Piketty’s theory is that the yield on capital usually exceeds the growth rate of the economy, and so the share of capital’s returns in national income will steadily increase, simply because interest income is growing faster than the income the whole society is getting. Let us therefore bring in the government to implement “a progressive global tax on capital” — to tax the rich. It is, he says, our only hope. Reading the book is a good opportunity to understand the latest of the leftish worries about capitalism, and to test its economic and philosophical strength. Piketty’s worry about the rich getting richer is indeed merely the latest of a long series going back to Thomas Malthus, David Ricardo, and Karl Marx. Since those founding geniuses of classical economics, trade-tested progress has enormously enriched large parts of humanity — which is now seven times larger in population than in 1800 — and bids fair in the next 50 years or so to enrich everyone on the planet. And yet the left routinely forgets this most important secular event since the invention of agriculture — the Great Enrichment of the last two centuries — and goes on worrying and worrying in a new version every half generation or so.
All the worries, from Malthus to Piketty, share an underlying pessimism, whether from imperfection in the capital market or from the behavioral inadequacies of the individual consumer or from the Laws of Motion of a Capitalist System. During such a pretty good history from 1800 to the present, the economic pessimists on the left have nonetheless been subject to nightmares of terrible, terrible faults. Admittedly, such pessimism sells. For reasons I have never understood, people like to hear that the world is going to hell, and become huffy and scornful when some idiotic optimist intrudes on their pleasure. Yet pessimism has consistently been a poor guide to the modern economic world.
Deirdre N. McCloskey, “How Piketty Misses the Point”, Cato Policy Report, 2015-07.
November 18, 2015
QotD: Piketty’s pessimism
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