LLamaRecipes/recipes/experimental/long-context/H2O/data/PaulGrahamEssays/gap.txt

May 2004When 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outdated, and the third empirically false.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?The Daddy Model of WealthWhen I was five I thought electricity was created by electric
sockets.  I didn't realize there were power plants out there
generating it.  Likewise, it doesn't occur to most kids that wealth
is something that has to be generated.  It seems to be something
that flows from parents.Because of the circumstances in which they encounter it, children
tend to misunderstand wealth.  They confuse it with money.  They
think that there is a fixed amount of it.  And they think of it as
something that's distributed by authorities (and so should be
distributed equally), rather than something that has to be created
(and might be created unequally).In fact, wealth is not money.  Money is just a convenient way of
trading one form of wealth for another.  Wealth is the underlying
stuff—the goods and services we buy.  When you travel to a
rich or poor country, you don't have to look at people's bank
accounts to tell which kind you're in.  You can see
wealth—in buildings and streets, in the clothes and the health
of the people.Where does wealth come from?  People make it.  This was easier to
grasp when most people lived on farms, and made many of the things
they wanted with their own hands.  Then you could see in the house,
the herds, and the granary the wealth that each family created.  It
was obvious then too that the wealth of the world was not a fixed
quantity that had to be shared out, like slices of a pie.  If you
wanted more wealth, you could make it.This is just as true today, though few of us create wealth directly
for ourselves (except for a few vestigial domestic tasks).  Mostly
we create wealth for other people in exchange for money, which we
then trade for the forms of wealth we want. 
[1]Because kids are unable to create wealth, whatever they have has
to be given to them.  And when wealth is something you're given,
then of course it seems that it should be distributed equally.
[2]
As in most families it is.  The kids see to that.  "Unfair," they
cry, when one sibling gets more than another.In the real world, you can't keep living off your parents.  If you
want something, you either have to make it, or do something of
equivalent value for someone else, in order to get them to give you
enough money to buy it.  In the real world, wealth is (except for
a few specialists like thieves and speculators) something you have
to create, not something that's distributed by Daddy.  And since
the ability and desire to create it vary from person to person,
it's not made equally.You get paid by doing or making something people want, and those
who make more money are often simply better at doing what people
want.  Top actors make a lot more money than B-list actors.  The
B-list actors might be almost as charismatic, but when people go
to the theater and look at the list of movies playing, they want
that extra oomph that the big stars have.Doing what people want is not the only way to get money, of course.
You could also rob banks, or solicit bribes, or establish a monopoly.
Such tricks account for some variation in wealth, and indeed for
some of the biggest individual fortunes, but they are not the root
cause of variation in income.  The root cause of variation in income,
as Occam's Razor implies, is the same as the root cause of variation
in every other human skill.In the United States, the CEO of a large public company makes about
100 times as much as the average person. 
[3]
Basketball players
make about 128 times as much, and baseball players 72 times as much.
Editorials quote this kind of statistic with horror.  But I have
no trouble imagining that one person could be 100 times as productive
as another.  In ancient Rome the price of slaves varied by
a factor of 50 depending on their skills. 
[4]
And that's without
considering motivation, or the extra leverage in productivity that
you can get from modern technology.Editorials about athletes' or CEOs' salaries remind me of early
Christian writers, arguing from first principles about whether the
Earth was round, when they could just walk outside and check.
[5]
How much someone's work is worth is not a policy question.  It's
something the market already determines."Are they really worth 100 of us?" editorialists ask.  Depends on
what you mean by worth.  If you mean worth in the sense of what
people will pay for their skills, the answer is yes, apparently.A few CEOs' incomes reflect some kind of wrongdoing.  But are there
not others whose incomes really do reflect the wealth they generate?
Steve Jobs saved a company that was in a terminal decline.  And not
merely in the way a turnaround specialist does, by cutting costs;
he had to decide what Apple's next products should be.  Few others
could have done it.  And regardless of the case with CEOs, it's
hard to see how anyone could argue that the salaries of professional
basketball players don't reflect supply and demand.It may seem unlikely in principle that one individual could really
generate so much more wealth than another.  The key to this mystery
is to revisit that question, are they really worth 100 of us?
