A Capital Idea

In Capital, Piketty complains that the "r" (return) of inherited money is greater than growth, "g". That’s how we will end up with a rentier society.

 

Piketty insists that, since r exceeds g, the return to capital exceeds economic growth,  wealth of any kind will outperform work. Thus, according to the French economist, the rich will just keep on getting richer, and we’ll be left with an economy in which plutocrats are surrounded by us unsuccessful boobs, wandering around between Mad Max and a Star Wars bar scene.  Further, he goes on to say that the rich who inherit have access to much greater returns than the rest of us, making it a self-supporting spiral of economic misery.

This is great because there is justification in being angry at the rich.

 

It is interesting--but so is Lamarck.

The Sunday Times’s annual rich list, which was recently published, shows something different. Some 94 percent of the 1,000 people made the cut not by getting rich the old-fashioned way—by marrying or inheriting—but instead by making it. This correlates with the large sociological study in The Millionaire Next Door. It's a small sample and may not be indicative. But is does not agree with the Piketty theory, which has little hard support. It is doubtful that haziness of a theory will defeat it, though. Leaders and aspiring leaders always look for something, anything, to justify their power-concentrating, self-serving acts.

Leaders will always volunteer to set things right.

 

But--even if Piketty were correct-- the basic question goes unanswered: Can an order be imposed from above that will produce predictable results, however desirable? For example, how well has Iraq implemented the Madisonian blueprint that, in the American experience, is without doubt superior and worthwhile?