The Solution to Income Inequality is to Empower People

Income inequality is on the minds of journalists and political candidates.  It’s on the lips of people who worry about social justice.  I think income inequality is a symptom and solving for it won’t change anything.  There are deeper problems that we can attack as a society which will do a lot for the symptom.

With the innovative technical tools that have been developed in Silicon Valley (and other tech centers), we have the ability to design policy to empower the individual.  The promise of artificial intelligence, and virtual reality will enable even more tech tools that can make government policy a lot better, and cheaper.

The solution for income inequality isn’t simple.  It’s daunting to even tackle it in this blogpost.  Here are some assumptions that I make when thinking about the problem.

The policies that will solve for income inequality empower people.  They don’t “take care” of people.  People shouldn’t be warehoused and pushed aside or ignored from cradle to grave.  People are assets.  They aren’t liabilities to society.  Successful policy isn’t about “handouts” or “hands up”.  Policy should make it easier for individuals to control their own actions, and make their own way. There is dignity in work.  There is dignity in the struggle.  There is no dignity in government handouts.

That’s not to say government doesn’t have a role to play.  It does.  Laissez-Faire works to a point.  But the problems are too deep, too ingrained for government to entirely walk away.

Our society is not based on a “zero sum game”.  It’s based on opportunity (the pursuit of happiness).  It’s not based on pure equality in every facet of life, but the equal opportunity to pursue life.  America is a capitalistic free enterprise society.  This core principle ensures that income inequality will always be present in our society.  People will always be entering our society (and we want them) and transitioning through our society.  Usually, they start at the bottom.

Instead of focusing on income inequality, we should be creating policy that focuses on income mobility and economic opportunity.  Most of the policies on the books in America today make those two concepts harder to attain.

(end of assumptions!)

Why is it on the minds of so many in the tech community?  The largest US tech centers are located in intensely hard left wing Democratic areas, so the topic is talked about a lot.  Many of tech people I know inexplicably believe that Socialist Bernie Sanders has the solution for inequality.  He is a Democratic candidate for President, and a Senator from Vermont.  If it scares Democrats that Trump is polling well, it frightens me more that someone like Sanders even gets traction.  Sanders solutions are not a solution.  Income inequality won’t change, and will be made worse.  By the way, Hillary Clinton doesn’t have any novel ideas or solutions about solving it either.  Her proposals would make it worse as well.

Paul Graham wrote an essay which was widely read and commented on which you can read here.  He is a leader in the startup tech community.  He started YCombinator, one of the best tech company accelerators in the business.  His actions have caused you and me to have a better life on earth, and have created a lot of opportunity for a lot of people.

Mark Suster was on Bloomberg Television, and wrote about it here.  Mark is a successful entrepreneur and venture capitalist at Upfront Ventures in Los Angeles.  Mark is investing in the innovation of tomorrow.  One of the things I love about Mark is he is not afraid to put it out there.

Albert Wenger of Union Square Ventures in New York is thinking about it too.  Because of the pace of innovation, and the displacement of traditional jobs, Albert proposes a basic income for people supplied by the government.  I agree with this in theory, but would take a far different approach to get there.  I would expand the earned income tax credit (EITC) significantly.

Paul, Mark and Albert lie on the left side of the political spectrum. Based on what I have read from them, Paul is probably more to the left than Mark or Albert.  All are highly intelligent.  All are principled.  All are straight (meaning honest), and good people.   I have met Mark and Albert personally, but have never met Paul.   Interestingly, on many topics I agree with the outcomes that they desire, but disagree on the road we should take to get there.

I decided to blog about this because I am on the right side of the political spectrum.  In the startup community, we are a minority.  I am an out of the closet Libertarian/Conservative Republican in Chicago.  For those of you that live around a bunch of Republicans, you can’t imagine how difficult it is to be out of the closet.  For those of you that are like me and live in highly Democratic areas, you can empathize.  The community isn’t exactly welcoming, and in fact often is highly discriminatory.  Overtly so.

I believe in markets, and I believe that every individual wants the best thing for themselves and their children.  I also think debates about income inequality get entwined in normative economics which is not productive. Professor John Cochrane uses positive economics to solve problems.  He wrote about income inequality here and here.  Markets are central to human existence, and have been since the beginning of time.  Markets solve problems.

One of the reasons that I really enjoy seed stage investing is every time I make an investment, it creates the opportunity for a free enterprise business to make lives better.  Money is just a by product of the effort it takes to build a company.  The real reward is bringing your passion to life through hard effort.