Would a basketball team trade one of their players for 100
random people?  What would Apple's next product look like if you
replaced Steve Jobs with a committee of 100 random people? 
[6]
These
things don't scale linearly.  Perhaps the CEO or the professional
athlete has only ten times (whatever that means) the skill and
determination of an ordinary person.  But it makes all the difference
that it's concentrated in one individual.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]
Then
you're saying that it's unjust that people want the wrong things.
It's  lamentable that people prefer reality TV and corndogs to
Shakespeare and steamed vegetables, but unjust?  That seems like
saying that blue is heavy, or that up is circular.The appearance of the word "unjust" here is the unmistakable spectral
signature of the Daddy Model.  Why else would this idea occur in
this odd context?  Whereas if the speaker were still operating on
the Daddy Model, and saw wealth as something that flowed from a
common source and had to be shared out, rather than something
generated by doing what other people wanted, this is exactly what
you'd get on noticing that some people made much more than others.When we talk about "unequal distribution of income," we should
also ask, where does that income come from?
[8]
Who made the wealth
it represents?  Because to the extent that income varies simply
according to how much wealth people create, the distribution may
be unequal, but it's hardly unjust.Stealing ItThe second reason we tend to find great disparities of wealth
alarming is that for most of human history the usual way to accumulate
a fortune was to steal it: in pastoral societies by cattle raiding;
in agricultural societies by appropriating others' estates in times
of war, and taxing them in times of peace.In conflicts, those on the winning side would receive the estates
confiscated from the losers.  In England in the 1060s, when William
the Conqueror distributed the estates of the defeated Anglo-Saxon
nobles to his followers, the conflict was military.  By the 1530s,
when Henry VIII distributed the estates of the monasteries to his
followers, it was mostly political. 
[9]
But the principle was the
same.  Indeed, the same principle is at work now in Zimbabwe.In more organized societies, like China, the ruler and his officials
used taxation instead of confiscation.  But here too we see the
same principle: the way to get rich was not to create wealth, but
to serve a ruler powerful enough to appropriate it.This started to change in Europe with the rise of the middle class.
Now we think of the middle class as people who are neither rich nor
poor, but originally they were a distinct group.  In a feudal
society, there are just two classes: a warrior aristocracy, and the
serfs who work their estates.  The middle class were a new, third
group who lived in towns and supported themselves by manufacturing
and trade.Starting in the tenth and eleventh centuries, petty nobles and
former serfs banded together in towns that gradually became powerful
enough to ignore the local feudal lords. 
[10]
Like serfs, the middle
class made a living largely by creating wealth.  (In port cities
like Genoa and Pisa, they also engaged in piracy.) But unlike serfs
they had an incentive to create a lot of it.  Any wealth a serf
created belonged to his master.  There was not much point in making
more than you could hide.  Whereas the independence of the townsmen
allowed them to keep whatever wealth they created.Once it became possible to get rich by creating wealth, society as
a whole started to get richer very rapidly.  Nearly everything we
have was created by the middle class.  Indeed, the other two classes
have effectively disappeared in industrial societies, and their
names been given to either end of the middle class.  (In the original
sense of the word, Bill Gates is middle class.)But it was not till the Industrial Revolution that wealth creation
definitively replaced corruption as the best way to get rich.  In
England, at least, corruption only became unfashionable (and in
fact only started to be called "corruption") when there started to
be other, faster ways to get rich.Seventeenth-century England was much like the third world today,
in that government office was a recognized route to wealth.  The
great fortunes of that time still derived more from what we would
now call corruption than from commerce. 
[11]
By the nineteenth
century that had changed.  There continued to be bribes, as there
still are everywhere, but politics had by then been left to men who
were driven more by vanity than greed.  Technology had made it
possible to create wealth faster than you could steal it.  The
prototypical rich man of the nineteenth century was not a courtier
but an industrialist.With the rise of the middle class, wealth stopped being a zero-sum
game.  Jobs and Wozniak didn't have to make us poor to make themselves
rich.  Quite the opposite: they created things that made our lives
materially richer.  They had to, or we wouldn't have paid for them.But since for most of the world's history the main route to wealth
was to steal it, we tend to be suspicious of rich people.  Idealistic
undergraduates find their unconsciously preserved child's model of
wealth confirmed by eminent writers of the past.  It is a case of
the mistaken meeting the outdated."Behind every great fortune, there is a crime," Balzac wrote.  Except
he didn't.  What he actually said was that a great fortune with no
apparent cause was probably due to a crime well enough executed
that it had been forgotten.  If we were talking about Europe in
1000, or most of the third world today, the standard misquotation
would be spot on.  But Balzac lived in nineteenth-century France,
where the Industrial Revolution was well advanced.  He knew you
could make a fortune without stealing it.  After all, he did himself,
as a popular novelist.
