I'm frequently perplexed how someone of little consequence flares -- however briefly -- into national prominence: Joe the Plumber, Ronan Farrow, Kate Gosselin. To this undistinguished triumvirate, we can add the French economist Thomas Piketty, whose book Capital in the Twenty-First Century has served as the petard for his own grand flare up.
I haven't read Piketty's book, nor do I intend to, but I get the gist of it from what I've read secondhand (mostly through the filter of free-market economists). My understanding is that the value of capital increases at a faster rate than economic growth. Over time, the gap between the return to capital and income generated by labor grows ever more yawning. The rich get richer and everyone else gets screwed.
This old Marxist notion of a ceaseless battle between capital and labor has, and always will be, cockamamie.
Capital cannot generate a return without labor acting upon it, and labor is nothing without capital. There is no better example of a synergistic relationship. That the two interact and how they interact produces a living standard. To ask which is more important -- capital or labor -- is to ask which is more important to maintaining life -- the heart or the lungs?
The dual undercurrents of homogeneity and perpetuity further undermine Piketty's argument: laborers are always laborers, capitalists are always capitalists; never the two shall meet. Again, life is, thankfully, never so tidy. Most of us are capitalists, and most of us are labors... and we are all different capitalists and different laborers. Capital and labor are heterogeneous. How the continuously changing slurry is mixed and in what proportions is determined by the entrepreneur in his quest to satisfy insatiable human wants.
But what bugs Piketty, from what I gather, is the successful business. The capitalist/entrepreneur grows wealthy, yet the laborer doesn't. The capitalist acquires more capital, and as the capitalists' capital accumulates the ratio of capital to labor grows, thus squeezing out labor. (To be honest, I'm unsure if this is more Marx or Piketty.) Of course, the laborer accepts no risk: His capital is secure; his high time preference is accommodated -- he's paid immediately.
Eyeball the joint, meaning the world, to see how far Piketty is off base. The United States is a capital-rich country; India is capital poor in comparison. We could all be employed in India -- shoveling footers with a shovel, unclogging sewers by hand, farming corn with rake and spade.That's a dearth of capital for you.
With that said, the grand failure in Piketty's thesis is his belief in the "lump of labor fallacy:" There is only so much work to be done, so machines crowd out labor. This is undeniable nonsense. There is always work to be done, and there always will be in a world of constrained (I prefer "constrained" to "scarce") resources.
Unconvinced? India or the United States, your choice?
I haven't read Piketty's book, nor do I intend to, but I get the gist of it from what I've read secondhand (mostly through the filter of free-market economists). My understanding is that the value of capital increases at a faster rate than economic growth. Over time, the gap between the return to capital and income generated by labor grows ever more yawning. The rich get richer and everyone else gets screwed.
This old Marxist notion of a ceaseless battle between capital and labor has, and always will be, cockamamie.
Capital cannot generate a return without labor acting upon it, and labor is nothing without capital. There is no better example of a synergistic relationship. That the two interact and how they interact produces a living standard. To ask which is more important -- capital or labor -- is to ask which is more important to maintaining life -- the heart or the lungs?
The dual undercurrents of homogeneity and perpetuity further undermine Piketty's argument: laborers are always laborers, capitalists are always capitalists; never the two shall meet. Again, life is, thankfully, never so tidy. Most of us are capitalists, and most of us are labors... and we are all different capitalists and different laborers. Capital and labor are heterogeneous. How the continuously changing slurry is mixed and in what proportions is determined by the entrepreneur in his quest to satisfy insatiable human wants.
But what bugs Piketty, from what I gather, is the successful business. The capitalist/entrepreneur grows wealthy, yet the laborer doesn't. The capitalist acquires more capital, and as the capitalists' capital accumulates the ratio of capital to labor grows, thus squeezing out labor. (To be honest, I'm unsure if this is more Marx or Piketty.) Of course, the laborer accepts no risk: His capital is secure; his high time preference is accommodated -- he's paid immediately.
Eyeball the joint, meaning the world, to see how far Piketty is off base. The United States is a capital-rich country; India is capital poor in comparison. We could all be employed in India -- shoveling footers with a shovel, unclogging sewers by hand, farming corn with rake and spade.That's a dearth of capital for you.
With that said, the grand failure in Piketty's thesis is his belief in the "lump of labor fallacy:" There is only so much work to be done, so machines crowd out labor. This is undeniable nonsense. There is always work to be done, and there always will be in a world of constrained (I prefer "constrained" to "scarce") resources.
Unconvinced? India or the United States, your choice?
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