When outsiders view the tech community, they tend to focus on the wealth that people like Mark Zuckerberg or Bill Gates have.  Zuckerberg and Gates are statistical outliers.  However, they created a lot of wealth for millions of others by creating the companies they built. Almost all tech exits are between $20M and $60M dollars for the whole company.  Those smaller exits create wealth for founders, employees, and investors but not like most perceive.  Gates created more economic opportunity by his creation of Microsoft than he ever will through his foundation.

What public policies get us to the point where everyone can take advantage of the opportunity that America offers?

Professor Gary Becker’s research provides the answer.  People do better when they grow up in a two parent household.  They do better when they have more  education.  They do better when they stay off drugs and when they are healthier.

We were warned by President Eisenhower about the “military industrial complex”.  But, today we have massive segments of government and non-government organizations that benefit from the “Industrialized Poverty Complex”.  It benefits by keeping plenty of people in poverty.  American governments have spent trillions of dollars fighting the war on poverty with zero success.  More money isn’t the answer.

What public policies in place today are holding people back?  Here is one example.

Unemployment benefits are paid to the long-term unemployed.  Many on the right would simply end benefits after a fixed period of time.  On the left, the solution would be to increase the monetary renumeration in the benefit.

Instead, Unemployment benefit programs need to have skills training and a lot of help with matching workers to jobs.  Instead of a check, it should be structured as a voucher that lets individuals choose the training they want, and the job matching service they want.  The goal of any such program should be to train the worker to transition to a new job, rather than to simply provide cash benefits to allow them to meet their basic needs. People are an asset, not a liability.  Workers who have been  unemployed for more than 6 months should get training and then placed in jobs through wage-subsidy programs that allow some share of the wages to be paid by the employer and the rest to be paid by the unemployment insurance program.

Oh, by the way, entire businesses that help people will crop up around this problem if we focus on empowering individuals and not masses.

Here are the policies that have to be changed and structured differently if we want to make sure everyone has access to income mobility and economic opportunity:

  • Minimum wage laws
  • Progressive taxation and higher marginal tax rates
  • Corporate tax laws
  • Workers compensation laws and regulations
  • Policies and regulations that make it harder for individuals to open small businesses (Occupational licensing)
  • Redistribution policies based on “fairness”
  • Government mandated or enabled unionization of workforces
  • Bureaucratic, centralized one size fits all standardization
  • Policies discouraging marriage
  • War on Drugs
  • Mandatory sentencing for non-violent crimes
  • Policies against school choice
  • Subsidies
  • Mandated regulation
  • Estate tax laws
  • Government control of large swaths of land (added from the comments)

It is not that our government has just gotten too big.  It has.  The other problem is our government policy is poorly designed.  It is designed to serve masses, and not the individual.  Policies limit freedom.  They limit choice.  One size fits all is a really bad way to regulate in a lot of cases.

Simply enabling freedom of choice will create opportunity that one can only imagine.

tip of the hat to Glenn Reynolds and Instapundit.

tip of the hat to Doug Ross.


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  • “It is designed to serve masses, and not the individual.”

    It serves the individuals who design it and run it pretty well.

  • Prospector

    Fascinating. I’m encouraged. I would add some other things to the bucketlist of “Things that need to change” including:
    1. Insurance reform (last year, our various insurance obligations, incl. workers comp., amounted to ~20% of gross revenues –> YIKES! It’s killing our business)
    2. State primacy over public lands and resource management
    3. I’m sure I’ll think of more

    • #2 is a good one. Insurance reform depends. Auto insurance is pretty cheap. Health insurance hyper expensive because of Obamacare and the Federal govt/State govt mandates. No competition, and ability for attorneys to milk the system.

      • Johnathan Swift Jr.

        Yes, sell off all federal lands that are not needed for military bases or that are not parks now, splitting the money between the federal government and the states. If they environmentalists want to create massive nature preserves in Idaho or Utah for example, they can buy them. Then, use the money to pay down the national debt.

        • Ronald Coase would tell you that private individuals will take care of the land better than centralized bureaucracies.

          • Johnathan Swift Jr.

            Yes, that was my point above. Sell it off. I grew up a westerner, so my states consisted of primarily federal owned land. The whole interior of God’s Country (Idaho) is ruled by the federal bureaucracy. Same for Wyoming, Montana, Nevada, Utah and much of the west. They can’t manage the parks they already have, but they want more. The state is more rapacious than any so-called Robber Barron ever dreamed of being.

  • JohnYuma

    Want to lower insurance costs? Reduce the amount of $$$ they pay in claims.

    Plaintiffs should have to quantify damages in the filing of any lawsuit, and pay pro-rata share of defendants’ costs, including attorney fees, if court awards anything less than the amount initially filed for, including ALL costs if defendant is found not liable for any damages.

