Thursday, May 22, 2014

Piketty is Promoting Envy

By Randall Holcombe

The ultimate thesis in Thomas Piketty’s best-selling Capital in the Twenty-First Century is that the return on capital is higher than the growth in output and wages, so the owners of capital will see their wealth, and therefore, incomes, rise faster than those who earn the bulk of their incomes through labor. The distribution of wealth and income will become increasingly skewed to the benefit of the owners of capital.

Piketty recommends progressive taxes on income and capital as the remedy to the growing inequality he forecasts. He says (p. 471), “…the ideal policy for avoiding an endless inegalitarian spiral and regaining control over the dynamics of accumulation would be a global tax on capital.” The tax (p. 516) “…ought to be a progressive annual tax on individual wealth.”

Piketty makes clear that the purpose of the progressive taxes he recommends is not to provide funds to raise the incomes of those at the bottom, but rather to lower inequality by reducing the incomes of those at the top.

Recommending a progressive income tax with rates of 50-60% on incomes over $200,000 and a top marginal rate of 80% on incomes above $500,000-$1 million, he says (p. 513), “A rate of 80 percent applied to incomes above $500,000 or $1 million a year would not bring the government much in the way of revenue, because it would quickly fulfill its objective: to drastically reduce remuneration at this level…” Recommending a progressive tax on capital, Piketty (p. 518) says, “The primary purpose of the capital tax is not to finance the social state but to regulate capitalism.”

Piketty freely admits that the policies he recommends to reduce inequality would not do so by bringing up those at the bottom end but rather by bringing down those at the top.

When one looks at the remarkable accomplishments of capitalism, an economic system that is roughly 250 years old, among its top accomplishments is how much it has done to improve the standards of living of average citizens and the working class. The rich have always been very comfortable, and capitalism has brought a level of comfort to working-class people today that would have been unimaginable to even the most well-off people a century and a half ago.

Why should average citizens be concerned about the wealth of the very well-off if the system that makes them well-off produces prosperity for everyone? Evidence suggests that most people are not that concerned. In big government countries ranging from Canada to Sweden, the government sector has shrunk with public support, and in the United States, lower taxes and smaller government remain politically popular (even as the government increases its involvement in health care and energy).

Piketty promotes the politics of envy, in which greater equality is a goal in itself — as opposed to the goal of helping out those at the bottom of the income distribution — and Piketty plainly states that the policies he recommends to reduce inequality would do so by pulling down those at the top rather than bringing up those at the bottom.

The above originally appeared at


  1. I'd like to see Piketty put his prescriptions into practice in his own home amongst his own family members first. Then, we can all plainly see for ourselves the results of just how successful or unsuccessful his prescriptions are.


  2. Financial Crisis in America: If Only the King Knew!

    Incentives and Ideology
    By James Kwak
    May 20, 2014

    “If only the King knew!, we cried a thousand times from the depths of our abyss.”

    Cahiers de doléances de Cahors, 1789

    In pre-Revolutionary France, common people would often say of their problems, “If only the King knew . . . .” Whatever evils they suffered at the hand of their government must be due to the king’s ministers and officials, for the king himself could not be at fault. But the king knew exactly what was going on.

    As Levitin shows, our financial regulators were and remain deeply enmeshed in a complex political environment. At the margin, they have the discretion to do favors for the industry or for specific institutions (such as the OTS backdating a capital infusion by IndyMac to make it seem well capitalized when it actually wasn’t). But major regulatory decisions, such as turning a blind eye to derivatives or bailing out banks, are made by the political system as a whole...

    More generally, we can’t blame everything on the bureaucrats. The financial non-regulation that made the 2008 crash possible was the explicit policy of multiple presidential administrations, and some of its most important elements sailed through Congress with bipartisan support.

    The choice to bail out large banks rather than homeowners was made by the Bush and Obama Administrations. And Congress passed the Dodd-Frank Act, which largely left in place the regulatory system that had failed so spectacularly, with the Administration lobbying heavily to weaken the most far-reaching reforms. In other words, President Obama knew exactly what was going on — just as President Clinton knew what was going on when he signed the Gramm-Leach-Bliley Act, allowing the consolidation of commercial and investment banking."

  3. Ignoring so many things that would go wrong, one huge irony at least here in the US, is that should his prescription ever occur, governments at every level will find themselves broke as the group he proposes to destroy pay the lion's share of taxes collected for operating government. What he is proposing was proposed by Marx, the father of the modern progressive income tax, well over 150 years ago.

  4. "Piketty is Promoting Envy"

    Yup. Like I've already said many times about that pathetic little punk, he's pissed because he's not extremely rich so he doesn't want anyone else to be either. What a weak-ass pussy!