hypothetical past culture with a deterministic power that most people don’t believe is possessed by culture at any point. Besides, the kind of inequality we see today wouldn’t have been possible, wouldn’t have even been conceivable among hunter gatherers.

    In a world in which people with literal superpowers used those powers to earn billions, we’d be no less eager to tax that wealth, because the argument for progressive taxation isn’t about intrinsic characteristics of individuals, and certainly isn’t about our ability to “grab” wealth from others. As a side note, it’s not clear how these hypothetical super humans would become super wealthy: how do you make billions of dollars with x-ray vision? With the powers of flight? Probably the best analogy is with entertainers, artists and athletes, but most of them aren’t billionaires, and very few billionaires make their money through sports or cultural production.

    So, no, inequality talk is not about “grabbing.”

    • arch1

      Ryan, I think that what you are calling redistribution, Robin is calling grabbing.

      • Ryan

        Grabbing, alas, is in the eye of the beholder.

      • Alexei Sadeski

        As opposed to “actual deformities in the economy,” which are clearly not in the eye of the beholder?

      • BobLoblaw

        Its pretty clear in economics that money has diminishing marginal utility. Wealth inequality is no less a deformity than dead weight losses are.

        The claim that people are entitled to all that our markets give them is much more subjective.

      • VV

        “grabbing” is loaded language, because it intrinsically contains a moral judgment

    • http://juridicalcoherence.blogspot.com/ Stephen Diamond

      Inequality talk is about actual deformities of the economy

      Rectifying deformities in the economy doesn’t typically inspire movements. These movements are necessarily based on more primal motives than economic efficiency, such as the human loathing of inequality.

  • arch1

    Why did you make an unfalsifiable prediction rather than a falsifiable one?

    • http://overcomingbias.com RobinHanson

      I can imagine real surveys about hypothetical scenarios whose answers would be informative about this theory.

    • Weaver

      Did you see Willam Bur’s post above?

  • BenGolden1

    It seems like your argument is that “redistribution” is really more about taking than about giving? You’re saying that because of ancient historical norms, we take offense at instances of sizable and not-easily defended wealth, and that justifications for redistribution that rely on recipients are developed only to justify our natural impulse to the wealthy.

    The real puzzle to me, given the usual justification for redistribution, is why people want to redistribution to (relatively) wealthy Americans, rather than to poor third-worlders, and I think you’re saying that people don’t care so much about where the wealth goes; they just want it to get grabbed.

    • Alexei Sadeski

      I believe Robin is saying that folks want the wealth redistributed to themselves. Hence little interest in redistribution to poor people, and much interest in redistribution from the very very rich to the mere rich.

      • BenGolden1

        His response to Paul Gowder suggests otherwise

  • http://lukeparrish.rationalsites.com Luke Parrish

    Hmm. Suppose certain people are both with birthmarks that give them the superpower that they can command anyone without such a birthmark to do anything they want, and they will obey. Would we be in favor of removing the birthmarks or reducing their effect?

    Of course we would. Being enslaved is no fun. The people with birthmarks might prefer to keep them, and might produce all kinds of propaganda supporting the divine right of birthmarks and so forth, but the discomfort it brings to the commoners would still give incentive towards overturning such a system.

    Does that mean such a system would not be economically advantageous? Perhaps having absolute authorities to look up to would actually improve efficiency.

    To expand on that, suppose that being commanded to do something by someone with a birthmark makes you do it with twice the efficiency. Would we still want to ditch the birthmark system? I would say probably, still. We would want to research ways to give people the same kind of birthmark power over themselves to preserve the efficiency gain, but we nonetheless wouldn’t be content with the status quo when it involves such extreme power differences.

    The main reason for this is that some subset of birthmark people will tend to abuse their power, and those who don’t intentionally abuse it are likely to do so unintentionally.

    The only obvious way to keep the birthmark system around without severe discomfort to non-birthmark people would be with a very complex system enforced by those with birthmarks that ensures that it is never (or at least rarely) abused. Such a thing is difficult to implement because birthmark people do not know what it is like to be subjected to someone else’s will, and wouldn’t necessarily sympathize enough to know how to best design and enforce the system. They would be likely to systematically underestimate the abuses.

  • Rafal Smigrodzki

    If this interpretation is correct (and I think it is), then perhaps it may offer guidance as to the best way of resisting such grabbing attempts: Instead of trying to justify inequality (and thus ceding moral high ground to grabbers, as if we were ashamed of wealth), perhaps we should roughly denounce the grabbers as the greedy, hypocritical rule-breakers who should be shamed and shunned.

    • Alexei Sadeski

      Agreed.

    • http://juridicalcoherence.blogspot.com/ Stephen Diamond

      You’ve got to justify it. It’s in our forager nature to despise inequality unless it favors us, and even then there’s some sense of shame unless you’re subject to strong acculturation to accept it. You’ve got to propagandize that it benefits society as a whole for folks to tolerate it.

      But your rule-breaker approach is anything but novel. Remember the 47%? That didn’t turn out to be as effective as rationalization, did it?

      You support the rule makers; others support the rule breakers, but inevitably only part of the time. Robin’s account shows your real strength: you have the upper hand due to consistency, whereas the rule breakers are opportunistic, but don’t confuse mere consistency with a publicly approved “morality.”

      • Rafal Smigrodzki

        Perhaps I was wrong to say “instead”: A proper strategy should contain elements of both shaming and rationalization. The former aims to portray opponents as unworthy which is standard in any real fight (and is more effective if we can point to their inconsistency), the latter appeals to the listener’s self-interest.

    • VV

      Liberalists have been chanting “taxes are theft” since always. It didn’t work.

  • Ben

    This hypothesis effectively puts the wealthy on pedestal of their own, making it the “have’s” versus the “have-not’s.” However, I don’t believe that taxes do such a thing. Taxes are meant to target everyone proportionately, as it is their obligation to the state/country they live in. If you look at it through this lens, and remove the image of the poor snatching at the foot of the pedestal like foragers, I think it is fair to say the rich should pay more. Government is supposed to try and provide equal happiness for each of its citizens, which means some (the poor) are going to need more support and the wealthy pay more. The laws put in place far supersede raw Hominin instincts; such laws are an emblem of society’s civility. You’ll slip into dark waters when trying to relate modern humans to their base instincts. Eugenics uses science the same way.

    • http://extropolitca.blogspot.com Mirco Romanato

      “Government is supposed to try and provide equal happiness for each of its citizens, which means some (the poor) are going to need more support and the wealthy pay more.”

      These ideas are very wrong.

      How could government know what any or all individuals need to be happy? How the government could make anyone equally happy as someone else or everyone else?

      At best, the government (officials) know what make them happy and will (try to) implement it. Then they will claim it will make all people happier, wealthier, whatever… and who is not happy with this is EEEVILLL.

  • ThaomasH

    I have an alternative theory. Some people think the government should be spending more money on some things (protection against asteroids, health care for poor people, fixing potholes, etc.) Fortunately, it is noticed that there is a growing group of people who used to be taxed at much higher rates who have recently gotten big reductions in their tax rates. And then someone said, “Hey, what if we taxed those guys?”

    And when that thought was overheard another group of people started talking about “class war” and “the 47%” and the “takers” and generally panicking.

    • http://overcomingbias.com RobinHanson

      Your suggestion that we first realize we want more money, then go look for who we can get it from, then we start feeling concern about the particular sort of inequality that could justify taking stuff from those particular people, is pretty close to what I proposed.

      • ThaomasH

        I was misled by “taking stuff” and “grabbing.”

      • http://juridicalcoherence.blogspot.com/ Stephen Diamond

        That’s a very clear rendition. If I may restate one of my points in relation to it: this is refuted by the fact that we don’t use the abstract inequalities that would be justifying if we could invoke them.

  • http://EasyOpinions.blogspot.com/ Andrew_M_Garland

    The demand to “give back” some of one’s wealth is based on the idea that it is partly stolen. If it isn’t stolen, there is no moral reason to give some back.

    Great wealth earned outside government cronyism comes from doing good things for people, things they voluntarily pay for. Someone earns millions of dollars by pleasing a great many people.

    People trade voluntarily among themselves and some become rich. Absent fraud, there can be no complaints. It is in fact greedy to walk around a neighborhood, find the big houses, and ask those people to give back some of their wealth in gratitude to the society which has already received good value. Accumulations of wealth are the result of creating even more wealth for the people who bought the particular goods and services.

    === ===
    Max:  Big companies are making obscene profits. Those lucky bastards should be paying their windfall profits back into the government, to help me.
    Fred:  Yeah, and let’s get back more money from those lucky bastard lottery winners, and from top athletes, and movie stars, and popular writers, and super models.
    Max:  Uh, I don’t think you see the point.
    Fred:  I thought the point was that no one should be smart, beautiful, or lucky.
    === ===

    Hating Lottery Winners

    Why should businessmen be disliked and pay high taxes because their success is partly luck, while all-luck lottery winners are accepted as deserving their winnings?

    • VV

      The demand to “give back” some of one’s wealth is based on the idea that
      it is partly stolen. If it isn’t stolen, there is no moral reason to
      give some back.

      I think you are asking the wrong question. Here it is a better one: what is the moral reason to enforce property rights?

      • http://extropolitca.blogspot.com Mirco Romanato

        If you have the right take without their consent from others, they have the right to take from you.
        You enforce property right because if people do not respect other’s property rights they will not respect yours.

        Rephrasing:
        if stealing is allowed, do not cry when people steal from you.

        Now, if stealing is permitted, there is no incentive to work more than the minimum needed to feed yourself and your own family.
        Why building a home? They will enter and take it from you and will not take care of it as other can enter and take it from them.
        Why storing food? So other can steal from you and eat it without working?

      • VV

        Very well. Now what if “stealing” (that is, taking stuff in your possession by coercitive means) only occours predictably and publicly, by a single organization (the government), which is under democratic control.

      • IMASBA

        Taking stuff in your possession by coercitive means can also mean you are just stealing back what is rightfully yours. Stealing isn’t always unethical.

      • http://extropolitca.blogspot.com Mirco Romanato

        In your system, the biggest, baddest, strongest, take it all and the others suck it up.

        Coercion can be used only if you are the strongest, baddest, meaner, smarter thug. The weakest can not use coercion against the strongest.

        Wellcome in a tyranny.

        the reality is you would like to use the majority (via democracy) to do the stealing for you. In reality is a minority that will control the majority and will steal from all others. So the chances you are in the minority stealing are pretty low.

