The Paul Graham piece from 2005 is interesting: This has been written before the 2008 crash.  His point is that inequality rewards risk, and you need people to take risks.  But of course not too much, because if you take too much risks, and fail, you make something fail which is "too big to fail".  Fannie Mae failed.  The near-government institution he mentioned as counter-example of a risk-taking venture capitalist.  And they failed, because they were taking way too many risks - too much for a big institution, not too much for a VC.

I'm also not agreeing with his view of "reward", and that you do a startup to become insanely rich.  Maybe in the USA this is your motivation... but actually a much smaller inequality would make that goal easier to achieve, because status is measured by comparing with your peers in the golf club: If the biggest yacht is just 20m long, it's still the biggest yacht, and it's still a luxury yacht.

That means if you eliminate economic inequality completely, you will not get people to take risks.  I'm fine with that; some inequality is needed to reward people for the risks they take, if they do so, and if the risks don't threaten the overall society.

What he didn't quite get is that there are different ways to take from the rich and give to the poor: income tax or profit tax is just one, and it's probably not a good idea; in a PID regulator, income tax is the P element.  I would be a wealth tax (as wealth is integral of income over time), and we also need a D element to get society stable: D is a damping factor for income change; unemployment benefits, pensions and basic income fit the D part (D applies to both sides of the edge, so when you suddenly earn much more than before, the D part would take some money out - we have that with conditional loans, which are only paid back if your income exceeds a certain threshold - and after they are paid back, the money drain stops).

Now we are on firm ground from an EE perspective, and therefore can apply scientific methods to figure out how to set these parameters so that they give us a stable society that doesn't have to run in that pitchfork maoist response to an overshoot of unregulated inequality.

Note that some of these concepts already have a known effect to startups: The basic income eliminates or at least significantly reduces the need to have an investor in the very early stages of your new business: as long as you only need to do work, the risk-takers can take that effort by themselves - and these early investors are the VCs which want to take the highest gain out; the later investors already can look at the demos, and can judge if this can be a success.

So you only need to reward the founders.  And as a successful startup business is one which has a high growth rate, the wealth tax is doing that just fine: As your wealth is relatively small compared to your income (you didn't have much time to accumulate it), the wealth tax doesn't hurt you much.  Initially.  If your company grew really big and you have been a billionaire for 20 years, it will eat much more from your wealth as an income tax ever could.

This is a very interesting analysis, +Bernd Paysan.  Your economic model with PID controllers is fascinating -- indeed! why not apply industrial control theory since economic policy is at heart about about the macro control of fiscal dynamics.

Your example of status and yachts ties the question of incentivisation to whether motivation can be equally generated by relative or absolute disparities.  I'm inclined to agree that relative disparities can be sufficient.  Which in principle opens the way to devising a model that keeps the absolute disparities small without negatively affecting motivation (appetite for risk).  An additional advantage of such a model is that it should help prevent a "bet the farm" attitude since outsized risks wouldn't payoff with outsized rewards.

Thinking through the model you suggest.  The basic income component you highlight should, in principle, encourage greater entrepreneurism, should it not?  It brings within reach of a larger segment of the population the ability to experiment with new ideas, new offers, new opportunities, including by the less wealthy, the older, those with responsibilities, -- which means more equal opportunity.  This is something which Yellen alluded to, claiming that the current model (connections, VC funded, bet everything approach) is not equal opportunity.  While it certainly works well enough for a small class of individuals, it is not accessible to the vast majority of the population.

Where I think the PID model with basic income is vulnerable is that this basic income would need to be higher than it currently is in order to have the effect I think you're describing.  But then how to respond to the counter-argument that such a high degree of social support may lead many to choose not to work at all --- i.e. why bother to work when a good standard is provided for free?

Very interesting discussion. Looking at another aspect of the revolution, perhaps from the bottom - up, and the fundamental change individuals and society need to explore. Although written as a U.S. centric tale, Friedman and Mandelbaum's THAT USED TO BE US addresses the changes they see that those who you might see as entrepreneurs , but on a personal level. They classify them as CREATORS and SERVERS and the changes in societal perspective , education, basic thought, etc. and how the systemic perspective needs to be addressed if the U.S. [western] societal order is to be maintained. This piece incorporates both THE WORLD IS FLAT perspective as well as Hanaeur's observations ( see also Hanaeur's and Liu THE TRUE PATRIOT, addressing individual responsibility and empowerment). Change and the current unrest (revolution) fits well into THE WORLD IS FLAT paradigm and we are all becoming more an integral, world citizen whether we know ( like) it or not.

+Assad Ebrahim The question whether people will stop working when there's a basic income has been asked over and over again; all experiments come the the conclusion that this is nothing you have to fear.

So far, the experiments have told us that the people who stopped working (they do exist) were:

* Mothers with young children who needed her care
* Teenagers who then went to school instead of working for money
* People who had three full-time jobs to make a living quit two of them, and demanded fair wages on the third one, to continue to work there (a position they weren't in before)
* Old people who should have retired, but couldn't afford it

In other words: people who had something more important to do (or had worked too much or too long to be healthy) stopped it.  And actually, the mere existence of the basic income levels the wages, as very low wages are not enough incentive - so either these jobs vanish (do you really need someone packing your bag in the supermarket?), or they get properly paid.

Yes, agreed and accepted.  Though experimental evidence supports such an argument, proceeding down a route such as offering a sensible basic income arrangement would require a full-scale social commitment, which in turn would initially empty out public coffers unless an immediate and seismic rearrangement of public finances were also in the offing -- and this would of course be opposed by the obvious sources for these extra funds -- back to Haneur's argument & the pitchforks alternative.

What would it take?  Going in this direction would IMO require a massive political shift away from points of view that have become hegemonic in the West (certainly in the US) certainly since since the 80s and perhaps before this: namely limited government, minimal social safety nets, the idea that laissez-faire economics ensures equitable outcomes, the trickle down theory that what benefits the wealthy benefits society at large, and the notion that society has no obligation to ensure anything more than living at the poverty line for those who can't make it up the ladder on their own.

+Assad Ebrahim Yes, of course, Reagonomics and Thatcherism need to go where their proponent went: 6 feet under.  I was quite pleased that when Thatcher died, "Ding-dong, the witch is dead" suddenly became a very popular ring-tone in UK ;-).

+Bernd Paysan, +Bob McClure Two years on from this social justice conversation, a lot has happened: Brexit, Trump, ... This article on the declining progressive impact of meritocracy is insightful:

The world's richest 1% have as much wealth as the rest of the world combined. The top 8 richest have as much wealth as world's poorest half.

While these, and similar, statistics create a sense of outrage, the real issue is regressive policies, national and international, that lead to the continued impoverishment and suppression of large parts of society.

These regressive policies are in education, wage standards, residential zoning, tax laws, arms sales, foreign aid conditions, support for repressive regimes, food & drug deregulation, health care, and social services/welfare schemes, amongst others.

http://www.bbc.com/news/business-38613488