On Piketty
Who cares about rich kids? Entrepreneurs are supreme.
“But how do you make that defense if the rich derive much of their income not from the work they do but from the assets they own? And what if great wealth comes increasingly not from enterprise but from inheritance?”
This quote from Krugman roadmaps the smart conservative response to the Piketty debate on capital accumulation and economic inequality.
Allow me to retort.
Economic Inequality doesn’t matter as long as GROWTH rewards entrepreneurs more than inherited capital.
Growth comes from enterprise and has two components: Entrepreneurs and Capital. Labor isn’t in this picture. Favoring Labor has nothing to do with increasing enterprise. Efforts to favor Labor historically led to “communism” (scare quotes), socialism, or some kind of collectivism which proved to kill growth.
So, Piketty and Krugman are screaming that inherited capital can be bad. Great news! This is progress. Color me impressed. This means they will support reorienting the economy to favor entrepreneurs over inherited capital, right? Right?
And to quickly dispose of another liberal trope, favoring Labor does not favor Entrepreneurs. Making it “easy” to be an entrepreneur via big government, is literally like chaining anchors to trapeze artists.
The magic trick of liberal debate is very simple, and once you learn it, you’ll see it everywhere. Pretend the game afoot has two players: Capital and Labor. 1% vs. 99%.
Exposing the trick, and winning the debate, is just as easy for Libertarians. Insist the game has three players: Entrepreneurs, Capital and Labor.
The least important player, Labor, only truly benefits from growth. Workers are basically just down stream consumers. Regardless of their nominal wage, their lives are defined by the new things that they can BUY. Their lot improves, whenever entrepreneurs are winning.
Does this generation’s Labor get to consume more things (economic growth) than last generation’s Labor? If so, entrepreneurs have been in charge. If Labor hasn’t gotten to consume more, then inherited capital has been in charge.
Just in case I have to prove Labor doesn’t matter, imagine new factories built entirely by and run by robots, paid for by inherited Capital, with no Labor. Who is the most important player in this example? The Entrepreneur who thought of it.
What would be terrible is if somehow the laws and tax structures of our economy favored inherited Capital, so Entrepreneur didn’t have the leverage TO MAKE MOST OF THE MONEY when the robot factories are built.
Note: Liberals like Piketty and Krugman are in some way tacitly agreeing to any policy suggested by Conservatives and Libertarians that stacks the deck toward Entrepreneurs.
Which brings us to the elephant in the room of every Economics debate.
Successful entrepreneurs have the same motivation as all parents (even Liberals). They want to give their children unfair advantages over other parents’ children. This is the grand Darwinian prize of being an entrepreneur.
In our robot future example, we can see what’s coming. Labor = Consumers granted a Guaranteed Income, in a epic battle between the Entrepreneurs of TODAY vs. the Entrepreneurs of YESTERDAY.
The seeming paradox is that we can’t end inherited capital outright, via Piketty’s wealth tax, because that limits the motivations of today’s Entrepreneurs.
But, there is no paradox. The trick is to favor new companies over old companies. To favor new wealth over old wealth. To favor new market entrants over old ones.
The Litmus Test for Liberals:
Airbnb is a battle between an Entrepreneur and Paris Hilton. Does Krugman favor AirBnB?
Amazon is a battle between an Entrepreneur and the Walton heirs. Does Krugman favor Amazon?
Aereo is a battle between an Entrepreneur and the Roberts heirs. Does Krugman favor Aereo?
Terrified of inherited wealth, Piketty and Krugman must publicly support the new entrants. They must weaken the cozy deal that government has with rich kids — the entrenched enterprise players must be sacrificed, via reduced government regulations for upstarts.
Our marching orders are now simple. Forget about Labor, and favor Entrepreneurs over Capital.