      • VV

        So you seriously think that all taxes are theft and all government officials are thugs?

      • http://extropolitca.blogspot.com Mirco Romanato

        Yes and not.
        All government officials are not thugs, just a few too much. The others are abetting them because they need a check to maintain their families or just believe they are doing the right thing.
        I’m sure the large part of Nazis were not evil, they just did what they believe the right thing to do.

        But when police go in the news because it is discovered they have quotas of fines to deal out because the politician need money to pay for the city balance or other pork (and this is the same everywhere, in the US, Europe, Africa) then you know they are thugs. Maybe not evil thugs, but they do not see you as a human being, for them you are first an ATM and after a human being.

      • VV

        What is the alternative to government do you propose? Anarchy?

      • http://extropolitca.blogspot.com Mirco Romanato

        In many ways it would be a great improvement.
        Where I live, if taxes disappeared we would have double our income in a night.
        And if regulations disappeared our productivity would skyrocket.
        Actually, in Italy, entrepreneurs pay around 80% of their income in taxes. Not their profits, their income. Whenever they turn a profit or not. So, many are leaving for saner places like Switzerland, Austria, Moldova, Romania.

        Just today I talked to a friend in Sicily: the Public Health System there gave an ear aid to his grandmother. She waited two years and spent 1.200 €. It turn out the item prize, from the producer, is 50€ plus 20€ for delivery to the client.

        From what I read, the US is not a lot behind us and in many ways is a lot ahead of us in this run tot he cliff.

      • IMASBA

        “Where I live, if taxes disappeared we would have double our income in a night.”

        But purchasing power would go down for a lot of people, stay mostly flat for many other people and go up only for rich people who used to pay a lot of taxes.

        “And if regulations disappeared our productivity would skyrocket.”

        The increase in productivity would come with an increase in pollution, accidents, etc… and wages for most people would go down towards subsistence level.

        “Actually, in Italy, entrepreneurs pay around 80% of their income in taxes.”

        Rich Italians paying their taxes, lol, you must think we were born yesterday… btw, even in Denmark and Sweden no one pays 80% of their profits, let alone their entire income, in taxes.

      • http://extropolitca.blogspot.com Mirco Romanato

        Oh, a racist just showed his true face:

        If you know the language you could learn something instead of live of prejudices.
        http://www.youtube.com/watch?v=YQRZh4fJxKk

      • Peter David Jones

        The Laffer curve demonstrates that tax rates can be inefficiently high, but that doesn’t mean the optimal level is zero.

      • IMASBA

        Yes, even many right wing economists believe the Laffer Curve probably doesn’t go down again until 50-70% of GDP. Also, remember that it matters what the taxes are spend on: 100% taxation does not lead tot economic collapse if the money is simply given back by the government, and even a planned economy has greater than zero GDP, so the Laffer Curve is a gross oversimplification of reality that assumes all taxes go towards non-productive things while in reality for example taxing for welfare merely shifts wealth away from the private jet industry to the cheap supermarket industry, instead of the wealth getting hurled into the Sun.

      • Weaver

        Laffer inflexion does NOT depend on % of GDP, its the marginal rate at any level of income.

        You can have negative effects way down the income distribution with poorly designed welfare, for example.

      • IMASBA

        Yup, my bad, having different tax rates for different kinds and levels of income matters (though usually the top marginal rate for earned income is close to taxation as a percentage of GDP because this is the source of most government funding, with tax benefits and sales tax almost canceling each other out out).

      • Boxer

        In the real world, the businesses like Goldmann-Sachs are thugs, this is the thing that is disingenuous. For example, many mortgage securities products were knowingly fradulent and we have insider testimony that supports this, plus it is obvious by inspection to anyone who understood sophomore level statistics in school. Mortgage products based on the idea that “the probability of many mortgages failing at once is very small because each mortgage’s chance of failure in a given year is completely independent” (and that is the formula most often used by these people, showing they are either nitwits or frauds) is nonsensical. It’s like bundling bets that roofs won’t get wet across a city at once and claiming the odds of many roofs getting wet at once is the product of the probability of one roof getting wet, so it’s unthinkable that they’d all get wet on the same day.

        That’s fraud, and then using their money to distort the justice system is a form of force.

        Your saintly m(b)illionaires have achieved their position by fraud and force. In many cases murder as well. The government is our main protection against gangs of rapacious psychopaths, not just a ‘thug’ who is persecuting lovely people who got rich by hard work and honesty.

        Note that I really have nothing against a society ruled by vicious psychopaths, as long as they are honest about it.

      • http://extropolitca.blogspot.com Mirco Romanato

        In the real world, thugs like G&S are simbiontes with the government. They are one and the same, the doors are revolving.
        Without the government keeping out competitions and saving them, G&S would be broke tomorrow. It is governments that make them TBTF and TBTJ.

        So, when you talk against G&S you are talking against governments like the US’s and many other in the West.

        When the markets are not rigged completely in their favor, G&S avoid to play any role.

      • Boxer

        Agree there is symbiosis but the general public has /some/ input into the government. Goldmann-Sachs is an unaccountable tyranny (lovely phrase, not original with me) as are most companies. The public has some input at the retail level but what is really dangerous is when force and fraud are married. We have several non-violent ways of putting the brakes on the growth of the symbiosis you mention; one is to vote for people who are at least publically against such things – this IS possible or we wouldn’t have had bank regulations, or an FDA, etc in the first place. Another is to strike at the tyrannical companies by either refusing to buy their products or refusing to sell to them (typically labor – if no one will /work/ for GS then they shut down).

        In the current climate the path of voting seems somewhat more effective than trying to strike at the ‘trouble spots’ in the corporate world, in fact, I think the ‘trouble spots’ are there because they are in niches like ‘investment bank’ or ‘offshore manufacturing empire’ where it is very hard to strike back. Campbell’s and Heinz are fine companies because they know they are subject to consumer pressure or they are actually deeply ethical.

        Heinz Foods is an example of a company that seems to be ethical from its foundations in pickles and canned foods. Their competitors back in the day (robber baron era) used /formaldehyde/ as a preservative for food because it was /cheap/. They saved a few cents a can and sold their cans just a lcent or two cheaper. Heinz combated this by lobbying for labeling laws and something like the FDA with the power to take actual POISON off the shelves.

        Today’s Rand Paul types would say “oh let business make its own rules, anyone killed by poison food is a stupid person who deserves it”

        Some companies are good.
        Some lobbying is good.
        Some politicians are good.

      • Weaver

        I think you misrepresent Rand Paul types.

        There’s a difference between “x should have a legal duty not to sell poison food (or any good not fit for purpose)” and “there should be an expensive government regulatory system to prevent x selling poison food”.

      • http://extropolitca.blogspot.com Mirco Romanato

        It change nothing.
        Stealing is not right if done by one or by the majority.

        Stealing can be done in many different ways; in some you discover the theft a lot later and you do not know who was stealing from you.

        In the end, whatever be the reason or the way the stealing happen, people learn to hide what they own or just not waste time and efforts to produce what can be stolen.

      • Peter David Jones

        There is no such thing as the creation of wealth ex-nihilo, so people do not have a moral claim to 100% of their notional wealth.
        Employers rely on the state to educate them and their workforce, to provide infrastructure and security, and so on. Without those services, they could not make money. Payment is not stealing.

    • IMASBA

      “People trade voluntarily among themselves and some become rich. Absent fraud, there can be no complaints.”

      And people who are paid by the rich get to decide the definition of “fraud”, what could possible go wrong…

      Also, transactions are never strictly voluntary because at any point in time there is already existing economic inequality stemming from previous points in time. There are always people who have more freedom to decline deals than others.

  • Alexander Gabriel

    Is wealth inequality in a posthuman world at all like wealth inequality today? In that world, anything a poor Homo sapiens member can do themselves through their own labor, an em can objectively do better and cheaper.

    So, objectively, the poor human cannot provide *anything* useful for any other human. Not advice. Not material sustenance. Not sex.

    In Frank’s terms their local rank is at a nadir.

    In that world we might not talk pointlessly about storming Olympus, but we might still feel a strong wish to kill or wirehead ourselves, or secede into a more meaningful existence in the Matrix.

  • weareastrangemonkey

    “why is so little concern expressed about all the other kinds of inequality?”

    A simpler explanation than Robin’s:

    We focus on inequalities that can be affected by policy. Material goods are transferable while things like health, beauty and talent are not (we could destroy them but not transfer them).

    But the question also relies on an inaccurate premise: that we do not care about these other kinds of inequalities.

    There are many rules designed to redress inequalities in inalienable characteristics.

    1. Rules concerning modesty have existed at many points.

    2. Rules regarding monogamy and norms against adultery. These rules inhibit (not completely) strong, healthy and attractive people from acquiring more than their fair share of mates and children.
    3. Norms that the weak and the infirm should be protected.

    4. Norms that those who are most capable, endowed with great abilities, are morally obliged to help those who are less capable.

    Indeed the third and fourth point are at the heart of leftist re-distributional politics, to quote the beardy one:

    “From each according to his ability, to each according to his need.”

    Or in line with his superhero analogy:

    “With great power comes great responsibility.”

    Isn’t the point of a superhero that they have great powers which they are obliged, by their own morality, to use for the benefit of others and not themselves. If they didn’t do so then they would not be considered to be superheroes because their behaviour is immoral. Watching someone drown may not be murder but it is pretty close.

    • http://juridicalcoherence.blogspot.com/ Stephen Diamond

      We focus on inequalities that can be affected by policy.

      That’s a simpler claim than Hanson’s, but it is also a weaker claim. Hanson would add that the inequalities we focus on are those that benefit ourselves and our allies (even where inequality could be reduced in other regards without the help of those adversely affected).

      Some evidence for Hanson’s “addendum” is (if it’s true–it’s an empirical question) that we care less about inequalities when they afflict people whom it would be hard to ally with. (This doesn’t preclude concern with nonmaterial forms of inequality.)

    • http://overcomingbias.com RobinHanson

      Rules and norms for modesty and monogamy seem driven mainly by other non-inequality-based considerations.

      • weareastrangemonkey

        But you agree that 3 and 4 are solid examples of concerns about non-financial inequality?

