Monday, June 02, 2014

On inequality and the Piketty mess

For anyone who has been following the news in the last few weeks, those who favor redistribution over wealth creation have been dealt a setback with the Financial Times' review of the data Piketty used in his book "Capital in the Twenty-First Century" (Amazon). In a way his book has been a Rorschach test (Qz). While many of his supporters have been reduced to name calling (or dismissing the criticisms, HuffingtonPost) despite some fundamental problems with his claims, I'm not sure why it matters.

As Scott Adams, author of Dilbert points out (Dilbert):

If you could snap your fingers and magically double the wealth and income of every human on earth while somehow keeping inflation in check, would you do it?

Before you answer with some version of "Duh, yes." keep in mind that you would be severely worsening income inequality. And that, as we are often reminded by the media, will destroy civilization.

I'm not entirely clear why income inequality leads to doom, all other things being equal, but I hear it has something to do with the French. The analogy, as I understand it, is that Marie Antoinette and her historically inaccurate philosophy "Let them eat cake" is exactly like Bill Gates pledging his fortune to eradicating malaria, fixing education, and providing clean water to the poor.
Further, as Prof Deirdre McCloskey asks, in the context of the fact we are so much wealthier today at effectively every socioeconomic group than our ancestors, how much does inequality matter?

No comments: