A Response to Paul Graham’s Article on Income Inequality
As a response to PG&#x27;s article, I posted this:<p>&gt;PG is wrong that he is a creator of economic inequality. Technology development usually brings prices down. This is deflationary; the &#x27;big picture&#x27; way that deflation happens: that prices are discovered more efficiently, or resources are used more efficiently, or that idle labor capacity is recruited to fulfill a want or need that was not known before (esp: think uber&#x2F;lyft).<p>&gt;Deflationary processes are inherently anti-inequality. Think of it this way. If we never changed the minimum wage, then people&#x27;s incomes, especially at the bottom segment of society would make their net economic potential greater over time.<p>&gt;It is not the investment in technology that makes &quot;tech drive inequality&quot;. It is the political structure around it. We have a structure where monetary policy shoves free or cheap money into the faces of banks and the investment classes in efforts to &#x27;stimulate&#x27; the economy, where the secular (over decades, not over years) inflation drives low- and middle- class citizens into risky investment activity just to be able to sustain themselves in their later years (effectively a subsidy for the rich).<p>&quot;families often consist of two breadwinners (&amp; no children) with a hearty amount of debt, nothing owned, and few savings. The family unit itself may even be weaker because of less shared ownership. Wages haven’t tracked productivity for decades, so wages haven’t risen since the previous story was normal.&quot;<p>Is this because of rapacious capitalists taking wages?  The nominal wage has increased since the early 70s, but the purchasing power of that nominal wage has gone down faster than the increase.  This is policy, not capitalism.<p><a href="http:&#x2F;&#x2F;www.nytimes.com&#x2F;2012&#x2F;04&#x2F;06&#x2F;opinion&#x2F;krugman-not-enough-inflation.html" rel="nofollow">http:&#x2F;&#x2F;www.nytimes.com&#x2F;2012&#x2F;04&#x2F;06&#x2F;opinion&#x2F;krugman-not-enough...</a><p>Policy wonks like to argue that the fed should &quot;pay more attention to employment&quot;.  The irony is that if you think that people are consigned to being wage slaves, a national policy of total employment is keeping people there.  There is a cost to getting people employed, and that is that those who are employed are going to be paid less, and the way you trick people into that is by making what people earn be less, even for the same or greater nominal amount (&quot;sticky wages argument&quot;).<p>What happened in the early 70s?  Prior to the nixon shock we had wage increases leading inflation and a trending toward decreasing of the wage gap that had momentum enough to continue till about the 2000s (if you think about it that momentum makes sense because entrants into the workforce in the 70s started retiring in the 200s) - during the bush&#x2F;obama era we see income inequality turning the corner.<p>While we are certainly trending towards getting worse things actually are not that bad:<p><a href="http:&#x2F;&#x2F;im.ft-static.com&#x2F;content&#x2F;images&#x2F;d823a614-9e82-11e5-b45d-4812f209f861.img" rel="nofollow">http:&#x2F;&#x2F;im.ft-static.com&#x2F;content&#x2F;images&#x2F;d823a614-9e82-11e5-b4...</a><p>Everyone is worried about the far right side of the graph (which is partially a histogram artifact) but look at the left hand side of the graph and see how the lowest income fraction of society is far less populated than 40 years ago.  (yes, between 2008 and 2015 it is getting worse, which is cause to worry)