  • Misanthrope

    “America is a capitalistic free enterprise society.”

    No, it most certainly is not; nor has it been for a very long time.

    And it is no coincidence that income inequality has increased as it has become less so.

    • Give evidence. America is a capitalistic free enterprise society. Income inequality hasn’t increased because of free enterprise-it’s increased because of poorly designed government policy.

      • Johnathan Swift Jr.

        I think he is saying that it has gradually abandoned its free market roots and evolved into a hybrid system – free market/socialism/crony capitalism. The crony capitalist aspects of the United States system are increasing beyond measure, especially with the development of a whole new class of faux environmentalist/blood-sucking-crony capitalists like Slime Steyer.

        • Crony capitalism certainly exists. But, America is still mostly a free market free enterprise system. Government is way overbearing-but compared to many other societies it’s pretty darn good. Ask someone that emigrated here.

          • Johnathan Swift Jr.

            Yes, it is better, but the level of cronyism is spreading at a furious rate and environmentalism is the one-size-fits-all tool that is being used worldwide to finally put the nails in the coffin of the free market.

            Just look at the damage the evil Arnold, the maid maker and the even more evil Jerry Brown are doing, all with the preposterous notion that one state can set an example for the rest of the world on “climate change.” All by destroying one of the most productive economies the world has ever known.

            Meanwhile, the tech titans vote left for the most part, work with the all-knowing state, but keep their own money off shore and protect it every which way to Sunday while they throttle the beleaguered middle class with their unworkable ideas and preposterous prescriptions.

            The future looks pretty bleak for the free market, the engine that has lifted much of the world out of abject poverty to relative abundance in the same of two and a half centuries since Mr. Watt and his contemporaries got everything going.

      • Misanthrope

        As anyone with 4th grade reading comprehension could tell you, my point was that income inequality and free enterprise are inversely proportional. Since those words are probably too big for you, that means income inequality increases as free enterprise decreases.

        If you think being fined $135,000 for not baking a cake indicates a capitalistic society, then you need a remedial economics lesson.

        Government tells American businesses what and how much they can produce, where they can produce it, what price they can sell it at, who they must hire and what they have to pay them, and even who they must do business with.

        You can argue whether all those things are good, bad, or indifferent; but you cannot argue they constitute a capitalistic, free enterprise economic system.

        • Steve Kellmeyer

          “my point was that income inequality and free enterprise are inversely proportional.”

          There is no evidence of that. In times past, the one who owned slaves was rich, made so on the backs of his slaves. Now, the one who owns machines is rich, made rich on the backs of his machines. The one who owns the means of production will be richer than the ones who don’t. Capitalism proves that true.

          I am not convinced that income inequality is a real problem. It certainly exists, but it isn’t clear that it causes real problems in society, apart from envy, which exists no matter what you do.

          • Misanthrope

            A system allowing one man to expropriate the value of another man’s labor is not capitalism. In capitalism, markets set the value of labor, not government.

            Non-capitalist societies prove even more so that those who control the means of production are richer than those who don’t – because in non-capitalist societies, those people are far fewer, and answerable only to themselves. Look at North Korea – there’s no society on Earth with greater income disparity. You think the government doesn’t completely control the means of production there?

          • No, they pay for that labor. A person trades their skill for money. The free enterprise earns a profit off coordinating production and distribution.

            In our system, unions and governments set a floor on the price of labor for many occupations. But, for investment bankers and other white collar job, the market sets the price.

          • Misanthrope

            “In our system, unions and governments set a floor on the price of labor…” Thank you for making my point, which was that “our system” is not capitalism. If it were, nobody could set a floor or a ceiling on any price; because under capitalism, price-setting is the exclusive purview of markets.

            And just what do you think establishes the amount of money any person receives in exchange for his skill? You think employers roll a dice, or maybe consult sheep entrails?

            Labor is a market, just like any other; and it applies to ALL types of employment, not just white collar jobs. That unions and governments see fit to interfere in some of those markets is merely a proof of my argument that the United States is not a capitalist system.

            You are clearly an economic illiterate. Pick up a high school Introduction to Economics text and educate yourself at least a little before spouting off on subjects about which you are embarrassingly ignorant.

  • theBuckWheat

    “The moral crisis of our age has nothing to do with gay marriage or abortion; it’s insider trading, obscene CEO pay, wage theft from ordinary workers, Wall Street’s continued gambling addiction, corporate payoffs to friendly politicians, and the billionaire takeover of our democracy” That was from Robert Reich’s Facebook page. Reich is being paid $240,000 per year and this semester at least only teaches a single class, on income inequality, at the University of California at Berkeley.