  • http://priorprobability.com/ F.E. Guerra-Pujol (Enrique)

    Hanson is totally right about “homo hypocritus” … that’s why I am also a big fan of Robert Trivers’s work on deceit and self-deception … I would only add this: another problem with increasing taxes on (i.e. grabbing from) the super-rich (and the main problem with most forms of public choice generally) is that people get to change the “rules of the game” while that game is still being played! This behavior is worse than “gaming the system” … it’s changing the game when you don’t like who the winners are

    • Stuart Armstrong

      Would you consider the reduction of university tenure and of various licensing requirements for certain professions (such as taxi drivers and beauticians) examples of unfair changes to “the rules of the game”? What about attempts to reduce the powers of unions?

      I don’t see how your approach allows for any changes that might hurt anyone at all.

      • http://priorprobability.com/ F.E. Guerra-Pujol (Enrique)

        Touche’ … those are good points … you are asking me to trade off the benefits of getting rid of stupid & inefficient rules (like licensure requirements or tenure) with the “harm” caused to the rule of law (by changing the rules of the game mid-stream) … and this puts me in a difficult position (can you see me squirm?) … but whatever happened to the “rules are rules” maxim … if you are playing by a set of rules and are then able to get tenure or a license, then is it really fair to change the rules after the fact? … But I do see your point (and I thus need to re-think my position). Do you see mine, though?

      • Stuart Armstrong

        I do see your point. Changing the rules has a cost (both moral and practical).

        History seems to imply that though its important to maintain continuity in a lot of areas (the fundaments of contract law for instance), the most successful societies have had a continual change and refinement of rules.

        One other consideration is that since rules have been changed a lot in the past, people should expect rules to change in future (in practice, they probably don’t, which is a problem).

  • solipsist

    Billionaires do earn so much not because of their abilities alone; they are the lucky outliers of system which rewards productive members stochastically. To become a billionaire in 40 years, you must earn an average of $500,000 per week. Bill Gates would require a lot more luck to earn that much than Clark Kent would.

    If you demand an evolutionary explanation, I’d suggest ‘communities punish members who contribute far less than they receive’. Personally, I’m satisfied with ‘stochastic payoffs and diminishing utility of money make social insurance a good idea’.

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  • dmytryl

    Well, very simply put, those billionaires have not, in fact, provided some value to the society that is worth billions. They played a stochastic market game which as you undoubtedly know will end up with same wealth distribution even if skills are exactly equal and/or non existent (there are simulations demonstrating this).

    Whereas the hypothetical physical superpower billionaires did actually provide value (working in place of very expensive machinery) and got paid in a fair exchange.

    There are people in-between – for instance Bill Gates is closer to the hypothetical superpower billionaires, and Carlos Slim is on the other side of the spectrum.

    Taxing the former is not even actually a tax of any kind. It is merely a tweak to the stochastic game (an unnatural game the rules of which in any case require government enforcement and have to be supported by the masses) to make the resulting distribution more flat.

    • Rafal Smigrodzki

      You are trying to frame the issue as one of just deserts rather than efficiency. The rich enjoy a “windfall” which we, the good folk, should “tweak” away in the interest of … well, why? Ah, “flatness”, a new name for forced equalization.

      Someone who values economic efficiency would however first analyze the total economic gains in a system, and only then look at their distribution. Since the “tweaking” you talk about greatly diminishes economic output, and lowers well-being across the board, the efficiency-minded analyst would leave capitalist billionaires alone.

      • dmytryl

        First: The game and it’s rules are enforced by the government and the people. Ain’t going to be done for free.

        Second: citation needed on the last assertion.

      • Peter David Jones

        There are justifications for taxation and redistribution other than equality. Robin assumes that everyone is basically OK, and redistribution just gives some people extra goodies. But some people, such as the disabled, are unabled to survive without welfare, so there is an ethical argument. There is also the pragmatic argument that taxation is a fair way of paying for public goods that benefit everyone including the rich. Business regularly complains that taxes are too high, but there is little demand for a zero-tax regime where business has to supply its own infrastructure and security, and educate its own workers.

        You gave no reason to think that zero-tax is efficient. Here are two reasons to think tax-and-redistribute is efficient: economies of scale, and flexibility.

      • IMASBA

        Indeed, and there’s a more fundamental point: why would someone who is not a billionaire himself care if a world of unrestricted capitalism is more productive? Why would it be a goal in itself to increase the total productivity of society without looking at the distribution of wealth? People like Rafal Smigrodzki just assume that is a goal, as if it is part of some religion. It’s just absurd, of course a society with a $15 trillion GDP where no one dies of hunger or curable illness is a better one than a society with a $30 trillion GDP where 90% of the people are on the edge of starvation and cholera and TBC kill millions each year, because society includes that 90% of people!

      • Peter David Jones

        This is a mistake which is endlessly repeated on this forum: seeing the goal of economics, (or politics, or society), as the maximisation of GDP, rather than utility (happiness, well-being). You could increase GDP overnight by making everyone work 80 hour weeks, but what’s the point?

      • IMASBA

        Perhaps it’s related to nationalism: some primal urge these people have that gives them a hard on when they see their own abstract organization grow larger? In the 19th century these kind of people got a hard on from watching their country’s military grow bigger, even if orphans had to starve for it and now they get a hard on from watching their country’s GDP grow bigger, even if orphans have to starve for it.

        Of course there’s also a group that really believes (instead of just espousing it because they’re paid to do so) that the rich are supermen who, no matter how much stuff you give them, always produce even more stuff and also more than consumer spending by non-rich people would have produced.

      • Rafal Smigrodzki

        Very reliably in my experience, those who demand that the rich be taxed out of existence, ostensibly to feed the hungry in Africa, actually never send a dime of their own money to save a child from death. This tells me their true motive is envy, not love.

        More importantly, continued economic growth through unrestrained capitalism brought hundreds of millions of Chinese peasants out of dire poverty, while the demands to destroy Mr Gates helped nobody. This is why all men of a beneficent nature should care about the productivity of capitalist economies.

      • IMASBA

        “A person truly concerned about the disabled might see their existence as an argument for charitable giving, or building better insurance systems, not for fleecing the rich. You argue in favor of taxation in general but you did not provide an argument in favor of steeply progressive taxation, which is the focus of Robin’s post.”

        If taxation wasn’t progressive there either wouldn’t be enough revenue to support the disabled or the poor would be crushed under taxation.

        “More importantly, continued economic growth through unrestrained capitalism brought hundreds of millions of Chinese peasants out of dire poverty, while the demands to destroy Mr Gates helped nobody.”

        Caring about the living standards of Chinese peasants means you care about the distribution of wealth, not just GDP growth, you’re arguing with yourself.

      • Rafal Smigrodzki

        Your claim that *progressive* taxation is needed to support the disabled is plainly wrong.

        The other part of your comment is incomprehensible.

      • Rafal Smigrodzki

        A person truly concerned about the disabled might see their existence as an argument for charitable giving, or building better insurance systems, not for fleecing the rich. You argue in favor of taxation in general but you did not provide an argument in favor of steeply progressive taxation, which is the focus of Robin’s post.

      • John

        Obviously, it’s a contested claim that the tweaking really diminishes output and especially well-being across the board.

    • Scott H.

      Labor rules today, not capital. That fact that labor is often compensated in capital makes this less clear, but it is true. How is your 401k doing, capitalist?

      • VV

        Labor rules today, not capital.
        Evidence?

    • IMASBA

      dmytryl

      “Well, very simply put, those billionaires have not, in fact, provided some value to the society that is worth billions. They played a stochastic market game which as you undoubtedly know will end up with same wealth distribution even if skills are exactly equal and/or non existent (there are simulations demonstrating this).

      Whereas the hypothetical physical superpower billionaires did actually provide value (working in place of very expensive machinery for example, replacing a lot of the oil and other natural resource usage) and got paid in a fair exchange.”

      Good points!

  • Army1987

    Whoops, I did something wrong in the previous comment. Please delete it

    We
    don’t discuss inequalities across time, because it is hard to grab
    stuff from the past or the future.

    Isn’t sustainability about not grabbing too much stuff from the future?

    • http://overcomingbias.com RobinHanson

      I changed the wording to “grab much more than we do.”

  • Grant

    Here’s a thought: wealth is potential consumption (you can spend it) and control (you can control what you own). Yet we seem to hear many more people ask for wealth taxes than consumption taxes. Is this evidence that people are more concerned with the power and status aspects of wealth than the distribution of goods and services?

    • http://overcomingbias.com RobinHanson

      Or the cash held confers more status than the consumption goods it buys?

  • kodiakbear

    Great post Robin! Best read of the morning.

  • kebko

    Great post, Robin. One quibble I will make is that I don’t think it’s just about the ability to take stuff. It’s also about the deep-seated antipathy we have toward Deidre McCloskey’s bourgeoisie. It would be possible to have social norms that led to more equitable mating. It would be possible to set up legal means to constrain powerful employees in their dealings with their employers, or to enforce civil rights codes regarding how consumers or laborers treat minority business owners. We don’t create tools for redistribution in these other areas because they don’t correlate with the bias we have against those who deal in or have accumulated wealth.
    At the other end of the policy spectrum, there is a history of populist policies, like immigration limits, minimum wages, and unionization, which were frequently aimed at increasing the inequality among laborers. These policies are populist anyway because they create constrictions against firms and owners who represent the bourgeoisie.
    If we didn’t have the means to enforce any type of redistribution, populists would find a way to do this sort of anti-bourgeois grabbing. The social norms that lead to the ability to grab, and the inability of the targets to respond with a morally persuasive defense, are the inevitable results of the anti-bourgeois bias.

  • http://barrkel.blogspot.com/ barrkel

    This is one of your weaker efforts, Robin.

    Massive income inequality is unjust because it overcompensates owners of capital vs people who merely sell their labour. It’s a side-effect of the pyramid structure of ownership that our economic model uses to structure production; but there’s nothing intrinsically or necessarily fair about it.

    People at the bottom of the pyramid lack much bargaining power in how they’re compensated. The resilience of conspiracies and trusts is much higher up the pyramid, where fewer people need to collude to oppress those below them. Even people who are fairly well off, like software engineers, suffer when Google and Apple etc. agree not to poach from one another’s firms (http://www.lieffcabraser.com/antitrust-intellectual-property/case/344/high-tech-workers-class-action-lawsuit).

