It may be that the following critique of Piketty's defense of Marx is correct in every detail. I don't know, but to conceded a point. However, it does not follow that each and every aspect of the Capitalist system is all for the good. Some of the most capitalist of all capitalists have made telling criticisms and to leave the impression that Capitalism is flawless does no-one any good. Regardless, Marx-as-economist is even more flawed and the article provides a useful antidote to current Piketty enthusiasm that is taking root in some circles. Billy -------------------------------------------- Forbes
I5/01/2014 @ 8:12AM |28,867 views Six Ways Thomas Piketty's 'Capital' Isn't Holding Up to Scrutiny Dubbed the “rock-star economist,” France’s Thomas Piketty has topped the _Amazon.com_ (http://www.forbes.com/companies/amazon/) _Amazon.com_ (http://www.forbes.com/companies/amazon/) bestseller list with the surprise blockbuster _book _ (http://www.forbes.com/search/?q=Piketty) “Capital in the Twenty-First Century,” which argues that because the return on capital must be greater than overall growth, the rich are destined to hog an ever-increasing proportion of the economic pie. Piketty’s research, his eloquence (he quotes Jane Austen and Honore de Balzac) and his call for wealth taxes plus a confiscatory marginal income tax rate (80 percent) have Keynesian liberal economists swooning. Their leader, Paul Krugman, _boasts_ (http://www.nytimes.com/2014/04/25/opinion/krugman-the-piketty-panic.html) that “the right seems unable to mount any kind of substantive counterattack to Mr. Piketty’s thesis. Instead, the response has been all about name-calling.” Krugman is misinformed. Piketty’s book is being shredded. Here’s a brief rundown of some of the flaws in “Capital in the Twenty-First Century” that have already been exposed. * Piketty’s story about the source of capital accumulation is misleading. A paper by a quartet of French economists says that return on capital has been higher than growth entirely because of the _soaring value of housing_ (http://www.nytimes.com/2014/04/30/upshot/why-pikettys-book-is-a-bigger-deal-in-america-than-in-france.html?hpw&rref=&_r=0) , hardly something that is available only to a handful of oligarchs. * Piketty’s claims about capital accumulation are contradicted by his own charts. Piketty’s own research shows, _writes Clive Crook_ (http://www.bloombergview.com/articles/2014-04-20/the-most-important-book-ever-is-all-w rong) in _Bloomberg_ (http://www.forbes.com/companies/bloomberg/) _Bloomberg_ (http://www.forbes.com/companies/bloomberg/) View, “that capital-to-output ratios in Britain and France in the 18th and 19th centuries, when r [the return on capital] exceeded g [economic growth] by very wide margins, were stable, not rising inexorably. The same was true of the share of national income paid to owners of capital. In Britain, the capitalists’ share of income was about the same in 1910 as it had been in 1770. In France, it was less in 1900 than it had been in 1820.” This is all according to Piketty’ s own statistics. Crook adds that because Piketty predicts that in the next century r will be a little lower and g a little higher than they have been historically, “in his own analysis the chances are good that the future gap between return on capital and growth will be smaller than the gap that failed to produce an inexorably rising capital share in the two centuries before 1914.” “Capitalists are claiming a substantially smaller share of the economic pie today than they did in the mid-19th century,” adds _economist Garrett Jones in Reason_ (http://reason.com/archives/2014/04/26/living-with-inequality) . “Back then capital income was a bit more than 40 percent of total national income. Now it’s a bit under 30 percent. So if capitalists… are going to become a bigger deal in the future, they’ve got a long way to go before they’re at 19th-century level.” * Returns on capital and the growth rate are likely to converge, not diverge. Over time, _explains Jones_ (http://reason.com/archives/2014/04/26/living-with-inequality) , “growing replacement costs and the quest for cheaper alternatives both make it hard to imagine capital growing as far as the eye can see.” Piketty’s contention that high interest rates will be the dynamite that blows a chasm between