    • Steve Kaplan took on “obscene CEO pay here”

      Robert Reich is not an economist, and knows little to nothing about positive economics and the relationship to income inequality/income mobility/income opportunity.

      • Johnathan Swift Jr.

        Well, his course of study at Oxford included economics I believe, it’s just that everything he learned was wrong. The Reich rule is that he has one big hammer in his tool box – income inequality or IE – and he uses it like a blacksmith, to pound everything.

  • theBuckWheat

    Those who complain about “inequality” never mention how much Oprah or Mick Jagger earn or how little their stage help is paid. Nor do they complain that Matt McGloin, the quarterback for the Los Angeles Raiders has a $108 million contract while one of his team’s cheerleaders just sued the team over her pay of $5 per hour. It is hardly news that over 40 university presidents have pay packages that exceed $1 million or that the heads of 11 charities in the US are paid over $1 million while their volunteers are asked to donate their time and money. Does it matter how much it cost author J.K. Rowling to write a series of novels that have created over $1 billion in wealth for her?

    So who exactly has the income that is proof of “inequality”? Times up: Apart from just railing against “the wealthy” as a nebulous group that excludes all rich liberals, they only complain about business leaders who earn a lot of money. Now why would that be?

    “Income inequality” joins Peak Oil and Global Warming as frauds of the left that converge to advance a statist ideological agenda rather than advancing prosperity and liberty.

    Liberals like to talk about “income inequality” because it is a useful tool with which to talk others out of their liberty and property.

    • Johnathan Swift Jr.

      No, it’s always amusing that the list of miscreants who are damned for making too much are always the money men or industrialists, never the model who is worth a hundred million or the little Hollywood pop tart who is a billionaire. There has never been a better time to be a celebrity, where that fleeting fame can be leveraged into a lifetime of reality television, endorsements, public appearances, and a line of products. But because the left loves and dominates the mass media, they feel those people have earned and deserve their money while they lard on the regulation for small business people and everyone who gets their hands dirty in making the economy work.

  • Steve Kellmeyer

    This is stupid. By definition, 50% of the population has an IQ below 100. You can empower them all day long and twice on Sunday, and they still won’t have anything meaningful to contribute to society. All of their work skills have been taken over by machines. They are now superfluous.

    As for work conferring dignity, yeah, that’s been the general point of Catholic teaching for millennia and the concern projected by Pope Francis specifically since the beginning of his pontificate.

    The problem is, it isn’t clear that income inequality is actually a problem at all. 200 years ago, everyone lived in the same box of low income and low health (see Hans Rosling’s Youtube video, 200 Years in 4 Minutes). Now no one lives in that box.

    There was essentially no income inequality for most of human history. What there has always been, what is growing as Catholic Faith is stripped from the public sphere, is an inequality of dignity. If work used to confer dignity, and now no longer can (see the IQ problem above), then we have to figure out some other way of recognizing the inherent worth and dignity of every human being. Economics is never going to solve that problem. Not even close.

    The “solutions” listed in this article don’t actually work.
    Kudos for trying, etc., but it really doesn’t touch the realities.

    • Johnathan Swift Jr.

      While I don’t agree with all of Mr. Carter’s views, I don’t believe that anything he wrote was “stupid.”

      My late father, who was from the World War II generation used to say that “there is no shame in any honest labor.” And there will never be a machine age utopia where there are no menial jobs. I grew up in a family business and owned my own and was proud of the fact that I did a lot of the janitorial work myself. It gave me time to think and I never wanted to feel that I was too good for it.

      And of course, you are correct that the notion that there is no soul, no spark, nothing transcendent, is part of the problem. If everyone is simply a widget, then they are just in need of a hole to be stuck in. We see this in Europe. Look at Cologne, Malmo, Rotherham, mass rape… and the poor girls are looked up by the left as mere speed bumps on the road to a progressive, multicultural utopia, who made the unfortunate mistake of getting too close to its vangaurd.

      One of the major reasons for the immigration crisis is because we have trained young people in Europe and the United States to believe that countless jobs are beneath them, so people take pride at being on handouts rather than working at a menial job. There will always be thousands of small jobs that are inefficient for machines and that could pay reasonably well, if the government didn’t take so much and the enonnomies of the west began to create jobs again. The American economy is so lumpy in great part because of the regulatory burden on small businesses, the same sort of non-chain businesses that lefties love, but which have a much more difficult time with the regulatory environment than larger businesses with lawyers and accountants and scores of minions and compliance officers.

