Wednesday, November 22, 2006

Paul Graham: Mind the Gap

Paul Graham writes, in an essay named Mind the Gap:

When people care enough about something to do it well, those who do it best tend to be far better than everyone else. There's a huge gap between Leonardo and second-rate contemporaries like Borgognone. You see the same gap between Raymond Chandler and the average writer of detective novels. A top-ranked professional chess player could play ten thousand games against an ordinary club player without losing once.

Like chess or painting or writing novels, making money is a very specialized skill. But for some reason we treat this skill differently. No one complains when a few people surpass all the rest at playing chess or writing novels, but when a few people make more money than the rest, we get editorials saying this is wrong.

Why? The pattern of variation seems no different than for any other skill. What causes people to react so strongly when the skill is making money?

I think there are three reasons we treat making money as different: the misleading model of wealth we learn as children; the disreputable way in which, till recently, most fortunes were accumulated; and the worry that great variations in income are somehow bad for society. As far as I can tell, the first is mistaken, the second outdated, and the third empirically false. Could it be that, in a modern democracy, variation in income is actually a sign of health?
I think the argument he gives is pretty convincing.

There is one bit I’d make a -- relatively minor -- criticism of, though. He consdiers whether it’s unjust that certain kinds of work are underpaid. And though this question is phrased about work in general, his response is really only about work whose pay-level is determined by free-markets, and he doesn't make it very clear that he’s not really answering the general question. There's work like doing basic research, where the pay-level isn't, as far as I can see, determined by free-markets.

The bit in question is
When we say that one kind of work is overpaid and another underpaid, what are we really saying? In a free market, prices are determined by what buyers want. People like baseball more than poetry, so baseball players make more than poets. To say that a certain kind of work is underpaid is thus identical with saying that people want the wrong things.

Well, of course people want the wrong things. It seems odd to be surprised by that. And it seems even odder to say that it's unjust that certain kinds of work are underpaid. [7]
where that note 7 says:
One of the biggest divergences between the Daddy Model and reality is the valuation of hard work. In the Daddy Model, hard work is in itself deserving. In reality, wealth is measured by what one delivers, not how much effort it costs. If I paint someone's house, the owner shouldn't pay me extra for doing it with a toothbrush.

It will seem to someone still implicitly operating on the Daddy Model that it is unfair when someone works hard and doesn't get paid much. To help clarify the matter, get rid of everyone else and put our worker on a desert island, hunting and gathering fruit. If he's bad at it he'll work very hard and not end up with much food. Is this unfair? Who is being unfair to him?
I think it would have been more reasonable to say something like:
Well, of course people want the wrong things. It seems odd to be surprised by that. And it seems even odder to say that it's unjust that certain kinds of work, whose pay-level is determined by free-markets, are underpaid.

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