[12]Only a few countries (by no coincidence, the richest ones) have
reached this stage.  In most, corruption still has the upper hand.
In most, the fastest way to get wealth is by stealing it.  And so
when we see increasing differences in income in a rich country,
there is a tendency to worry that it's sliding back toward becoming
another Venezuela.  I think the opposite is happening. I think
you're seeing a country a full step ahead of Venezuela.The Lever of TechnologyWill technology increase the gap between rich and poor?  It will
certainly increase the gap between the productive and the unproductive.
That's the whole point of technology.   With a tractor an energetic
farmer could plow six times as much land in a day as he could with
a team of horses.  But only if he mastered a new kind of farming.I've seen the lever of technology grow visibly in my own time.  In
high school I made money by mowing lawns and scooping ice cream at
Baskin-Robbins.  This was the only kind of work available at the
time.  Now high school kids could write software or design web
sites.  But only some of them will; the rest will still be scooping
ice cream.I remember very vividly when in 1985 improved technology made it
possible for me to buy a computer of my own.  Within months I was
using it to make money as a freelance programmer.  A few years
before, I couldn't have done this.  A few years before, there was
no such thing as a freelance programmer.  But Apple created
wealth, in the form of powerful, inexpensive computers, and programmers
immediately set to work using it to create more.As this example suggests, the rate at which technology increases
our productive capacity is probably exponential, rather than linear.
So we should expect to see ever-increasing variation in individual
productivity as time goes on.   Will that increase the gap between
rich and the poor?  Depends which gap you mean.Technology should increase the gap in income, but it seems to
decrease other gaps.  A hundred years ago, the rich led a different
kind of life from ordinary people.  They lived in houses
full of servants, wore elaborately uncomfortable clothes, and
travelled about in carriages drawn by teams of horses which themselves
required their own houses and servants.  Now, thanks to technology,
the rich live more like the average person.Cars are a good example of why.  It's possible to buy expensive,
handmade cars that cost hundreds of thousands of dollars.  But there
is not much point.  Companies make more money by building a large
number of ordinary cars than a small number of expensive ones.  So
a company making a mass-produced car can afford to spend a lot more
on its design.  If you buy a custom-made car, something will always
be breaking.  The only point of buying one now is to advertise that
you can.Or consider watches.  Fifty years ago, by spending a lot of money
on a watch you could get better performance.  When watches had
mechanical movements, expensive watches kept better time.  Not any
more.  Since the invention of the quartz movement, an ordinary Timex
is more accurate than a Patek Philippe costing hundreds of thousands
of dollars.
[13]
Indeed, as with expensive cars, if you're determined
to spend a lot of money on a watch, you have to put up with some
inconvenience to do it: as well as keeping worse time, mechanical
watches have to be wound.The only thing technology can't cheapen is brand.  Which is precisely
why we hear ever more about it.  Brand is the residue left as the
substantive differences between rich and poor evaporate.  But what
label you have on your stuff is a much smaller matter than having
it versus not having it.  In 1900, if you kept a carriage, no one
asked what year or brand it was.  If you had one, you were rich.
And if you weren't rich, you took the omnibus or walked.  Now even
the poorest Americans drive cars, and it is only because we're so
well trained by advertising that we can even recognize the especially
expensive ones.
[14]The same pattern has played out in industry after industry.  If
there is enough demand for something, technology will make it cheap
enough to sell in large volumes, and the mass-produced versions
will be, if not better, at least more convenient.
