"Thus we’d probably do better to isolate the worst kids in their own school or work hell; they’d be worse off but the gains to other students would more than compensate."

Yes, perhaps, but the missing part of this statement is that those who benefited from this arrangement would then have to compensate those who got screwed.

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Ha, you are pattern matching on the wrong thing. I'm suggesting steps away from homogeneity, not toward a rigid class system with any kind of predestination. Everyone has a wide range of where they could end up capability wise. Much of what actually happens is governed by influences that have little to do with your natural ability.

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1. Pay kids to learn.No further problems in high school because the kids are motivated to learn as fast as they can. Before high school kids learn so little that the lower level of schooling simply doesn't matter.You do have the problem that very high earnings enable brainiac fifteen year olds to kill themselves driving their convertibles the wrong way down one way streets while a half naked fifteen year old girl is drinking Johnny Walker and doing coke in the shotgun seat...but the sacrifice is worth it, in the opinion of the fifteen year old brainiacs.

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MZ wrote >>I think I would have been better off in high school if I wasn’t required to take electives in art, home economics, and wood shop. I’ve never used that “knowledge” as I don’t even remember it.>>

MZ, my experience is the opposite of yours. I, too, had to take shop courses I've never used, but I think they were VERY valuable, because I came to understand how things are done that, as a software engineer, I would otherwise never have done, and how people work that I would otherwise never worked with. I don't propose this as an economic advantage, but just an advantage for "living in the real world."

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Oh brave new world, that has such people in it.

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7YrsDD: You completely misunderstand me. I'm not sure how that's possible since I clearly did not envision giving the money away per capita or something silly like that.

If you break up the Walton fortune into 7000 chunks and give 7000 people selected for entrepreneurial possibility 10 million a piece, and this theory is correct, wouldn't the theory say that we would then see a wave of entrepreneurship from those 7000 which we would not see from the Waltons?

I think any counter-argument would have to invoke negative externalities - focusing on the negative effects of the confiscation/break-up itself, or the distribution; but any such counter-argument can be defeated by rewriting the argument to focus on preventing the creation of such giga-fortunes and favoring smaller fortunes. (For example, inheritance laws could be modified so that giving anyone more than 10 million is heavily penalized but any amount under that is favorably treated.)

Granite26: many people do not invest for those reasons. It's hard to imagine that the investors in many techie-beloved startups like Tesla seriously expect to make billions of dollars off it; many tech millionaires invest to 'do good by doing well' or because the goal is crazy-awesome (John Carmack & Armadillo Aerospace come to mind).

And even if there is a negative effect, we don't know that it would always and at every level of break-up be worse than its gain. To go back to my example, would breaking up and redistributing the Walton fortune do *so* much damage that the benefits of 7000 entrepreneurs looking to invest in something won't exceed it?

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From a social and cultural point of view, mixed in with rule breaking and exploration in High School, separating people makes a lot of sense. Hard to arrange it just so, but possible. Right now, most communities either force everyone together or have a cliff where kids are thrown off of into the pit of the "other" school. The nature and quality of the "other" options is what separates good districts from bad districts, but few or none do it right yet. Ideally, you need to keep fluidity so that one false move or bad quarter doesn't doom you to the dungeon. As long as there is rapid mobility between realms, it is a great idea. Unfortunately, often the insidious things start small and aren't clearly a problem until long after they have become infused in a clique. Making negative effects of attitude, habits, and choices apparent much sooner would be very good. Feedback loops longer than a few weeks are useless to a large chunk of teenagers. And any extremely discontinuous penalties lead to fatalism in some significant subgroup.

The problem is that many with wealth aren't A) adventurous and B) don't feel enough social responsibility to start businesses or otherwise directly foster the creative engines. Many have been convinced that they are doing that by investing in the stock market or some other indirect feeding of the Big Business Machine. I feel that, in the average case, that is exactly like thinking that you are directly helping the homeless guy you saw today by paying more Federal taxes.

I firmly feel it is my responsibility to, after doing as well as I can with my children and significant others, to use my skills to A) do the most good and, given A, B) make the most money so that I can find new ways to do or help other people do A. Having wealth creates a responsibility to perform at least as much as having high ability. Being neutral or negative in effect on the world is the only real sin there is.