      I am not obsessed with inequality either Steve, that is an obsession of the egalitarians. They have not learned in the modern, connected economy, the late 20th and 21st century economy that it is simply impossible to prevent. Even the most heavily socialized economies with confiscatory taxation creates billionaires, because there are so many markets and they are so large because of an ever larger consumer base of poor, middle class and wealthy consumers. That train left the station sometime in the 1980s and it is a runaway train. The United States has a dedicated class warrior in office in the form of one Barak Obama and all of his policy prescriptions have only widened the divide, in large measure because of the bureaucracy and layers of red tape and regulation he and his minions in both parties have laid on with a trowel.

      • I am not obsessed with income inequality. I am obsessed with income mobility and opportunity.

        • Johnathan Swift Jr.

          I was not so much accusing you of being obsessed with the dreaded EI, but simply stating that this is not one of my concerns.

          I agree with you wholeheartedly that the answer to many of our problems is creating a much more fluid economy, which means less regulation, less top down governance, lower taxes and fewer barriers to starting a business.

          All of us who have encountered bureaucrats find that they, or many of them. see their natural role in hindering business, not helping them. It’s rarely, “what can we do to help,” or “how can we help you into compliance with our regulations?” The business is seen as the natural enemy of the state.

          DRAT – Displace, Replace, Abort, Tax.

      • Steve Kellmeyer

        “there will never be a machine age utopia where there are no menial jobs.” That’s a faith-based statement.

        A century ago, we said, “there will never be a machine age utopia where there are no horses.” And we were wrong. There are no horses in any meaningful economic sense.

        Now, perhaps you are correct. But you are betting the future of half the population. To the degree that you are wrong, that percentage of the population will not, in fact, have jobs.

        • Johnathan Swift Jr.

          There has been a nice series of exchanges here because everyone seems to be intelligent and civil and I think most of the disagreements are more a matter of degree than anything else.

          When I first arrived in Flanders, in 1983, I was surprised to find farmers using work horses to plow the fields. Now, next door to us, there were small farmers with plots that were just a number of acres, four, six acres. Now, my own family the American west had transitioned from work horses to tractors just before World War II and my mother and her siblings rode a big workhorse to school, several of the little girls and one of the boys. They of course went to a tractor and all of its wonderful hydraulic accessories because it was more efficient.

          So, at first I thought the work horses were a novelty, but the farmers said that for a tiny farm, there wasn’t a major gain in efficiency for a tractor, especially in the tight spaces they worked with. And the horse produced a steady supply of manure and probably gave him someone to talk to while they worked. It was a bit of a lesson for me. And there are still spreads that use horses to run cattle, especially over uneven terrain. We will reduce two and four legged employees, but probably never eliminate them. And dogs and horses work for food, like the sign says.

          I don’t like any minimum wage and feel everyone should be free to make their own agreements. The joke of course is that the same people who argue for minimum wages the most run businesses that are awash in interns, essentially temporary indentured servants or who want to import foreign works and fire natives to save overhead. So, clearly one of those super hamburger machines will replace a $15 an hour burger flipper.

          But, while I am what I would describe as a socialized loner, most of us like human contact, so that is why I will go to a coffee house in the states, where I can meet interesting people and lecture each of the kids working there about going to junior college and how to avoid all the loans that will see them postpone marriage and children. I am a pied-piper of doom, when it comes to the notion of kids working at a coffee house with a $80,000 debt at twenty-five.

          So, I think that people like to deal with people. Like that awful song goes, People Need People (Sorry if you are a Streisand fan, I’m more of a Cole Porter and Ella Fitzgerald person) I can buy an expresso machine, but wherever I am, I like to walk and explore and deal with a person. I hate self-check out machines. At a place I go to frequently, I try to remember the names of every employee, to know something about their lives and their children, if they have them.

          The leftists like small restaurants and many of them look down on big business with disdain, especially McDonalds, which has them spitting with contempt. But, ironically, every policy they favor, from President Obama down, favors the big business over the small because they can navigate the rules, regulation and taxes so much better.

          The trendy little bistro in Sausalito or Cambridge has a much more difficult time because the owners or owners have no economy of scale and have to wear too many hats. They may be a great chef, but manage people or accounting poorly and yet they can’t afford more staff. Small business is a nightmare in many ways, one minute you are parking lot security and enforcement, the next copier repairman, the next janitor, then phone operator, then accountant, then personnel director and then the complain office.

