Thomas Piketty and other economists
Thursday, July 03, 2014 6:00 AM
Dear Mr. Berko:
I’m a retired high-school English/psychology teacher who has always been fascinated with economics and the stock market. Would you please explain the economic philosophy of Thomas Piketty, which has been taking the print media (especially The Wall Street Journal) and popular broadcast news programs by storm? Even noted economist Paul Krugman (whom I greatly admire) has endorsed Piketty’s ideas. I’ve tried to read Piketty’s “Capital in the Twenty-First Century,” but it’s too far above my knowledge level for me to understand. Though it’s a boring read, I sense it’s also important to understand.
T.R., Rochester, Minn.
So is William Shakespeare, who I believe is an execrable waste of time.
Meanwhile, you and a few other readers have kind of gotten carried away with professor Paul Krugman, who, in the past six years, has been frequently published and quoted by the media. In 2011, this elegant egalitarian loquaciously praised the Veterans Health Administration as a triumph of socialized medicine, calling it “free from the perverse incentives created when doctors and hospitals profit from expensive tests and procedures.” And in a recent book review, this diminutive (Paul is 5-foot-7) Nobel laureate enthused that Piketty’s book is “a bona fide phenomenon.” He continued to gush eloquently about Piketty’s brilliance and originality and the importance of his ideas. But I suggest you read Paul’s comments with a lot less awe because he may have been paid for his book review and comments on Piketty. Then be mindful that most economists are ivory-tower habitues who’d starve if they had to earn a living in our world of sticks and stones. Piketty’s book has created a sensation in the White House, and his TV interviews have given him celebrity status, but I think that will be short-lived.
And you’re right; “Capital in the Twenty-First Century” is a boring read. It was so boring that I couldn’t wait to put it down, though I did read parts of it all the way through. Piketty’s main thesis is that when the return on investment (assume 5 percent) exceeds economic growth (assume 3 percent), the difference (2 percent) is transferred from the poor to the wealthy. Seeing as we have a $15.68 trillion economy, that 2 percent, $313.6 billion, is a significant amount of money. Piketty pored over 40,000 tax returns, and his 600 pages’ worth of conclusions are really old porridge reheated and reheated and reheated. This “taking from the poor man and giving to the rich man” narrative has been going on since the most recent ice age and is the natural order of the universe. Mankind is nature’s only oxymoron.
Economists recognize that our deficit (the amount of money the government borrows annually to meet its expenses) closely measures the increase in wealth of America’s affluent. Basically, the more our government borrows (creating new money), the wealthier our affluent citizens become. This is really trickle-up economics designed by Washington and is among the few things that defy gravity, because money seldom trickles down. Piketty’s solution is a “global wealth tax” – based not on income but on an individual’s total assets – because he fervently believes that capitalism produces ever-increasing inequality. In his opinion, he’s as right as a rainbow.
Economists are people who are not capable of making a living in society and spend their muddled lives telling others how they should live. I probably know a dozen of these guys, the majority of whom are celibate, have handshakes like a wet glove, act a little goofy (think Alan “The Mumbler” Greenspan), wear shoes that squeak even when standing still, don’t cut their toenails and use an after-shave lotion that smells like Juicy Fruit. But this isn’t Piketty. Piketty’s a chubby, handsome fellow with a thick head of hair, and he’s a superb public speaker with a disarming French accent, giving his words a sense of intellectual authority. His female students at MIT (where I heard him speak in 1995) swoon all over him, and this man could charm the wart off a witch’s nose.
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