    But more ridiculously, the idea that we wouldn’t want people with superpowers to be taxed because they could physically retaliate, and thus the only reason we do so for people for whom a lot of people work (and thus create value for) is that they can’t defend themselves? That’s what pushed me over the edge. For one, they’re pretty good at defending themselves in any case – look at how many bankers got jailed over the banking crisis – and secondly, if people with superpowers existed, they would almost certainly not be benign, and we would likely be much better off rid of them. At least our pyramidal economic model has some side-effects in somewhat productively using labour. People with comic-book superpowers would be far too dangerous to have around.

    • B_For_Bandana

      That argument is not incompatible with Robin’s though. You are talking about a thoughtful argument for why financial inequality is unjust. Robin is talking about why lots of people instinctively feel outraged by financial inequality, and want to talk about it a lot.

      It is very plausible to me that both of you are completely right, separately, about those two very distinct things.

    • Sam Dangremond

      “owners of capital vs people who merely sell their labour”

      The most valuable capital, by far, is human capital.

      It’s not the 19th century any more.

  • Philip Goetz

    I don’t think this makes any sense. We wouldn’t try to tax super-people because we would be afraid of them; therefore, when we want to tax people whom we are less afraid of, it’s because we’re hypocrites.

    There’s no logical connection between your hypothesis and your conclusion. What there is, is an echoing of a sentiment I think you’ve expressed in previous blog posts, a libertarian dogma that says “Inequality is not a moral problem, and people who say that it is are lying.” It feels like you always want to come to this conclusion.

  • http://juridicalcoherence.blogspot.com/ Stephen Diamond

    Does the origin of inequality talk in self-interested property seizures have any moral or political relevance to redistributionist programs? In different ways, various commenters have addressed or raised this question.

    Unlike the apparent consensus (at least among “redistributionists” like me), I think it has moral and political relevance. If redistribution owes its origins to “grabbings,” it is a clue, if only a weak clue, to its nature today. It suggests that redistributionist efforts are likely to retain the element of bullying. Even if the billionaires confronted today are much more powerful, the redistributionist effort would still be likely to smack of cowardice: the appearance of the target being weak and isolated would be the main instigator. As one poster said, all morality has roots in primeval tendencies, but as Robin paints it, this one is particularly ignoble.

    I think Robin loads the dice. It is not at all clear that those who talked about inequality usually accused people falsely. It seems more likely that such takings represented the primary method of enforcing the equality norm. In the standard case, the accusations were probably true. The harm of antagonizing by someone applies when the target is really guilty of violating egalitarian norms. In this light, it would be those taken from that in the usual case were the norm violators.

    This is oversimplified, perhaps biased in exactly the opposite direction as Robin’s. Certainly hypocritical humans would be apt to use inequality talk in the manner Robin suggests. It’s possible takings were sometimes grabbings and sometimes norm-enforcing. But parsimony favors explaining norm enforcement by the same mechanism as you explain grabbing rather than positing a separate mechanism. Then, norm enforcement (against the shirking of duties to share) was probably the principal function of inequality talk.

    What remains is the insight that even when it is norm-enforcing the taking is motivated “selfishly” by individual and coalition interest rather than band- or society-wide considerations. This too has “moral” implications, but they aren’t partisan, since resistance to redistribution, as well, is based on purely “selfish” considerations.

  • http://bur.sk/en Viliam Búr

    An idea about an experiment:

    Find a group of “pro-equality” people and present them a new political plan: extra tax for billionaires, where all the money goes to poor people in Africa, and nothing to poor (but rich, compared with Africa) people in your country. Ask them for political support, and for ideas how to improve this plan. For extra fun, recommend redirecting some already existing welfare to Africa, reasoning that taking from richer people and giving to poorer is what we, the pro-equality people, should do as much as possible.

    • VV

      Doesn’t work. Government =/= charity.

    • Stuart Armstrong

      I’d approve of this plan, while recognising that it’s politically impossible.

      A way of improving the plan: tax billionaires to redistribute in one country (putting most redistribution in things that are more politically popular, like public schooling, infrastructure, pensions), remove immigration restrictions in that country, and allow immigrants to become citizens within a short time.

      Very unlikely to work, but it at least has a chance, unlike the direct redistribution-to-foreigners idea.

    • IMASBA

      @Viliam Bur

      Real funny. Next time try taking into account purchasing power differences and immaterial forms of wealth.

      Btw, many “pro-equality” people do favor increasing the wages of third world workers, even if that leads to reduced growth in the rich countries, what they’re not in favor of is your “plan” where the very rich would stll be getting richer and the poor in no country would really get ahead (because the tax raise on the very rich would be small, smaller than what’s taken from the poor in rich countries).

      • Weaver

        Bur’s point is to query why your principles of equality seems dependent upon arbitrary political groupings. Why is your moral obligation to x dependent on whether x is within your polity?

        And what on earth has PPP got to do with it? If anything, the same amount of money will do more good in Africa! Of course, excusing the obligation by refering to “immaterial forms of wealth” (and unmeasurable too, I’ll wager…) of Africans you can fall back on handwaving and mysticism, which is not unexpected at this juncture…At this point you look like an example of Robin’s hypothesis.

      • IMASBA

        “Why is your moral obligation to x dependent on whether x is within your polity?”

        Pragmatism: I can’t force foreigners to play by the same rules (I can’t prevent the aid from falling into the wrong hands) and they might even use things I give them against me. There are of course exceptions, such as minimum wage increments in low-wage countries, and in that case people like me don’t object to paying a little more (though the impact of those wages on the price is exaggerated in many people’s minds: stuff hasn’t become that much cheaper, corporate profits and executive pay have gone up a lot).

        “And what on earth has PPP got to do with it?”

        That sould be obvious: a square meter of land in Germany costs much more than a square meter of land in Kenya, but German soil isn’t really better. The effect of such things is of course limited but it’s far from negligible: a Chinese doctor making $13k per year will have a much more pleasant live than an American fast food workers making $14k per year, this is where immaterial wealth plays a role as well. For example when selecting a mate it is more important into which national income quintile you fall than the absolute dollar amount of your income. Another example is political influence which is proportional to your financial position relative to your countrymen. A third example is when people can’t afford to go see a movie or other leisure activities whose price also largely depends PPP.

        The reason I mention this is because some American conservatives keep playing the “shut up, you still have more money than an African” card while it’s entirely possible you are homeless while that African is supporting a family even though you own a larger amount of dollars than that African. Proposals like that of Bur wouldn’t make the world a better place: instead of a middle class Westerner and a middle class African you’d end up with a homeless Westerner and a middle class African. That is unless Western prices were brought down to African levels and that would only be possible by decimating the rich’s (shareholders, executives, landlords, real estate moguls, doctors, etc…) incomes, so it always comes back to the same thing.

      • Weaver

        1, OK…you distrust the effectiveness of such aid…I can accept that.

        2. I don’t think the numbers support your claim at all. Median PPP-adjusted incomes are still much lower in Africa, South America etc.

        Its not $14lk vs $13k in your Chinese example. It is $46k vs $9k, PPP adjusted.

        I’m very familiar with the whole marginal utility thing. But the raw numbers completely contradict your argument here. The PPP differences are not enough to overcome the absolute income differences.

      • IMASBA

        I’m not American either. The point I wanted to make about trusting foreigners is that even close allies have different systems. We may both live in stable democracies but if your country values leisure over money more than my country does this could mean you choose to have a shorter workweek, more holidays, a lower retirement age etc… and in that case my country is not obliged to equalize our GDP/capita through aid, only if we were to agree to equalize our systems there would be reason to equalize GDP/capita.

        “2. I don’t think the numbers support your claim at all. Median PPP-adjusted incomes are still much lower in Africa, South America etc.”

        Yes, so? I said the difference is exaggerated, not that there’s no difference at all. The difference becomes uncomfortably small for those at the bottom in the rich countries (a fast food workers in the US really does make $14k, not $44k, that’s for white collar workers).

        I think a trip through Europe shows a lot. compare say, Belgium, the Czech Republic. Belgium has a GDP/capita of $44k, the Czech Republic has $19k. Life in Belgium is virtually indistinguishable from life in the Czech Republic even though their PPP/capita are still significantly different: $37k vs. $26k.

        Similarly most people in China have a roof over their head and eough to eat, while an American would be homeless and starving with the $4k yearly salary of a Chinese factory worker. What’s the discrepancy? Inequality: an American still has to pay say $600 in rent every month because his landlord does not want to be set back to an income of $4k per year.

        Countries with shrinking economies are going to shit because do not manage to spread the pain: Greece is in a lot of trouble while it’s still 16% richer than the Czech Republic (GDP/capita) because certain groups of people take the brunt of the shrinking economy while other don’t and subsequently many prices are not lowered which results in Greece having lower PPP/capita. If every Greek shared equally in the country’s woes then Greeks would live as comfortable as the Czechs do. Suggestions like the one made by Villiam Bur will result in the same problems, UNLESS the rich were also bled dry, and more so than everyone else (if I get a Chinese salary I want to pay Chinese rent and that is only possible if my formerly rich landlord learns to live on a Chinese landlord income).

        So the whole thing becomes a joke. You can’t shush the lower classes who are complaining about inequality in rich countries with proposals like that by Villiam Bur because the only way for such a proposal to work would be by eating the rich in the rich countries!

        Also, PPP seems to underestimate living expenses (rent, land prices) and severely overvalues being able to buy an iPhone over being able to participate in local society, leisure activities, having security, etc… Like I said, a hobo in Norway officially has a higher PPP than an account in Kenya (with a family, a car and a house), or an entire tribe of Kalahari bushmen.

      • Weaver

        Damn, I was hoping for a handout. :-)

        Erm….am I following you correctly here? The PPP deflators are wrong (not harsh enough on the rich world) ? That’s a bold claim. Not without some appeal, but you can’t seriously expect it to close the yawning chasm much.

        Now Czech vs Belgian is almost persuasive at a 2:3 ratio (but ah – which way is the migration going?). But you’re smart enough to know I’m talking about the gross imbalances at the 10:1 ratio and higher. C’mon, please, no strawmen.

        Anyway, yes, China and American have sub-populations with overlapping PPP adjusted income. So what? We’re not taxing the poor in either country, right? We’re talking about taxing the rich in America (and some rich in China presumably?). And giving it to poor mostly in China Where it will do most utilitarian good, right?