[15]
And there
is nothing the rich like more than convenience.  The rich people I
know drive the same cars, wear the same clothes, have the same kind
of furniture, and eat the same foods as my other friends.  Their
houses are in different neighborhoods, or if in the same neighborhood
are different sizes, but within them life is similar.  The houses
are made using the same construction techniques and contain much
the same objects.  It's inconvenient to do something expensive and
custom.The rich spend their time more like everyone else too.  Bertie
Wooster seems long gone.  Now, most people who are rich enough not
to work do anyway.  It's not just social pressure that makes them;
idleness is lonely and demoralizing.Nor do we have the social distinctions there were a hundred years
ago.   The novels and etiquette manuals of that period read now
like descriptions of some strange tribal society.  "With respect
to the continuance of friendships..." hints Mrs. Beeton's Book
of Household Management (1880), "it may be found necessary, in
some cases, for a mistress to relinquish, on assuming the responsibility
of a household, many of those commenced in the earlier part of her
life." A woman who married a rich man was expected to drop friends
who didn't.  You'd seem a barbarian if you behaved that way today.
You'd also have a very boring life.  People still tend to segregate
themselves somewhat, but much more on the basis of education than
wealth.
[16]Materially and socially, technology seems to be decreasing the gap
between the rich and the poor, not increasing it.  If Lenin walked
around the offices of a company like Yahoo or Intel or Cisco, he'd
think communism had won.  Everyone would be wearing the same clothes,
have the same kind of office (or rather, cubicle) with the same
furnishings, and address one another by their first names instead
of by honorifics.  Everything would seem exactly as he'd predicted,
until he looked at their bank accounts.  Oops.Is it a problem if technology increases that gap?  It doesn't seem
to be so far.  As it increases the gap in income, it seems to
decrease most other gaps.Alternative to an AxiomOne often hears a policy criticized on the grounds that it would
increase the income gap between rich and poor.  As if it were an
axiom that this would be bad.  It might be true that increased
variation in income would be bad, but I don't see how we can say
it's axiomatic.Indeed, it may even be false, in industrial democracies.  In a
society of serfs and warlords, certainly, variation in income is a
sign of an underlying problem.  But serfdom is not the only cause
of variation in income.  A 747 pilot doesn't make 40 times as much
as a checkout clerk because he is a warlord who somehow holds her
in thrall.  His skills are simply much more valuable.I'd like to propose an alternative idea: that in a modern society,
increasing variation in income is a sign of health.  Technology
seems to increase the variation in productivity at faster than
linear rates.  If we don't see corresponding variation in income,
there are three possible explanations: (a) that technical innovation
has stopped, (b) that the people who would create the most wealth
aren't doing it, or (c) that they aren't getting paid for it.I think we can safely say that (a) and (b) would be bad.  If you
disagree, try living for a year using only the resources available
to the average Frankish nobleman in 800, and report back to us.
(I'll be generous and not send you back to the stone age.)The only option, if you're going to have an increasingly prosperous
society without increasing variation in income, seems to be (c),
that people will create a lot of wealth without being paid for it.
That Jobs and Wozniak, for example, will cheerfully work 20-hour
days to produce the Apple computer for a society that allows them,
after taxes, to keep just enough of their income to match what they
would have made working 9 to 5 at a big company.Will people create wealth if they can't get paid for it?  Only if
it's fun.  People will write operating systems for free.  But they
won't install them, or take support calls, or train customers to
use them.  And at least 90% of the work that even the highest tech
companies do is of this second, unedifying kind.All the unfun kinds of wealth creation slow dramatically in a society
that confiscates private fortunes.  We can confirm this empirically.
Suppose you hear a strange noise that you think may be due to a
nearby fan.  You turn the fan off, and the noise stops.  You turn
the fan back on, and the noise starts again.  Off, quiet.  On,
noise.  In the absence of other information, it would seem the noise
is caused by the fan.At various times and places in history, whether you could accumulate
a fortune by creating wealth has been turned on and off.  Northern
Italy in 800, off (warlords would steal it).  Northern Italy in
1100, on.  Central France in 1100, off (still feudal).  England in
1800, on.  England in 1974, off (98% tax on investment income).