          And when I write something like this on a left of center blog or a newspaper comments section, invariably I get a sneering reply, “then they shouldn’t be in business, if they can’t afford all the people they need,” or “if they can’t afford to pay their employees a living wage (which they determine), then they don’t deserve to stay in business.” All of their “compassion” goes out the window when it comes to business it seems. In reality, most small businesses start with savings, family loans and operate on a wing and a prayer. Many steadily go broke, only paying the employees and depleting the owner’s savings, to the point that it damages their retirement. Others just stay afloat for while, then hit a recession and are gone, each one a lifelong dream gone away.

          I am sure mechanization will continue apace, especially in manufacturing. It’s hard to imagine it in the same way for some tasks, digging, constructing, tasks that are not so repetitive and vary on each job or for janitorial. But the engineers are clever.

          In my grandfather’s day, it took 50% of the states to grow the food and raise the animals for the other half, now its 2% or less. And the crops are going to where it makes sense to grow them. It doesn’t make much sense to grow produce in Montana, except for a farmer’s market, so you see tens of thousands of acres at a time planted with alfalfa, which is what we planted a lot when I was a kid, farther south. But the farmers, who feed everyone are also treated with sneering contempt by the left, especially in California. They go to Trader Joe’s and buy nuts by the pound then pound out editorials about how water intensive they are (true), all while the winter rains pour off into the ocean because the state is unaware that much of the state is a desert, a paved desert in many cases, but a desert.

          And of course, they write about global warming, as if the Southwest has not been plagued by terrible droughts and awful snows. When I was a kid, grandfathers would still speak of the terrible winters of the 1880s, 1886/7 in particular, that their parent’s had experienced, when millions and millions of cattle died in the snow drifts. See, a horse can do a better job of pawing through the snow and getting some nourishment, but the cattle couldn’t so they would starve or walk off a cliff in the drifts. The coulees were full of piles of rotting cattle come spring. The famous little Russell painting “Waiting for a Chinook,” (a wind as well as a salmon) was done that year, when the owners asked how the cows were fairing.

          One of the tricks is to choose a career that a device or machine can’t replace!

    • We disagree. Change the educational system and those people will have a chance. Change the laws regulating starting a business and they have a chance.

      • Johnathan Swift Jr.

        The educational system needs – as Glenn Reynolds of Instapundit and the Instawife fame – says all the time, to be blown apart. A new model. It is little more than an employment system for millions of marginal teachers who bath their charges in leftist shibboleths, platitudes and prescriptions from the cradle on. Lots and lots of time wasting. Better to actually read a book or two. The most expensive schools – like we see in the blue paradise cities of Camden, Newark and Baltimore – are almost inevitably the worst public schools and the unions have made corruption the rule and even the most basic reform impossible.

        But, while lower I.Q. people are not doomed and can be brought up to be good, moral citizens, they are not going to be educated into software engineers, mathematicians or stock analysts. There has always been a streak of utopianism in the libertarian community. Free minds and free markets are great tools for helping many, if not most people, but in the end, the biggest obstacle that each of jus face stares us in the mirror, our own flawed nature. So, we can make things a lot better, but none of us should fall into the trap of what Professor Sowell calls the “unconstrained vision.”

      • Steve Kellmeyer

        If you want to understand income inequaity in aggregate, watch the Hans Rosling video “200 Years in 4 Minutes.” It’s a quick introduction to a topic that you need to become more familiar with. Rosling is an excellent statistician with much more material – you should familiarize yourself with it. Your statement about medieval income inequality is simply erroneous.

        Dignity cannot be bound up with economic output. That’s a utilitarian measure. When you define “work” as an economic activity and indicate that dignity derives from “work”, then you necessarily mean dignity derives from income.

        Also, try working as a teacher for a year or two. You will quickly discover that a large number of students simply cannot absorb the material necessary to do useful work. Whether that number is 10% or 50% is not the point – the point is, in a capitalist society that assigns dignity based on work, those people will never have dignity.

        The only thing that can give every person dignity is the Judeo-Christian faith system. No other system does that, or even attempts to do that… including capitalism.

        • Sorry, while I agree there is a space for faith in your life, it cannot emanate from the government. It’s personal. It’s familial. I know plenty of people that are not Judeo-Christian that are faithful and share similar values. The government can utilize the concepts of John Locke and Adam Smith, which came out of traditional Judeo-Christian values.

          • Steve Kellmeyer

            Obviously faith cannot emanate from the government.

            The point is, economics cannot solve the problem you want to solve. You want everyone to have dignity. Fine.

            If you tie human dignity to the economic value of human work, then a man only has dignity if he can hold an economically useful job. All those who cannot – the aged, the very young, the stupid, the handicapped – can, by definition, never have dignity. They cannot produce economically valuable output.

            If you want everyone to have dignity, everyone has to subscribe to a philosophical system that awards dignity on the basis of existence, not on the basis of work, economics, or anything else.

