TL;DR: Paul Graham tries to explain that taxing the wealthy does not solve the root economic problems that we commonly attribute to inequality. I maintain that taxation is the best solution we have, so by trying to brush that off the table, Graham’s view is ultimately harmful to society.

Today I read Paul Graham’s essay on Economic Inequality, Ezra Klein’s response to Graham, and Graham’s response to Klein. I leaned on side Graham at first. Then I got into a heated discussion with my good friend, and now I believe that Graham’s opinion on economic inequality is outright harmful.

Graham says economic inequality is not clear and simple, so our conversation about economic inequality should not be clear and simple. Inequality is a big topic, and it is probably best thought of as a symptom and not the cause. For example, poverty is bad – let’s attack poverty, and leave inequality alone.

Leaving inequality alone is a big part of his argument. He urges this point by saying that startups thrive on inequality, and without inequality, startups would die. Indeed, stock options for successful founders are worth 100-10,000x the net worth of the typical US household. Graham says that tackling inequality means standing in the way of the exponential curve of technological growth, and that would be fatal to society.

His rebuttal – and this is where I thought he had a good point – is that we should focus on root causes. Tax loopholes are one great example: why should we increase taxes on the wealthy if they’re going to avoid paying them anyways? Predatory financiers are another problem worth fixing: probably payday loans and subprime lending have hurt the poor more than comparing their paycheque to Bill Gates’ paycheque has hurt them. Fixing what’s broken is probably easier and more impactful than whatever else we’ve got in mind.

But this argument is insidious. The big solution we have to fixing inequality is taxing the wealthy, and Graham’s essay builds to the claim that taxes hurt society because taxes damage the wealth of startup founders. He says, “let’s aim at the problems. For example, let’s attack poverty, and if necessary damage wealth in the process. That’s much more likely to work than attacking wealth in the hope that you will thereby fix poverty.”

This is an unsafe conclusion. Without ever putting it so bluntly, Graham implies that taxes on the wealthy are harmful. Meanwhile, economists today study inequality with fervour, and there is a good consensus that raising taxes on the wealthy is the most effective solution to many of the problems of inequality.

I am strongly in favour of closing off opportunities for the rich to profit from zero-sum games. I imagine that most people would be in favour of that. But while the clunky government closes all of loopholes and criminalizes all malicious financial practices, people will continue to struggle under the oppression of inequality.

Evidence supports the theses of economists who suggest taxation solves the problems of inequality. And although dogma can create disagreement on the fairness of mechanisms of income distribution, I think that common sense shows that income equality ameliorates racism and poverty, to name a couple. Additionally, much economics research attacks when Graham points out that taxation hurts innovation (startups), so it’s probably unsafe to rest your opinions on that contention.

Graham disagrees with taxes, fine. But does that qualify as harmful? The reason I believe Graham’s essays are insidious is that he panders to his audience – Macbook-wielding techies (like me) who aspire to get rich from startups – who broadly benefit from inequality. He exalts our wealth-creating activities and defends our rightly-earned wealth from the horde of “equality” spewers. The harm he creates is telling innovative young people – current and future startup founders – that inequality is not our brunt to bear.

Graham’s essay is harmful because inequality is everyone’s problem. Not just the government’s problem and not just an evil hedge fund manager’s problem. Taxation might be the best solution, and if someone decides it so (be it an empirical economist or a democracy) then we have to be prepared to take the problem of inequality into our own hands.