        I call on you to honour your proposed moral rule (and a very kind hearted rule it is too, I can’t fault your charity). You can’t tell me that 25th %ile Chinese (~$2k) won’t do more with $100 than 75th %ile American (~$50k) will! The PPP even works in favour of the transfer; they can buy more with it than you can and have a lower starting point; their marginal utility must be much higher!

        (Let us skate over leisure time! You really can’t expect 10% differences in working hours to save your numbers here…can you? In fact I’ll bet you straight up that normalising for this will make it worse! Now pardon me whilst I take a siesta and dream of how to spend the money of your rich).

      • IMASBA

        “Erm….am I following you correctly here? The PPP deflators are wrong”

        They have to be at some level: at $600 per year I’d literally die in my country, there would be no way for me to survive (there aren’t even large animals to hunt in my country, every square meter of land has been claimed and the rivers are too polluted to drink from), but an entire tribe of bushmen has an even lower PPP than that and they live happy lives, mostly without hunger.

        “but you can’t seriously expect it to close the yawning chasm much.”

        The effects of GDP-to-PPP conversion and faults in the PPP are ultimately limited, but I’m sick and tired of people acting like they don’t exist at all and I’m also sick and tired of out of touch rich conservatives (this isn’t aimed at you) who don’t know I, and many other people, make much less than GDP/capita (I make only a quarter of that at this point in my life, though I expect to make more later on and then I’ll happily pay my taxes), yet their solution to solving the world’s problems is that people like me should give up nearly everything we have while they, the rich keep paying low taxes and amassing even more wealth. It’s clear that if I gave up more than the small amount I donate to charity now I wouldn’t be able to afford essentials unless the rich lowered their prices and joined me in being charitable.

        “Let us skate over leisure time! You really can’t expect 10% differences in working hours to save your numbers here…can you?”

        I only mentioned that because it’s an issue that plays in Europe where countries with short workweeks and low retirement ages are asking for money from richer countries, who demand reforms in return. It’s an issue that can be very real when you want to equalize two relatively rich democracies (such as two US allies).

        “I call on you to honour your proposed moral rule (and a very kind hearted rule it is too, I can’t fault your charity). You can’t tell me that 25th %ile Chinese (~$2k) won’t do more with $100 than 75th %ile American (~$50k) will! The PPP even works in favour of the transfer; they can buy more with it than you can and have a lower starting point; their marginal utility must be much higher!”

        Oh sure, if prices were lowered in my country, the whole charitable operation was progressive and we had some guarantees that the aid money wouldn’t just fall into the hands of rich corrupt Chinese officials, be used to fund armies that will destroy my country, or be used to hunt tigers into extinction then we have a deal. Of course realistically speaking (for reasons of security and stability) it would probably be better to freeze economic growth in my country at 0% and let poorer countries fully absorb global economic growth until they have the same PPP as us.

        “Anyway, yes, China and American have sub-populations with overlapping PPP adjusted GDP. So what? We’re not taxing the poor in either country, right?”

        Well actually the remarks rich conservatives make do imply that poor Americans should be taxed to death or else those poor would somehow be hypocrites if they called for more equality.

      • Weaver

        Incidentally, if you are American, I think I live in one of your well-ordered, non-corrupt, trustworthy, and slavishly friendly western allies. Alas, we do not quite have your GDP/Capita (PPP adj), and our median income trails yours. But I am sure we could spend any aid money you care to send to relieve our relative poverty, with all the net utility gains you identify.

        Equally, I am sure we could agree sufficient safeguards with you that the money would be well spent. After all, you already trust us on many other highly sensitive matters; it beggars belief you think it will be misappropriated by our elites. In any event, you are welcome to come here and disburse the money directly with your own oversight.

        Think of the good you could do by equalising our real incomes! :-)

  • JW Ogden

    What explains the fact that people seem to choose to be ignorant of the simple fact that at any realistic tax rate we are unlikely to be able to transfer consumption from billionaires.

  • VV

    People usually become billionaires via having “super-powers,” i.e., very unusual abilities, at least within some context.

    People usually become billionaires by being born to billionaires. And I would love to see the evidence that even those who weren’t have very unusual abilities.

    But what if most billionaires had super-powers of the traditional comic book sort, like x-ray vision or an ability to fly, etc.? That is, what if people with physical super-powers earned billions in the labor market by selling the use of these powers?

    Earn billions in the labor market by selling x-ray vision and the like? Sounds questionable.

    Well, I suppose that an amoral, utility maximizing Superman could just declare himself emperor of earth and force everybody to provide him whatever he wants, but that seems closer to mafia racket than market economy.

    I offer this prediction as a test of my favored theory of expressed inequality concerns: that inequality talk is usually a covert way of coordinating who to maybe grab stuff from.

    Ah, taxes are theft, never heard that before…

    You, and the other libertarians, have it backwards: property rights are not a law of nature, they are something that is awarded by the society and enforced by the government.

    So why should the majority allow a minority to own large properties if this doesn’t serve the interests of the majority?

    Because, I hypothesize, in reality those feelings only arise as a cover to excuse our grabbing, when such grabs seem worth the bother.

    You know, when you speculate on other people’s ulterior motives, someone might mention the fact that you are on the Koch brothers’ paybook.

    • http://overcomingbias.com RobinHanson

      “People usually become billionaires by being born to billionaires.” That isn’t remotely true. see: http://www.nber.org/papers/w19075

      • gjm

        Paywalled. There’s what looks like a copy of the same paper at http://elsa.berkeley.edu/~saez/alvaredo-atkinson-piketty-saezJEP13top1percent.pdf and I haven’t been able to find anything in it that says anything about whether people usually become billionaires by being born to billionaires. (It’s mostly about “the top 1 percent”. It says hardly anything about billionaires. It also says rather little about inherited wealth.)

        What am I missing?

        In a crude attempt to determine roughly what fraction of billonaires got that way by being born to billionaires, I took a look at the Forbes list of the 400 richest people in the USA. One wouldn’t expect the *very* richest people to be rich mostly from inherited wealth — it seems likely that generally the children of someone very rich are less rich than their rich parent — so I looked at the bottom 10 places on the list in the hope that they’d be more typical of US billionaires. From the bottom (numbered 392 not 400, because of ties) upwards:

        Denise York: inherited from Edward DeBartolo Sr. Dan Snyder: self-made (advertising). Paul Singer: self-made (hedge funds). Arturo Moreno: self-made (advertising). William Macaulay: self-made (private equity and fossil fuels). Peter Lewis: self-made (insurance — he basically inherited the company but it wasn’t big at the time). George Joseph: self-made (insurance). Mario Gabelli: self-made (money management). Jack Dorsey: self-made (tech startups). Neal Patterson: self-made (medical software).

        So: indeed it does not appear that most billionaires are the offspring of billionaires.

        I didn’t see that much obvious sign of superpowers either, though. It looks to me as if people usually become billionaires by going into a generally lucrative industry, being smart, working hard, and getting lucky. Maybe they really are all superhumanly intelligent or wise or industrious or something — it’s hard to see how we could know for sure — but if Robin has evidence for his claim that that’s how people usually become billionaires, it would be interesting to see it.

      • Peter David Jones

        Historically, over millenia, most of the top 0.1% were born into wealth. Tech billionaires are a relatively new phenomenon.

      • IMASBA

        Wealth of the parents and grandparents still correlates strongly with the wealth of the children. There are sadly plenty of “studies” which intentionally distort the figures (by saying someone who inherited $40 million and now has $100 million made most of his money himself, which is technically true but entirely missing the point, not counting the wealth of the grandparents and not counting the huge advantage stemming from semi-rich parents who can afford, the self-fulfilling prophecy of success that is an Ivy League education, for their child that was technically not born into vast wealth but still in the top quintile).

  • Stuart Armstrong

    >My guess is no

    >My favored theory is an application of homo hypocritus

    >I suggest that most talk

    >we just wouldn’t find

    >Because, I hypothesize

    A disappointing post with no evidence presented.

    My hypothesis: we take from the rich because income is easily measurable and easily transferable, unlike the other inequalities.

    And I present just as much evidence for my hypothesis as this post did for its.

    • http://juridicalcoherence.blogspot.com/ Stephen Diamond

      And I present just as much evidence for my hypothesis as this post did for its.

      It isn’t reasonable to expect all (or most) of the evidence in a single post. This wasn’t an evidentiary post (or was only to the extent the superman thought experiment is found compelling–I thought it was a reasonable intuition pump). To evaluate the claim empirically in a serious way, I think you would have to look at the basis for the claims in evolutionary psychology–such as Boehm’s work on primitive egalitarianism.

      • Stuart Armstrong

        >I thought it was a reasonable intuition pump

        The valid point of the post was “when we are faced with impossible tasks (such as getting money out of superheros), people rationalise why this isn’t necessary.” Evolutionary psychology or homo hypocritus isn’t necessary; the slightest tendency towards hypocrisy or even practicality would be enough to get that same result.

        All the rest was just strong connotations to make egalitarianism seem bad. The central claim “Inequality Talk Is About Grabbing” is unsupported, either by arguments, evidence or even links.

      • http://juridicalcoherence.blogspot.com/ Stephen Diamond

        Evolutionary psychology or homo hypocritus isn’t necessary; the slightest tendency towards hypocrisy or even practicality would be enough to get that same result.

        That’s a dogmatic assertion, not based on how morality actually works. There are many impractical things we strongly feel are wrong; the point is they aren’t about abstract equality. For example, when Nazi Germany overran the small countries of Europe, the citizens were strongly aggrieved, even though there was really nothing they could do about it. But that wasn’t based on abstract equality, although partly based on abstract community.

        What does make the discussion difficult is that it’s hard to discuss “moral” instincts without some preliminary catalog. (In my view, the best one is from Alan Page Fiske, which I reference at http://tinyurl.com/blhdluc .)

        On connotations, I too found them somewhat obnoxious, but I don’t think they’re out of bounds. The connotations were relevant to the point: in principle, rather like Marx’s use of “exploitation.”

      • Stuart Armstrong

        Hum… I take your point about it being a dogmatic assumption.

        But this makes the top post even worse. Your Nazi examples cause me to suspect that maybe some people would try and redistribute from super-heroes (and it illustrates why real example and evidence are so needed)! Since that was the only actual content of the post, it’s now completely void.

  • IMASBA

    “People usually become billionaires via having “super-powers,” i.e., very unusual abilities, at least within some context.”

