Tuesday, November 18, 2014

EconStar Galactica

Deirdre McCloskey reviews Capitalism in the Twenty First Century;
...in Piketty's tale the rest of us fall only relatively behind the ravenous capitalists. The focus on relative wealth or income or consumption is one serious problem in the book. Piketty's vision of a 'Ricardian Apocalypse', as he calls it, leaves room for the rest of us to do very well indeed, most non-apocalyptically, as in fact since 1800 we have. What is worrying Piketty is that the rich might possibly get richer, even though the poor get richer, too. His worry, in other words, is purely about difference, about the Gini coefficient, about a vague feeling of envy raised to a theoretical and ethical proposition.

Another serious problem is that r will almost always exceed g, as anyone can tell you who knows about the rough level of interest rates on invested capital and about the rate at which most economies have grown (excepting only China recently, where contrary to Piketty's prediction, inequality has increased). If his simple logic is true, then the Ricardian Apocalypse looms, always. Let us therefore bring in the sweet and blameless and omni-competent government--or, even less plausibly, a world government, or the Gallactic Empire--to implement 'a progressive global tax on capital' (p. 27) to tax the rich. It is our only hope.
Bold by HSIB in the above paragraph. Because we laughed out loud when we read it.

1 comment:

  1. Great piece by McCloskey, thanks for putting me onto it. (It even led me to add something to my latest post which, by coincidence, was about Marx being wrong about the state.)