United States in 1974, on.  We've even had a twin study: West
Germany, on;  East Germany, off.  In every case, the creation of
wealth seems to appear and disappear like the noise of a fan as you
switch on and off the prospect of keeping it.There is some momentum involved.  It probably takes at least a
generation to turn people into East Germans (luckily for England).
But if it were merely a fan we were studying, without all the extra
baggage that comes from the controversial topic of wealth, no one
would have any doubt that the fan was causing the noise.If you suppress variations in income, whether by stealing private
fortunes, as feudal rulers used to do, or by taxing them away, as
some modern governments have done, the result always seems to be
the same.    Society as a whole ends up poorer.If I had a choice of living in a society where I was materially
much better off than I am now, but was among the poorest, or in one
where I was the richest, but much worse off than I am now, I'd take
the first option.  If I had children, it would arguably be immoral
not to.  It's absolute poverty you want to avoid, not relative
poverty.  If, as the evidence so far implies, you have to have one
or the other in your society, take relative poverty.You need rich people in your society not so much because in spending
their money they create jobs, but because of what they have to do
to get rich.  I'm not talking about the trickle-down effect
here.  I'm not saying that if you let Henry Ford get rich, he'll
hire you as a waiter at his next party.  I'm saying that he'll make
you a tractor to replace your horse.Notes[1]
Part of the reason this subject is so contentious is that some
of those most vocal on the subject of wealth—university
students, heirs, professors, politicians, and journalists—have
the least experience creating it.  (This phenomenon will be familiar
to anyone who has overheard conversations about sports in a bar.)Students are mostly still on the parental dole, and have not stopped
to think about where that money comes from.  Heirs will be on the
parental dole for life.  Professors and politicians live within
socialist eddies of the economy, at one remove from the creation
of wealth, and are paid a flat rate regardless of how hard they
work.  And journalists as part of their professional code segregate
themselves from the revenue-collecting half of the businesses they
work for (the ad sales department).  Many of these people never
come face to face with the fact that the money they receive represents
wealth—wealth that, except in the case of journalists, someone
else created earlier.  They live in a world in which income is
doled out by a central authority according to some abstract notion
of fairness (or randomly, in the case of heirs), rather than given
by other people in return for something they wanted, so it may seem
to them unfair that things don't work the same in the rest of the
economy.(Some professors do create a great deal of wealth for
society.  But the money they're paid isn't a quid pro quo.
It's more in the nature of an investment.)[2]
When one reads about the origins of the Fabian Society, it
sounds like something cooked up by the high-minded Edwardian
child-heroes of Edith Nesbit's The Wouldbegoods.[3]
According to a study by the Corporate Library, the median total
compensation, including salary, bonus, stock grants, and the exercise
of stock options, of S&P 500 CEOs in 2002 was $3.65 million.
According to Sports Illustrated, the average NBA player's
salary during the 2002-03 season was $4.54 million, and the average
major league baseball player's salary at the start of the 2003
season was $2.56 million.  According to the Bureau of Labor
Statistics, the mean annual wage in the US in 2002 was $35,560.[4]
In the early empire the price of an ordinary adult slave seems
to have been about 2,000 sestertii (e.g. Horace, Sat. ii.7.43).
A servant girl cost 600 (Martial vi.66), while Columella (iii.3.8)
says that a skilled vine-dresser was worth 8,000.  A doctor, P.
Decimus Eros Merula, paid 50,000 sestertii for his freedom (Dessau,
Inscriptiones 7812).  Seneca (Ep. xxvii.7) reports
that one Calvisius Sabinus paid 100,000 sestertii apiece for slaves
learned in the Greek classics.  Pliny (Hist. Nat. vii.39)
says that the highest price paid for a slave up to his time was
700,000 sestertii, for the linguist (and presumably teacher) Daphnis,
but that this had since been exceeded by actors buying their own
freedom.Classical Athens saw a similar variation in prices.  An ordinary
laborer was worth about 125 to 150 drachmae.  Xenophon (Mem.