    That is an incredibly bold claim and it goes against the conclusions of most relevant research. In any case the difference in abilities between a billionaire and a person in the middle class are not large enough to justify the difference in wealth between them (a billionaire might be twice as smart as your average person, but 20.000 times as rich). The current economic system most certainly does not reward linearly with ability.

    “That is, what if people with physical super-powers earned billions in the labor market by selling the use of these powers? Would folks be just as eager to tax them to reduce unfair inequality?”

    If “folks” thought about it for 2 seconds they would be eager to heavily tax that practice. The ethics behind it are similar to that of a genetic/bionic divide. Even so, people with physical superpowers could actually contribute much more than ordinary people (unlike the average billionaire who relies on luck for the most part), which would at least justify some wealth, but ultimately giving a lot of money (and thus power) to people who happen to have some genetic mutation that influences their physique (without giving them the increased sense of ethics to comprehend that with great power comes great responsibility) will lead to disaster faster than can you say “oppressive aristocracy of rich mutant families who feel themselves to be better than everyone else”.

    “Yet concern is actually only voiced about a very particular sort: financial inequality at a given time between the families of a nation. The puzzle in need of explaining is: why is so little concern expressed about all the other sorts of inequality?”

    Because economic inequality is much, much more potent, plus it can be prevented relatively easy compared to for example appearance inequality (which societies do in fact also care about for example through providing state-funded reconstructive surgery) and those other forms of inequality can only be tackled through reduction of economic inequality.

    • Weaver

      I would like to see you try and tax an unwilling Superman…. I really would.

      OK, Kal El may pay his taxes willingly, squeezing coal into diamonds or whatever, but with your “average superhuman” with “average morality” would have the same tax aversion as the rich, and even more capacity to avoid it.

      Maybe the real reason for the DC Watchtower is tax exile for the Justice League. And good luck with the supervillans “Lex Luthor; its the IRS….put down the doom ray and submit your tax return now…”

      • mtraven

        Very analogous to the actual state of things in the US, where the rich have captured the government and are so very adept at avoiding taxation. Or IOW, the supervillains have won.

      • Weaver

        Kinda, yes. It seems that with competing polities that capital is now sufficiently powerful for individuals to capture or escape the taxing grasp of government….mostly.

        I wouldn’t call them supervillians though. They’re just regular types with vast resources. The problem with the Superhero ouevre is that everyone has exagerrated moral characteristics in addition to powers.

        I’ve always thought it implausible that super-powered individuals did not simply have super-well-paying jobs and get on with their lives, rather than being divided exclusively into criminals and heroes.

  • IMASBA

    In any case Hanson is looking at it from the wrong way. It should not matter how hypocritical or disorganized resistance to economic inequality is. It is the billionaires who own much more than their abilities justify (all billionaires) who should be explaining why high levels of economic inequality should be allowed by society when it has proven (strongly) negative effects for society.

    • http://overcomingbias.com RobinHanson

      Since you give a non-functioning email address, I must tell you publicly: you are violating the OB comment frequency rules. See the About page.

      • gjm

        I think the rule could do with redesigning (though I dare say it’s a tolerable heuristic). Consider, for instance, the following perfectly plausible situation: There are two posts being actively discussed. Someone (call them A), whose usual pattern of OB participation is to come along once a day or thereabouts and see what’s new, posts one comment on each. Each of those comments attracts two harshly critical or very interesting replies; call them B1, B2, B3, B4.

        Now A, the next time s/he visits OB and sees those replies, has the following options: (1) Reply to B1..B4 at that time. At currently typical commenting rates, this is almost certainly “violating the OB comment frequency rule”, to an extent described as “never acceptable” on the About page. (2) Reply to them but combine the replies into one on each post, so as to avoid violating the rule. This is clearly worse than #1: it makes for less-clear discussion structure, and probably means *more* comment content from A because of the need to say explicitly what’s replying to whom. (3) Reply to a couple now and a couple more the next time A is reading OB, which might be the next day. This is probably also worse than #1: it’s particularly unsatisfactory for (say) B3 and B4 who don’t get their responses for a day or two. Also, as long as A’s participation is “bursty” in this manner, delaying replies doesn’t help if each new post produces new discussions. (4) Devote (say) twice as much time to OB as he presently does, so as to find a window for replying to B3 and B4 after he’s no longer got two other comments among the most recent 10. If #1 has the problem that A is commenting too much, this is not actually likely to lead to an improvement.

        Of course the “solutions” (2,3,4) are solutions to a non-problem. (For OB; perhaps it’s a real problem for A if s/he wants to avoid annoying you and maybe getting banned.) Someone who posts (say) four comments a day is not, in fact, crowding out good discussion from other people, and if their doing so makes them fall foul of the commenting policy, so much the worse for the commenting policy.

        Another situation to consider, though I don’t know whether it arises in practice: A is an intelligent, articulate, polite representative of some viewpoint otherwise unrepresented among the OB commentariat. Accordingly, whenever A says something it’s liable to be met with quite a lot of criticism and questioning — from lots of different people, so no violation of the rules yet. But if A then tries to address those comments, boom.

        (Note for the avoidance of doubt: I have, so far as I know, never been in violation of the OB commenting policy. Maybe once or twice back in the pre-Less-Wrong days when I was more active here, though I don’t recall any such incidents. In particular, I am in no way associated with any of the people you’ve called out recently for violations of the rules.)

    • Peter McIlhon

      “It is the billionaires who own much more than their abilities justify (all billionaires) who should be explaining why high levels of economic inequality should be allowed by society when it has proven (strongly) negative effects for society”
      How do you know that billionaires own more than their abilities justify? Steve Jobs wasn’t worth billions? How did he make that much money? By helping hundred of millions of people and enriching their lives. Who are you to tell a Steve Jobs he didn’t “earn” his billions? Here’s a better question: How much is a typical billionaire’s abilities worth? Also, show me the proof of economic inequality having strong negative effects in America today. We’ve never had it better – all classes have never had it better.

      • IMASBA

        “How do you know that billionaires own more than their abilities justify?”

        Plenty of research has been done into that, read “fooled by randomness” by Nassim Taleb for an easily readable introduction, it explains things like “survivorship bias” (mistaking lucky people for being champions, even when the sample group is so large survivors are to be expected through nothing more than pure chance), “lack of alternative history thinking” (mistakingly believing that what happened in the past was the most probable outcome all along) and many other biases. But really it’s not difficult to reach the same conclusion as the economists, statisticians and psychologists who’ve done the research: it’s never a carpenter who becomes a billionaire by building furniture a thousand times faster than other carpenters, no, it’s always people in white collar fields where it’s easy to just get lucky.

        “Also, show me the proof of economic inequality having strong negative effects in America today. We’ve never had it better – all classes have never had it better.”

        There’s the highest incarceration rate in the world, there’s the erosion of democracy (the larger income inequality is, the more a small group of rich donors runs the country), there is more poverty, more homelessness, more crime and less social mobility than in other developed countries, millions of American children get education that doesn’t deserve the name. Purchasing power per hour worked has actually dropped for most Americans over the last decade and infrastructure is appalling compared to other developed countries. Also more and more Americans are relying on charity, which erodes their personal freedoms (charities come with forced ideologies such as hospitals that don’t carry out abortions and schools that do not teach real science).

        “How did he make that much money? By helping hundred of millions of people and enriching their lives.”

        This is what I call “Cheops bias” (the large pyramid is called “Cheop’s pyramid” instead of “50.000 workers, artisans and architects Pyramid”: you run an organization and you get all the credit for what that organization accomplishes, this is possible because of biases in the human mind, but it’s completely irrational. I can think of an organization where, for safety purposes, each morning 10 people turn on serial a power node for the organization, each one of them can claim that if they do not switch their node the organization produces nothing (because there would be no electricity). The problem comes when all 10 of them each claim they should get 100% of the company’s profits because they made those profits possible. The moral of the story: just because you happen to be in an influential position doesn’t mean you have a rightful claim to all production that is under your control. Production of the organization with you at it minus production without you is not equal to your contribution! And that’s just in cases where people hold real influence, where it’s not just random survivorship (it usually is just random survivorship that gets people to high places because the number of relevant events to measure ability from is too low to be statistically significant and even without that flaw the rewards for single winners are usually too great to reflect differences in ability).

      • Weaver

        ” it’s never a carpenter who becomes a billionaire by building furniture a
        thousand times faster than other carpenters, no, it’s always people in
        white collar field”

        Ermmm…..Because white collar jobs can be massively more productive than blue collar can ever be? Or do you know a carpenter that does create 1,000 tables a minute whom we are discriminating against?

        Incidentally, would you count professional sports as “white collar” jobs?

      • IMASBA

        “Ermmm…..Because white collar jobs can be massively more productive than blue collar can ever be?”

        Are they? Isn’t that in itself a form of bias? Are the power node switchers from my thought experiment white collar workers? Like I said: Production of the organization with you at it minus production without you is not equal to your contribution! The power node switchers who press a single button a day are not more valuable than the workers inside the organization, they have more control but that’s it, the same is in a sense, often true of management. It’s also no coincidence that the more volatile (read: casino-like) the business is and the harder it is to measure individual contributions the higher the rewards are in that business. Too often we’re paying bricks on dead man’s switches for their marvelous accomplishment of keeping the trains going.

        “Incidentally, would you count professional sports as “white collar” jobs?”

        No, then again there are no athletes who became billionaires through their sport (advertisement deals are separate, white collar, jobs). Still one relevant aspect of white collar jobs is present in sports: the winner takes all principle: I may run 0.1% faster than you but get a 500% larger reward for it.

      • Weaver

        RE: Power node switchers. This is a basic essentialist fallacy of value. I don’t think you understand shapley values.

        I have considerable sympathy for your CEO survivor error theory, but it doesn’t support your other points.

      • IMASBA

        “RE: Power node switchers. This is a basic essentialist fallacy of value. I don’t think you understand shapley values.”

        You’re missing the point: of course it is a fallacy of value, that’s what I was trying to show, and my point was that similar logic is still used to defend high incomes of the rich (“the CEO just signed a deal that will make us $300 million, so he added $300 million of value to the company”, and other such BS). We’re talking about the morality of real world income inequality here, not about what some economist devised as an alternative method that’s not used in practice and that holds no moral justification (Shapley values are amoral distributions that keep the peace).