            The only system that does this is Judeo-Christian. Insofar as any other system holds this concept, they got it from the J-C tradition. Either the J-C tradition was forced on them externally or they accepted that particular value set as superior, but no other system awards dignity based purely on existence.

            I teach logic, ethics, political science and world religions at the college level. Your solution has already been tried and it has failed every time.

    • JJS_FLA

      I know plenty of “geniuses” who are so lazy they never advance. Meanwhile, by dint of hard work, there are many with lesser brain capacity who prosper and flourish.

  • gurugeorge

    Excellent essay, agree on most of the points.


    It’s astonishing how little about market capitalism is taught in public education even though their students are expected to work and prosper within the American system after graduation. The tools are at hand more than ever today to organize self-work on a commercial basis but most high-school and even college graduates have no clue where to start never mind how to prosper.

    • Unionized teachers don’t understand the free market-or don’t believe in it.

      • slikcontrols

        I’m no expert on public unions, but as a member of a professiona engineering union in the Pacific Northwest, I enjoy the benefits of collective bargaining. I look at my union as a company whose mission is to sell high quality labor at fair price. I agree that is antithetical to a free market since the companies don’t really have a choice. In the manufacturing trades, union represented workers can raise issues of safety and quality without fear of reprisal.

        • Public sector unions are not economically efficient. There are economic incentives in negotiating that don’t make it an arms length transaction.

  • teapartydoc

    Missed one. Occupational licensing.
    “That no man, or set of men, are entitled to any exclusive or separate emoluments or privileges from the community.”– Virginia Declaration of Rights
    Medical licensing delenda est.

    • That’s a good one, and I alluded to it. You used better wording.

  • Bruno_Behrend

    First, expanding the EITC to cover more people with more money is a great start. I personally think the goal should be “Social Security at 20” with a guaranteed income of around $15K for every US citizen, paid from 20-60

    Use the EITC to phase that in.

    From that 15K, every citizen must choose a from a basket of retirement and health savings vehicles, along with a basket of health policies that fit their needs. (dramatically reduce mandates)

    Overtime, the health and retirement savings, along with insurance, would dramatically improve the outcomes of the current (and past) gamed systems.

    By the time people turned 60, they would enough to retire independent of the current, low, SS returns. Medicare may or may not still be around, but most people would be in far better shape than if the current system is still around.

    Of course, to finance all this, we have to have a much better tax system. We essentially need to unleash capitalism so it produces the wealth to finance the safety net.

    We could abolish all income, corporate income, and cap gains taxes, and replace them with these three taxes;

    1) 1.5 cent /1000 BTU tax on all energy consumption
    2) 3% transaction tax on purchase and sale of financial instruments

    3) 6% Modified Gross Receipts tax on business entity receipts

    My back-of-the-napkin calculations show this would raise $3.5 Tr year over year, with out any of the instability of our steep progressive system.


    All this can be tweaked, but it is the direction in which we MUST start moving.

    • Okay. Let’s take this one at a time. Your taxes are not economically efficient. Transaction taxes tax capital:

      6% national sales tax is inefficient too. Will only go up. Better to privatize large swaths of government, and leave sales taxes up to the state and local government since they are more accountable.

      • Bruno_Behrend

        All taxes have a level of inefficiency, but I think case is fairly strong that consumption taxes overall are more efficient than income taxes.

        From a replacement perspective, I think transaction taxes are better than capital gains taxes, which are excessive IMO.

        Where is a good place to find research on this. The things I’ve seen indicate that getting rid of all income taxes is both doable, and far far superior to keeping them.

  • George B

    Jeffrey, you state that “The largest US tech centers are located in intensely hard left wing Democratic areas”. This isn’t entirely true. The Telecom Corridor which started with Collins Radio in Richardson, TX and Texas Instruments in NE Dallas is Republican-friendly territory. I’ve worked at 4 tech startups so far in Richardson and Plano. Over time tech companies have spread out away from US-75 and across the Northern suburbs of the DFW Metroplex.

    • Dallas isn’t in the top 10 when it comes to tech centers in the world. The top in the US are Silicon Valley/San Francisco, NYC, Boston, LA, Chicago and Seattle. Austin is the largest tech center in Texas. Other tech clusters in the US are Boulder, CO. When I think about tech centers, I think about startup activity, not necessarily large Fortune 1000 tech companies.

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  • Terenc Blakely

    An empowered citizenry dis-empowers politicians.

  • creative_dude

    SJW’s are really offended by you if you try to teach people how to succeed on their own. You can get thrown out of a school for suggesting that people will be better off if they learn to manage their money.