ii.5) mentions prices ranging from 50 to 6,000 drachmae (for the
manager of a silver mine).For more on the economics of ancient slavery see:Jones, A. H. M., "Slavery in the Ancient World," Economic History
Review, 2:9 (1956), 185-199, reprinted in Finley, M. I. (ed.),
Slavery in Classical Antiquity, Heffer, 1964.[5]
Eratosthenes (276—195 BC) used shadow lengths in different
cities to estimate the Earth's circumference.  He was off by only
about 2%.[6]
No, and Windows, respectively.[7]
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?[8]
Part of the reason for the tenacity of the Daddy Model may be
the dual meaning of "distribution." When economists talk about
"distribution of income," they mean statistical distribution.  But
when you use the phrase frequently, you can't help associating it
with the other sense of the word (as in e.g. "distribution of alms"),
and thereby subconsciously seeing wealth as something that flows
from some central tap.  The word "regressive" as applied to tax
rates has a similar effect, at least on me; how can anything
regressive be good?[9]
"From the beginning of the reign Thomas Lord Roos was an assiduous
courtier of the young Henry VIII and was soon to reap the rewards.
In 1525 he was made a Knight of the Garter and given the Earldom
of Rutland.  In the thirties his support of the breach with Rome,
his zeal in crushing the Pilgrimage of Grace, and his readiness to
vote the death-penalty in the succession of spectacular treason
trials that punctuated Henry's erratic matrimonial progress made
him an obvious candidate for grants of monastic property."Stone, Lawrence, Family and Fortune: Studies in Aristocratic
Finance in the Sixteenth and Seventeenth Centuries, Oxford
University Press, 1973, p. 166.[10]
There is archaeological evidence for large settlements earlier,
but it's hard to say what was happening in them.Hodges, Richard and David Whitehouse, Mohammed, Charlemagne and
the Origins of Europe, Cornell University Press, 1983.[11]
William Cecil and his son Robert were each in turn the most
powerful minister of the crown, and both used their position to
amass fortunes among the largest of their times.  Robert in particular
took bribery to the point of treason.  "As Secretary of State and
the leading advisor to King James on foreign policy, [he] was a
special recipient of favour, being offered large bribes by the Dutch
not to make peace with Spain, and large bribes by Spain to make
peace." (Stone, op. cit., p. 17.)[12]
Though Balzac made a lot of money from writing, he was notoriously
improvident and was troubled by debts all his life.[13]
A Timex will gain or lose about .5 seconds per day.  The most
accurate mechanical watch, the Patek Philippe 10 Day Tourbillon,
is rated at -1.5 to +2 seconds.  Its retail price is about $220,000.[14]
If asked to choose which was more expensive, a well-preserved
1989 Lincoln Town Car ten-passenger limousine ($5,000) or a 2004
Mercedes S600 sedan ($122,000), the average Edwardian might well
guess wrong.[15]
To say anything meaningful about income trends, you have to
talk about real income, or income as measured in what it can buy.
But the usual way of calculating real income ignores much of the
growth in wealth over time, because it depends on a consumer price
index created by bolting end to end a series of numbers that are
only locally accurate, and that don't include the prices of new
inventions until they become so common that their prices stabilize.So while we might think it was very much better to live in a world
with antibiotics or air travel or an electric power grid than
without, real income statistics calculated in the usual way will
prove to us that we are only slightly richer for having these things.Another approach would be to ask, if you were going back to the
year x in a time machine, how much would you have to spend on trade
goods to make your fortune?  For example, if you were going back
to 1970 it would certainly be less than $500, because the processing
power you can get for $500 today would have been worth at least
$150 million in 1970.  The function goes asymptotic fairly quickly,
because for times over a hundred years or so you could get all you
needed in present-day trash.  In 1800 an empty plastic drink bottle
with a screw top would have seemed a miracle of workmanship.[16]
Some will say this amounts to the same thing, because the rich
have better opportunities for education.  That's a valid point.  It
is still possible, to a degree, to buy your kids' way into top
colleges by sending them to private schools that in effect hack the
college admissions process.According to a 2002 report by the National Center for Education
Statistics, about 1.7% of American kids attend private, non-sectarian
schools.  At Princeton, 36% of the class of 2007 came from such
schools.  (Interestingly, the number at Harvard is significantly
lower, about 28%.)  Obviously this is a huge loophole.  It does at
least seem to be closing, not widening.Perhaps the designers of admissions processes should take a lesson
from the example of computer security, and instead of just assuming
that their system can't be hacked, measure the degree to which it
is.