        “I have considerable sympathy for your CEO survivor error theory”

        Then it’s important to know most of the money of the rich comes from inheritance, snow-ball effects caused by inheritance (it’s a lot easier to make $1 billion if you start out with $400 million, even though technically you would have inherited only a minority of your wealth) and survivors (executives, finance traders, investors). Then in entertainment people become stars through unpredictable viral dynamics (read: luck, because there are undoubtedly millions of people who have the same talents as that popular singer, they just weren’t at the right place in the right time).

        My solution? Tax 100% above a certain amount of income (say $1 million per year, which is more than the POTUS, the president of Harvard and most Japanese CEOs make), it’s not exact but it’s simple and less worse for society as a whole than what we have now.

      • Weaver

        OK. Success has a thousand fathers, failure is an orphan etc. I think we kinda agree, but I don’t think you have (much) more evidence for your claims than the competing “CEOs cause all value” claim. We need the proportion of value added explained by CEO, with controls for market movement etc, and to my knowledge there simply isn’t a good study out there?

        I find it hard to believe CEO’s have no effect on future value. Note that even an r^2 of 0.2 would “justify” some of the salaries.

        Is there less social mobility than there used to be? A little, and wealth can be self-perpetuating over threshold effects, sure. But have things changed that much?

        100% Tax, eh? Erm…are you sure that would work.

      • IMASBA

        “I find it hard to believe CEO’s have no effect on future value. Note that even an r^2 of 0.2 would “justify” some of the salaries.”

        Some of it yes, I’m not saying the CEO should not be allowed to make more than the cleaning lady, but executive pay has completely gone overboard. Do note that my power node switchers example was ment to illustrate that someone can add a lot of value to the company without being deserving of a high wage (if the position does not require much skill to fulfill or get into and doesn’t bring much risk).

        “but I don’t think you have (much) more evidence for your claims than the competing “CEOs cause all value” claim. We need the proportion of value added explained by CEO, with controls for market movement etc, and to my knowledge there simply isn’t a good study out there?”

        There are actually studies about it and they do tend to agree with my viewpoints, there are also ex-traders and bankers who agree with me. The other side seems to consist mainly of journalists and right-wing think tank writers, both of whom usually lack the mathematical knowledge and the (financial) industry experience to really know what they’re talking about and that shows in their writing. Then of course there are simpler arguments to be made like a variety of animals that beat the stock markets for years at a time and the suggestion that perhaps it’s a bit absurd to assume billionaires (even the birthers among them) have insane IQs that make Stephen Hawking look retarded in comparison when there are much more down to earth statistical and psychological explanations for economic inequality. In any case it’s a fact wealth has diminishing utility and that the rich are a small minority so even if it was a 50/50 discussion it would be better to side with people like me (if I’m right you saved countless of lives, if I’m wrong you took a rich man’s 4th home).

        “100% Tax, eh? Erm…are you sure that would work.”

        In a world with only electronic payment it could, provided tax havens are properly dealt with. 99.9+ percent of people would not fall in that highest bracket anyway and most of the ones that do fall in it only slightly.

      • Weaver

        If you have study references I will read them :-)

        I think I understand and accept your power node switchers analogy now. We’re just arguing over what the CEO r^2 with added value actually is. I’m happy to believe some CEO, some industries, it is zero. Yes, I find the insider accounts persuasive, even if self-serving. But I note that CEO results overall seem overdistributed enough through time that there must be some correlation. Berkshire Hathaway is simply not explicable by chance. Again, it doesn’t require much non-zero to “justify” very high salaries relative to our cleaning lady.

        You draw attention to something I should have mentioned; we’ve been focussing on a rational/efficiency argument for high incomes. But there is a gap from that to the taxation argument. Lets say for the sake of argument you are right and it is “wholly unjustified”. There is an additional argument needed to tax it. I’m not really a utilitarian, so can’t proceed simply from “John’s income is mere good luck” to “we should tax John’s income – look how much good we could do with it!”.

        Incidentally, would you support a 100% tax of lottery winners? Or inheiritance tax? There’s a lot more wealth out there which is clearly “unjustified” in any rational contribution sense.

        “Provided tax havens are properly dealt with”

        I should have been clearer; that’s the nub of my scepticism, not the physical impossibility of 100%. The co-ordination problem you face in getting there is unsurmountable as individual countries are incentivised to “defect” from your 100% tax regimen and attract the rich to their shores. Actually, I’d bet that tax competition effects are increasing massively with labour and capital mobility of the modern age. The very technologies you think make it physically possible make it less politically possible.

      • IMASBA

        “If you have study references I will read them :-)”

        - Fooled by Randomness (Nassim Taleb)

        - Survivor bias and mutual fund performance (E.J. Elton, M.J. Gruber, C.R. Blake)

        - Are CEOs Rewarded for Luck? The Ones Without Principals Are (M. Bertrand, S. Mullainnathan)

        - Managers’ Selection: Survivors Always Look Better, Whether They Are Skilled or Not (D. Clermont)

        - Are Random Trading Strategies More Successful than Technical Ones? (A.E. Biondo, A. Pluchino)

        There are also some humourous accounts of a variety of animals that beat the stock market for years at a time.

        “We’re just arguing over what the CEO r^2 with added value actually is.”

        Yes, I do not count “accidental” value as something that should be relevant to reward: if you get into a position that exerts a lot of influence but you got there mostly by luck and the job isn’t particularly difficult or risky (to yourself) I’d say the value YOU add isn’t that great, even if your position adds a lot of value, to me it’s no different than a lottery winner claiming he added $1 million of value to the economy, or someone who finds oil on their land claiming he’s self-made and making a lot of money. Pop stars are a good example: they get where they are mostly through chaotic viral dynamics that they do not control and their jobs aren’t that much harder or riskier than that of the average person, still they rake in millions.

        “I’m happy to believe some CEO, some industries, it is zero.”

        Zero is a bit extreme, I’m sure most CEOs add some value just by doing necessary paperwork and negotiations.

        “Berkshire Hathaway is simply not explicable by chance.”

        Are you sure? There are a lot of similar funds in the world. Btw, I’m not saying everything is 100% down to luck, it’s more like poker: card counting skills and solid bluffing do give you an edge, but there’s still a large random element and the reward for the winner is disproportionately large.

        “There is an additional argument needed to tax it. I’m not really a utilitarian, so can’t proceed simply from “John’s income is mere good luck” to “we should tax John’s income – look how much good we could do with it!”.”

        There is the utilitarian argument, which is a strong argument, but there are more arguments to be made, such as increasing social mobility (by removing a financial aristocracy) and strengthening democracy (money = power, literally and in many ways). There’s also the simple fact that if you get more than you contribute that means someone else is getting less than they contribute.

        “Incidentally, would you support a 100% tax of lottery winners? Or inheiritance tax?”

        Yes, and yes.

        “The co-ordination problem you face in getting there is unsurmountable as individual countries are incentivised to “defect” from your 100% tax regimen and attract the rich to their shores.”

        That’s true. We will have to wait for a single global government, or superstates with a high degree of self-sustainability (at least when trade with other like-minded states is included) and the capability to strong-arm tax havens.

      • Weaver

        Respectfully, I’ve read 3 of those already. I don’t think they support the “no added value” hypothesis; just the “little added value” or “some have no added value” hypothesis. Taleb himself after all, does make money with his contrarian strategy. So there is at least 1 skilled trader, or so he would have us believe ;-)

        Yes, I think I’m fairly confident. There’s more than one Berkshire Hathaway class fund. Aggregate fund performance statistics still seem over-distributed relative to what we would get from a pure chance/no skill distribution. Your third reference is a pretty good take of what I usually see.

        PS. Ranking entity performance in messy systems is one of my jobs (not financial services). I’m very aware of how random fluctuation can be mistaken for skill.

      • IMASBA

        “Taleb himself after all, does make money with his contrarian strategy. So there is at least 1 skilled trader, or so he would have us believe ;-)”

        But he does admit he makes a lot less than most other traders, he even expects that to remain true and that’s fine with him, he accept it as the price for insurance against catastrophic losses. Also it may very well be that the stock market itself is a parasitic entity that enables not-so-great minds to gather more than their fair share of wealth relatively easy.

        “If we’re just haggling over a few points of r^2, rather than zero r^2, then we’re not that far apart.”

        Depends on your definition of “a few”, but yes, we are haggling over the size of the added value (and how much of that should be reflected in the reward), nowhere do I say that no value at all is added.

        “Yes, I think I’m fairly confident. There’s more than one Berkshire Hathaway class fund. Aggregate fund performance statistics still seem over-distributed relative to what we would get from a pure chance/no skill distribution.”

        Nassim Taleb believes a lot of Warren Buffett’s success is still attributable to chance. I don’t know enough details to be entirely sure but I suspect the trick lies in two things: 1) to do proper statistics Berkshire Hathaway has to be included in a pool with ALL traders on the stock market, not just other large funds, 2) temporary success can become a self-fulfilling prophecy through investors’ belief in that success (similar to a bubble but less catastrophic since Berkshire Hathaway really can increase its own intrinsic value using hyped investments). And ultimately the reward is disproportionate, even if the success is 100% attributable to Warren Buffett’s special skills.

        “PS. Ranking entity performance in messy systems is one of my jobs (not financial services). I’m very aware of how random fluctuation can be mistaken for skill.”

        So you rank school test scores or businesses?

      • Weaver

        Yes, I’m sure Buffet is lucky too. The outliers in these kind of system are both Skilled and Lucky. And yes, you do have to have a stratified sample.

        So you rank school test scores or businesses?

        Nope and Nope.

      • IMASBA

        “Yes, I’m sure Buffet is lucky too. The outliers in these kind of system are both Skilled and Lucky.”

        Precisely like my poker analogy where the best players still have a better chance of winning but the difference in skill across the sample is not particularly large meaning the majority of winners are average or below average (though the best players are overrepresented among winners) and a majority of the best players does not win. Now add to this an excessive reward for the winner, say 1000 times fo what everyone else gets, while even the best player in the world obviously isn’t 1000 times better than the average or median player, then make it mandatory for everyone to play poker games using real money and allow winners to use their prize money in their (or their kid’s) next round of the game so they can outlast better players simply by starting with more chips. And before I forget, the arbiters are paid by the winners and handsome people start with 20% more chips.

        There you have an approximation of the real economy and to me it becomes pretty much impossible to not see a maximum wage and wealth redistribution as moral imperatives.

