More love for Thomas Piketty from Martin Feldstein at the Wall Street Journal:
Thomas Piketty has recently attracted widespread attention for his claim that capitalism will now lead inexorably to an increasing inequality of income and wealth unless there are radical changes in taxation. Although his book, “Capital in the Twenty-First Century,” has been praised by those who advocate income redistribution, his thesis rests on a false theory of how wealth evolves in a market economy, a flawed interpretation of U.S. income-tax data, and a misunderstanding of the current nature of household wealth.
I think that Dr. Piketty’s assumptions hold better in Europe than elsewhere. I suspect this debate will continue, possibly for many years to come.
In the meantime I wonder how quickly American economists and politicians will figure out that Dr. Piketty’s global wealth tax which already has no traction will involve taxing poor people in the United States and other rich countries to the benefit of rich people in poor countries?
A global wealth tax is probably a good idea, in the abstract.
If one were completely cold-blooded about it, a really destructive war would probably be good, too. The great thing about burned cities is that they create lots of very local construction jobs. And if millions of workers have been slaughtered, well, the survivors can probably earn a good paycheck.
You can’t just massacre soldiers like WW1, you have to kill lots of civilians, too, and burn a lot of places down, to really get the best stimulus effect. Maybe capitalism really does require war.
Or we could take the Democrat’s approach – put a floor under the economic losers using taxes to pay for it. Palliative care, in effect.
Here’s a thought. We could simulate war’s effects. We could, for example, condemn Detroit, St. Louis, Oakland, Cleveland and so on. Raze them. Build them back up. That’s jobs both tearing down and building up.
We could pass a law that no car can be on the road after it’s ten years old. Yay, new care sales! Or a law that the effective age of bridges is now 20 years, across the board. Tear ’em down, build them again.
Also not likely to pass Congress, but at least we’d produce jobs and have some nice, shiny new cities and bridges.
Look at all of the jobs breaking bakery windows will produce! Jobs for glaziers, jobs for glassmakers, jobs for sand miners.
I think the Detroit idea has merit-that’s a window that’s already broken. I imagine it would go about as well as the rebuilding of NOLA though.
The operating costs of a city vary based on a number of variables including population and area. Right now Detroit is trying to operate a city suitable for a population of 3 million with an economy that struggles to support three quarters of a million. Add decades of mismanagement and it’s the Detroit of today.
It would be amusing in a gallows sort of way to see someone try to corral the three-quarters of a million into an appropriate area. I can already hear the cries of “Genocide!” and the Nazi analogies from here.
Feldstein is wrong about the misinterpretation of tax data. He is still part of the old guard trying to convince everyone that inequality is not real. Piketty is on solid grounds on his descriptions of inequality. It is his solution that is weak. No one will go for it.
Steve
When I sit on my deck and look over at Belvedere island – adjacent to Tiburon and populated entirely by rich folks – and imagine a beam from outer space just vaporizing every one of those houses, what should I imagine happening next? (Assuming the aliens are done zapping us.) Well, next I’d have to imagine the damned parking problems and the traffic because we’d be overrun with construction workers. We’d need some kind of fast food place (Five Guys!) just to feed the busy workers.
Right? We’d have inconvenienced a bunch of rich folks and created a whole bunch of jobs. There’s your income redistribution right there.
@michael, instead of destroying something in order to rebuild it; why don’t you just imagine it’s been destroyed and rebuilt and hand out money?
PD:
Because then we still have Detroit as is. Also, Belvedere people are snobs to us lowly Tiburon folk, so screw ’em.
I haven’t read the book, but I’ve read a lot of reviews of the book. I guess, on the internet at least, that makes me an “expert!” 😉
I thought this was a pretty good summary even though I’m not a huge Mankiw fan:
http://gregmankiw.blogspot.com/2014/04/first-thoughts-on-piketty.html
@michael, but the fake jobs can come with fake titles, like Deputy Director to the Supervisor of Assistants.
Pd
Or my favorite – Vice President of rare events.
PD and Guarneri:
You know, that’s worth considering, because then you can put that on your resumé.