  • smartguynyc

    What about replacing the current income tax system with a tax on wealth?

    • What about a flat tax of 15%, no write offs; along with 0% corporate income taxes? We would generate more economic activity, give people more economic opportunity, and have a government surplus. Taxes on wealth don’t work. See estate taxes. The wealthy avoid them. Look at the Kennedy dynasty. The wealthy also use foundations and hide behind them now. See the Clinton’s or many pro athletes and Hollywood types.

      • Prospector

        Would have to be able to deduct legitimate business expenses. Most of us are operating at 15% margin (or less).

        • creative_dude

          pointsandfigures suggested 0% corporate income taxes. If humans were rational a flat tax might make sense. In the real world I would eliminate the tax paid by the bottom 25% even if it meant a higher base rate for people above that. I would go so far as to advocate a tax rebate for people who work (at, you know, real jobs and all) for people who earn less than so (to be figured out amount) much.

          • Prospector

            Many small businesses and sole proprietors are not corporations and pay Self-Employment Tax. I would go for a flat tax of 15% on net income and a 10% VAT on all purchases.

          • No VAT. Horribly inefficient tax.

          • Prospector

            I would like a tax system that is stable, reliable, and predictable. As it has been, I’ve never been able to predict what my tax obligation will be in five years. Without this stability, I can’t develop a reliable economic model. I’m open to new ideas on how to achieve this.

          • If it’s a 15% flat tax, it would be stable, reliable, predictable, and you’d be able to fire your accountant.

          • Prospector

            If the flat tax were applied across the board, then everyone would have skin in the game and we could truly be a citizen-owned nation. Frankly, the fairest tax is an equal tax, but that would be even less popular than a flat tax. The reason I lean towards a VAT is that everyone pays.

          • easiest one to administer, understand and go to is flat. VAT is full of ways to gerrymander the code for advantage

    • What about a flat tax of 15%, no write offs; along with 0% corporate income taxes? We would generate more economic activity, give people more economic opportunity, and have a government surplus. Taxes on wealth don’t work. See estate taxes. The wealthy avoid them. Look at the Kennedy dynasty. The wealthy also use foundations and hide behind them now. See the Clinton’s or many pro athletes and Hollywood types.

    • richard40

      I would not just tax wealth, that would start eating up our investment seed corn. I would eliminate all taxes on income, and replace it with a tax on consumption (fair tax, national sales tax), combined with a very small tax on net worth. The sales tax would ensure that everybody pays, while the new worth tax would ensure the top pays their share, and also encourage them to invest their money rather than just sit on it in tbills.

      For example, the net worth tax rate would be restricted to 1/2 the interest rate payed on tbills, say 1% if tbills pay 2%. never more. That way, if you invest well, or own a company that is expanding, taking some level of risk, you can earn about 5 times that, thus the real rate for them is only 10%, but for those who just sit on inherited wealth with risk free tbills or bank deposits, their rate could be as high as 50%.
      The consumption tax (say 10%) ensures that everybody pays tax, there should never be any voters who never pay taxes, since they have too much of an incentive to raise them.
      Both of these taxes combined should allow the income tax and payroll tax to be completely repealed.
      And it has great incentives for making money and risk taking, since you can make as much money as you want and pay zero tax. You only pay tax when you either spend it, or sit on it earning interest or investment returns on money already made. And the more return you make on your investments, the lower you are taxed, encouraging people to get good returns, rather than just risk free ones. No inheritance tax either, but when they spend the inheritance, or earn returns on it, they gradually pay over the years.

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  • Thanks for sharing this perspective, Jeff. We don’t very often hear this type of discussion in tech from someone right-leaning. I already suspected your political
    persuasion but I appreciate that you seem to be able to see issues from a broad angle.

    For whatever it’s worth, I agree with a lot of what you’ve shared here.

    You must not live on the North Shore. I met plenty of Republicans in Kenilworth/Winnetka/Wilmette. Evanston not so much. 😉

    • Ha. No I live downtown. I grew up in heavily Republican DuPage County. I find North Shore Republicans to be more establishment Republicans. GOPe. Hard right wing people would call them RINOs.

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  • richard40

    As usual Glenn Reynolds had the key aside in this argument:
    “Ask yourself which policies provide better opportunities for graft and self-aggrandizement, and you’ll know which ones our political class will favor.”

    Those calling for gov intervention to erase income equality dont give a hoot about income equality, for them it is all about getting power over others, and rewards for themselves and their political allies.
    This article had a great insight in that most of the recommendations in it were about things gov should STOP doing, not more things they should START doing.

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