      • IMASBA

        To clarify, I do not think we can really get rid of the poker game (maybe some kind of technocracy will be possible with advanced AI, but not anytime soon). What we can do is decrease the reward for winning a game (to be more in line with the actual small role of skill and to decrease the influence winners have over arbiters), limiting how many chips can be brought to the next game (to decrease aristocratic tendencies) and giving beginners more chips to start with as a percentage of the total number of chips in the game (to make the game more meritocratic meaning beginners will be more motivated and more fresh playstyles will emerge).

      • http://juridicalcoherence.blogspot.com/ Stephen Diamond

        If any country were in a position to implement your program—regulated capitalism with ultrasteep redistribution at the top—it would be the People’s Republic of China. Perhaps the question is debatable, but I don’t think the Chinese Communist Party likes having billionaires. The fact that it finds it must tolerate them goes to show that inequality is essential to the efficient operation of a capitalist market, even a highly regulated one (which the Chinese market is).

        (For an approach to socialism using a faux market, and an argument that a faux market is better than an actual market, see “Belief–opinion confusion and the contradictions of capitalist investment markets: Fictional-market socialism.” — http://tinyurl.com /ke2oj98 .)

      • IMASBA

        “If any country were in a position to implement your program—regulated capitalism with ultrasteep redistribution at the top—it would be the People’s Republic of China.”

        The majority of China’s billionaires are high ranking communist party members (they elevate the term “champagne socialist” to a whole new level). Many other high ranking members are multimillionairs and the party leadership has been communist (or even socialist) in name only for a long time now. Plus I doubt they could just make all money electronic when most of the people are poor and many districts lack infrastructure.

      • http://juridicalcoherence.blogspot.com/ Stephen Diamond

        The majority of China’s billionaires are high ranking communist party members (they elevate the term “champagne socialist” to a whole new level). Many other high ranking members are multimillionairs and the party leadership has been communist (or even socialist) in name only for a long time now.

        I think that’s a popular misconception. In fact, government bureaucrats remain dominant in the party. The number of rich have been curtailed.

        See, for example, http://tinyurl.com/8mndn39 :

        “The CCP, more than a decade after former President Jiang Zemin tried to open it up to private businesspeople, remains dominated by Party and government bureaucrats, military officers and executives of state-owned corporations.”

        “The data from Hurun, publisher of a luxury-goods magazine that tracks China’s affluent, show the number of billionaire delegates at the Party Congress will rise by at most one since 2007, when it last convened.”

        State-run enterprises remain economically dominant in China. The country is Communist–but in a kind of ultra-Bukharinist way.

      • IMASBA

        There are 83 billionaires in China’s parliament (the 3000 highest ranking members of the party excluding the 25 member politburo). There are 122 billionaires in China (according to Forbes), so at least 68% of China’s billionaires are high ranking party members.

        As to multimillionaires, well it seems only senior party members and their family members (the entire party, including the lowest ranking members comprises only 5% of China’s population) become multimillionairs in China: http://www.sunday-guardian.com/investigation/the-party-line-is-wealth

      • http://juridicalcoherence.blogspot.com/ Stephen Diamond

        No, you don’t understand Chinese politics. The parliament is NOT part of the party; the party rules. The article I cited spoke of the party Congress, which is important; the “parliament” is unimportant. The very rich have greatly increased their numbers in the parliament while proportionately greatly declining in the party’s leading bodies. Only the second trend has political significance. The “parliament” definitely is not constituted of high ranking party members. (It seems the “input” of the rich can be obtained through their participation in parliament without giving them real power.)

        The article you cite comes from a far-right wing think tank. He cites some survey of Chinese where the people complain that wealth comes from politics in China to “prove” that it does.

      • IMASBA

        “No, you don’t understand Chinese politics. The parliament is NOT part of the party; the party rules.”

        I know this, yet the rich who sit in parliament for the communist party don’t do it for charity (it’s probably a reward ofr service and a great place to network) and the very rich are severely overrepresented in bodies with real power. I don’t know why you assume people involved in state enterprises are not rich: many of China’s ultra rich became rich through shady real estate deals via state owned enterprises (this is usually the domain of the completely rotten local governments which do not hold the supreme power but can easily, through party members, block extreme proposals, such as a 100% tax on multimillionairs and billionaires, from the national government).

        “The author of the article you cite heads a far-rightwing think tank. The author refers to some survey of Chinese where the people complain that wealth comes from politics in China to “prove” that it does.”

        I don’t know who the author is but the survey was Chinese, by the Chinese and even the publically known millionaire party members represent 35% of the millionaires in China (while the party contains only 5% of China’s population). Also, not officially inviting billionaire and multimillionaire party members to meetings, but not expelling these members from the party isn’t any different than American politicians complaining about the banks but taking huge campaign funding checks from those banks behind the scenes.

        Simply put, if the Chinese communist party were to eliminate billionaires and multimillionairs they’d be eliminating their own a lot.

      • VV

        Note that even an r^2 of 0.2 would “justify” some of the salaries.

        I don’t think that this criterion makes much sense. What matters in deciding the CEOs’ salaries is opportunity costs:

        In a world where CEOs made, say, million dollars rather than billions, and nobody made billions, would your average CEO choose a different profession? Would they be any significantly less incentivized to be as productive as they would be if they made billions?

  • Alexander Gabriel

    Mr. Hanson’s favored theory doesn’t strike me as likely. But the question is important.

    The first issue is to define what other dimensions of inequality matter.

    Maybe we might take Max Weber’s trio of money, status, and power. It might be that power inequalities are not talked about much today because in liberal democracies there aren’t many; in dictatorships maybe they aren’t talked about because that would get you jailed.

    It seems like status is a function of qualities that we admire for their own sake. Being educated clearly contributes.

    That reminds me of the Human Development Index of wealth, education and life expectancy. You can maybe see that we don’t care as much about the last two in that the Gini index is only about wealth. I’ve never heard of an inequality index for human development.

    One other thing. I have an answer for why we don’t talk about redistributing wealth in foreign countries. Because we don’t interact with those people. It’s the local rank that matters.

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  • mtraven

    ⫸ that inequality talk is usually a covert way of coordinating who to maybe grab stuff from. Let me explain.

    There is an entire corrupt ideology encoded in that sentence. Let me explain.

    The use of the word “grab” subtly (well, not that subtly) implies that there is some kind of natural distribution of resources, which those who worry about inequality propose to “grab”. Grabbing is not a very nice word, and by choosing that rather than something more neutral like “redistribute”, you’ve already biased the argument.

    In short, you aren’t about overcoming bias at all, but ensuring that your preferred political biases are so ingrained in the language people use that nobody will even be able to question them.

    Homo hypocritus, indeed.

    ⫸ our forager ancestors developed the ability to express and enforce social norms…One of those norms was that foragers weren’t supposed to grab stuff from each other just because they wanted the stuff…foragers needed ways not only to overtly accuse folks of violating norms, and to officially propose to take stuff away

    Foragers are not known for having large amounts of “stuff”. It’s practically the definition of a nomadic foraging lifestyle that people don’t have much in the way of possessions. Accumulation of “stuff” required the development of cities and agriculture, and priests and soldiers to enforce the norms about “stuff” and to make sure that the peasants didn’t “grab” any of it from their betters.

    • http://entitledtoanopinion.wordpress.com TGGP

      Anthropologists have documented foragers hiding “stuff” (food) for themselves so that they don’t become obligated to share it with others. It’s true that accumulation would be unlikely, and the egalitarian norms of foragers would contribute to that. It might be that the norm of sharing was strong enough that demands for “stuff” wouldn’t have to be disguised as something else, but jockeying over status may have been more covert.

    • http://juridicalcoherence.blogspot.com/ Stephen Diamond

      Grabbing is not a very nice word, and by choosing that rather than something more neutral like “redistribute”, you’ve already biased the argument.

      Language always contains potential connotative biases. “Redistribute” has a favorable bias, which isn’t changed because some rightists have reversed the connotation in defiance. (Analogy, “the n-word.”) “Redistribute” carries a basically favorable connotation because it asserts that what is being done is a do-over, thus is presumptively better and the first try failed.

      Granted, it’s a lot more subtle than “grab.” But don’t think it’s clear that smuggling connotations subtly is better than announcing them frankly. Hanson would admit the connotation of grab (or more likely, remain silent), while the element of approval in “redistribute” goes unnoticed.

      • mtraven

        I agree that language always contains some bias, hidden or otherwise, although I disagree on the superiority of Hanson’s unsubtle version of it.

        I think both words imply something wrong, actually: that there is some pre-existing distribution of wealth that we are only now going to alter (by grabbing or redistribution). That is the wrong way to think about it. The distribution of wealth results from a whole slew of existing institutions and individual actions. It is the way it is because of politics and war, as well as the more obvious economic activities, and we as citizens have a positive obligation to reexamine those politics and change them if they aren’t working.

  • Karl

    This post is ridiculous. The rich and elite change the market design so that they disproportionately benefit at the expense of the majority, ex globalization, structured finance. There is a lot of grabbing going on -its by the elite and if they keep it up they will suffer the same consequences that all overreaching elites have experienced -revolution.

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  • John

    You can’t grab something that already belongs to you. All capital that physically exists in the US is ultimately owned by the citizens of the US, collectively.

    It’s just that we use individual – transient! – property rights as a legal vehicle to create market incentives. This is merely a function of democratic will. We want billionaires to have some property rights. That’s why they have property rights. Every investor knows that elected officials can raise taxes as they see fit. They know this before they start investing.

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  • http://blog.seliger.com jseliger

    while people usually justify their inequality concerns by noting that inequality can make lower folks feel bad, that justification can apply equally to a great many sorts of inequality

    I may have read your post when it was originally published (and subsequently forgotten about it), but a couple days ago I wrote something similar in “The inequality that matters II: Why does dating in Seattle get left out?” Someone on that post left a comment pointing back to this one.

    In the last year I’ve seen a lot of writing about financial inequality and almost none about non-racial, non-financial forms of inequality.

  • Sonnie Bailey

    “People usually become billionaires via having “super-powers,” i.e., very unusual abilities, at least within some context.”

    I’m reminded of Daniel Kahneman’s success equation that goes something like “success = talent + luck”; “great success = a little more talent + a lot of luck”. I think it was Taleb who suggested that the difference between mild success and wild success is luck.

    If there’s a relevant super-power, it’s being lucky. If that’s the case, it raises a whole set of other questions and issues that aren’t addressed in this post.