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August 12, 2014

"Piketty's Terrifying Dystopia"

I thought I was done posting links about Piketty's book, but Eric Falkenstein induces me to post another. For two reasons. One is there are a number of very fine bits. Examples:

When I was growing up it was common for progressives to caricature the 1950s as a period of bigotry, materialism, and conformism, now those same progressives consider this a golden age; What if the key to reducing inequality is bigotry? . . . 

In sum, his main concern is that the rich don't create wealth, they mainly just take it from others, and so social justice is negatively related to their wealth. Stalin's thoughts on the Kulaks were similar. . . .

Yet, Piketty merely attacks inequality without any serious discussion of how, exactly, wealthier rich people is worse than poorer rich people. It is petty and perverse to assert that a year where the stock market rises 20% is worse than one where it only rises 5%, because of its effects on inequality. Intellectuals generally hate evangelical Christians in good part because they are so similar in temperament and their preoccupation with eschatology; progressives are the new Puritans, whose haunting fear is that someone outside the state may be rich and not even feel guilty.

If inequality within a country is bad per se, should we curtail unskilled immigration (after all, immigration was much lower in Les Trente Glorieuse)? Is the inequality of capitalism worse than that of politics? Note Chelsea Clinton is currently paid $75K for a speech, surely not due to any trenchant analysis of today's issues, but rather, she's part of a political dynasty. Jeb Bush's son is often mentioned as a potential Presidential candidate, and so too Hillary Clinton. US Vice President Joe Biden's son is on the board of a Ukrainian gas company, probably not because he is expert at energy logistics.  Nepotism is less common in business than politics because shareholders lose patience with the founder's grandson much quicker than voters lose patience with the latest Kennedy, Gandhi, or Papandreou.

Read the whole thing for more.

The second reason is that in the second half of the post Falkenstein zeroes in on the fundamental flaw of all arguments for Big Government: the huge, consistent gap between government as Liberals like to imagine it could be from the way it actually is. To well-trained economists this is known as the subject matter of Public Choice, and both theoretically and empirically, Liberals have little answer for it. The standard replies from Liberals that I see nowadays are of two principal types. One is a sneer that conservatives are essentially anarchists with a inexplicably deep attachment to the market and a quasi-religious hatred of government. This is, of course, completely false. I simply note that religion deals largely with matters of the unseen; conservatives' criticism of Big Government is firmly grounded in history and tons of contemporary evidence.

The second reply is the "Here's a government program that clearly, demonstrably made these people better off. So there!" But it is physically impossible to spend trillions of dollars per year and not make somebody, somewhere better off. That is not now, nor will it ever be, the issue. The issue is, at the margin, does government spending and regulation provide more--properly accounted for--benefits than costs. Liberals rarely want to discuss that because somewhere, deep down, they're probably scared of the answer.

Bonus: two University of Chicago scholars offer "Thomas Piketty Is Wrong: America Will Never Look Like a Jane Austen Novel".

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Eric Falkenstein

Piketty's book was a very Marxian approach when you think about the amount of time spent critiquing vs. the time spent discussing how exactly to make it better, as if will is sufficient. Further, the bad effects of prior policies (discouraging family formation, barrier to entry via licensing) aren't mentioned at all. Piketty reminds me of Hayek's point that people have to understand the world may simply not be able to work the way they want it to.

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