For any wealthy individuals who truly pursue and directly support entrepreneurialism in a consistent and significant way, I would vote for zero taxes during those years they are cogent and active. When they are successful, I'd even vote for a rebate on some of the tax revenue they created (probably for some specific situations). For those hoarding and riding their wealth, I would double their taxes (or something along those lines). I totally applaud the former and despise, to some degree, the latter. And I despise societies that make the former harder than it is naturally, often by directly protecting big business thereby enshrining reverse economies of scale out of fear or ignorance. (Japan perhaps? France probably -- their socialistish environment for small businesses is onerous.)

On the relatively poor entrepreneurs starting businesses, they tend to disappear more often, however they are more driven and are able to take existential risks more to some extent. Different businesses may require different types of actors for competitive success.


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Robin: if someone with a million to invest is rich (let’s assume they have 10 million net), and being richer than that doesn’t help innovation and growth, then isn’t this an argument for breaking up all fortunes over that, such as the ~$70 billion Walton fortune? That’s thousands of new rich-people/investors, after all.

gwern, I'm not sure how the thousands of new RP/Is follows at all from breaking up the fortunes > $10 million NW. Even at the per-household not per-capita level, I don't see how the per-household number gets to even $10,000 per household. (Assuming for the sake of argument $1 trillion in aggregate worth in fortunes > $10 million and only 125 million households to receive proceeds or shares.)

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You don't need to be rich yourself if you can persuade a rich person (or a banker, or a manager of a venture capital fund) to lend you the money.

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Being richer than 10 million net is the reason people do the investing in the first place.

In a non-Libertarian view, the reason they're there is to serve as a carrot for everybody else, not because they are useful in an of themselves. (Same as why Tim Hartford's CEOs get paid dumb amounts... Spur on the Veeps with hopes of advancement)

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Adam Smith made the point about needing lots of moderately rich people in Wealth of Nations.

A person with three million dollars can spend a million on a business. America has millions of such people and they aren't generally considered really rich.

My guess is that the optimal entrepreneurial wealth level is about $10M. I think that's roughly where the Gates and Buffet families were coming from, and its fairly close to the old meaning of "millionaire".

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The education article is in favor of tracking - after all much of what it is talking about is optimizing the average, not raising the top. The educators see the 5% gifted kids as a special education class that money can be saved on, by combining with the remaining 90%, and they want to increase the overall result for that 90%.

What I find fascinating is that for the females this does work (perhaps because it helps over-ride the noted tendency of women to adopt an unintelligent role around puberty?), but for the higher performing, but second tier males it causes them to under-perform (perhaps due to competitive pressure? Or maybe it is further sexual politics at work?). Naively the conclusion might be to throw political correctness away and have a male-only honors program, but it's not clear that this would actually work.

In either case, I couldn't tell whether the bottom 5% was before or after major learning disabilities were accounted. Even if not, from the special ed teachers I know, those students take a great deal of time, so by removing the typical tracking I suspect that is one theory that could explain the results.

And having worked with some of these kids before, I've concluded that nearly all of the clever kids in any school are split between the gifted and the special ed.

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Thus we’d probably do better to isolate the worst kids in their own school or work hell

Many school systems around the world start stratifying students by the age of 14 or 15, some going directly into the work force, some going to vocational schools, and others going to college preparatory schools. I think I would have been better off in high school if I wasn't required to take electives in art, home economics, and wood shop. I've never used that "knowledge" as I don't even remember it.

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The "special-ed kids" are much less likely to be highly productive. IQ during youth is highly predictive of adult IQ, and IQ is a big driver of economic productivity.

In order that as few bright kids as possible get stuck in the ghetto, they should be IQ-tested early and separated accordingly.

Robin's point is that, however bad it is for the kids at the bottom, they could be more than adequately compensated with the additional wealth created by the more efficient set-up, so paragraph two is a bit of a non sequitur unless you can back it up with a study.

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If there are grades or any sort of assessment which are used to decide admissions, then isn't that system segregating?

Every system will perform some sort of segregation and discrimination, as long as resources are not equal to desire - that is one of the classic definitions of economics, isn't it? The allocation of finite resources. What social institutions could not segregate in that sense?

If they all do, then it is Rawls's theory that is inconsistent with observations; if some such segregation be 'justice' and others not be, the problem is only pushed back - why is the 'academic hell' any worse than special ed, or remedial classes or any of the current destinations for those disruptive or really bad at classes?

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Robin: if someone with a million to invest is rich (let's assume they have 10 million net), and being richer than that doesn't help innovation and growth, then isn't this an argument for breaking up all fortunes over that, such as the ~$70 billion Walton fortune? That's thousands of new rich-people/investors, after all.

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