r and g “is less an iron law and more a chalkboard speculation.” * Piketty’s income stats don’t include government transfers. When assessing the plight of the non-plutocrats, Piketty looks only at income tax returns. As _Scott Winship points out in Forbes_ (http://www.forbes.com/sites/scottwinship/2014/04/17/whither-the-bottom-90-percent-thomas-piketty/) , that omits any consideration of the welfare state — Social _Security_ (http://www.forbes.com/security/) , Medicaid, Medicare, food stamps, public housing, school lunches, etc. Piketty’s analysis also excludes the value of health insurance that Americans typically earn as part of their compensation package. It hardly makes sense to measure poverty without including the payments that are being made to reduce it. Incorporating such factors, Winship estimated that the real median income of a four-person American household in the bottom 90 percent of earners rose by $26,000 between 1979 and 2012, or $13,000 for a one-person household, as against Piketty’s claim of minus $3,000 per household in that period. * A U.S. wealth tax would be unlawful and counterproductive. Central to Piketty’s work is the idea that plutocrats can safely be attacked without harming the overall economy — without reducing the growth of the overall pie. “The evidence suggests that a rate [of tax] of the order of 80 percent on incomes over $500,000 or $1 million a year would not reduce the growth of the US economy,” Piketty asserts. In fact, high marginal tax rates _reduce incentives to work_ (http://www.econlib.org/library/Enc/MarginalTaxRates.html) and hence provide a drag on growth. As for a wealth tax, that _wouldn’t even be Constitutional_ (http://www.forbes.com/sites/timworstall/2014/04/29/pikettys-wealth-tax-would-require-a-constitutional-amendment-in-the-us /) . Besides, “eating capital is the best way to impoverish a nation, reduce productivity growth and keep wages down…societies where the most successful entrepreneurs are rewarded by the state seizing their assets don’t prosper,” _writes Allister Heath in The Daily Telegraph_ (http://www.telegraph.co.uk/finance/economics/10796532/Thomas-Pikettys-bestselling-post-crisis-mani festo-is-horrendously-flawed.html) . * A huge pool of potential capital is widely available to the non-rich. If the growth of capital left to build upon itself is such an amazing unstoppable force, _says Kevin Williamson in National Review_ (http://www.nationalreview.com/article/376632/get-rich-or-die-trying-kevin-d-williamson) , that’s an argument for turning Social Security into an individualized investment account like a 401(k). The Social Security withholding tax amounts to 12.4 percent of each paycheck (divided equally between employee and employer). If that money were put into individual accounts growing at a modest rate instead of providing a giant government slush fund to be used for general spending, every American with a paycheck would retire a successful capitalist. This principle holds true regardless of income. Even if you made only $20,000 a year and never got a raise, writes Williamson, investing $2,000 a year at 4.5 percent for 45 years leaves you with over $300,000, which could be converted into an annuity paying $1,800 a month, more than you made in your job. (http://www.forbes.com/sites/kylesmith/) _Kyle Smith_ (http://www.forbes.com/sites/kylesmith/) Contributor _Follow Following Unfollow _ (javascript://follow) (56) + show more I am a current-affairs columnist and film critic for The New York Post, for which I have covered everything from political conventions to film festivals. I have also contributed reviews and essays to The Wall Street Journal. Follow me on Twitter: @rkylesmith. (http://www.forbes.com/sites/k ylesmith/2014/05/01/six-ways-thomas-pikettys-capital-isnt-holding-up-to-scrutiny/#) -- -- Centroids: The Center of the Radical Centrist Community <[email protected]> Google Group: http://groups.google.com/group/RadicalCentrism Radical Centrism website and blog: http://RadicalCentrism.org --- You received this message because you are subscribed to the Google Groups "Centroids: The Center of the Radical Centrist Community" group. To unsubscribe from this group and stop receiving emails from it, send an email to [email protected]. For more options, visit https://groups.google.com/d/optout.
