Friday, October 21, 2016

Nobel Prize Economist Calls to "Democratize Capital (Like Funded Social Security etc) so that Profit Income is More Widely Distributed"

This is the damn strangest email in the Wikileaks Podesta emails dump that I have come across.

Nobel Prize-winning economist Robert Solow, who apparently uses the email, was asked to comment on a New York Times book review of  Thomas Piketty’s book, “Capital in the Twenty-First Century.”

He replied in a confidential email that called for massive socialization and intervention in the capital sector (my highlights)


From: Barbara Lewis []
Sent: Thursday, January 30, 2014 9:54 AM
To: Sandler, Herbert Subject:
RE: NYTimes: Capitalism vs. Democracy

Dear Herb,

I know Piketty abit; he was my colleague at MIT for a couple of years, 20 years ago, and I wrote a recommendation for him when he wanted to return to France. Remember that he is Emmanuel Saez's co-author in a lot of research on very high incomes in US and elsewhere.

Somehow I missed the review of his book that is quoted by Edsall. I had heard that the book was coming out, and I have asked Leon Wieseltier if he would like me to review it for the New Republic. Piketty is very smart. I'm familiar with part of the argument he seems to be using (in fact I invented some of it 60 years ago!). Part of today's inequality problem could be reversible, part may indeed be deep in what is happening to advanced economies, and I hope Piketty can help with that. I have occasionally written that we may need to somehow democratize capital (like funded social security etc) so that profit income is more widely distributed. Apparently Dick Freeman agrees. On the whole I am very suspicious of "inevitability" arguments, but you don't have to interpret Piketty's data that way, even if he does. I hope Leon wants me to review the book, it would give me a chance to think more about this, which has always interested me.

We're still here.

I have never been impressed with Solow as an economic thinker, but I never realized he was this bad.

Thomas DiLorenzo has written:
Solow seems to have no conception of human action as a process of plan coordination, although he uses Austrian-sounding language at one point in discussing "coordination failure" in the marketplace.  He sees the job of the economist as the construction of obtuse mathematical theories to ostensibly explain this alleged "failure," but not to inquire how market participants act to overcome coordination problems. He doesn't appear to be the least bit interested in how markets actually work; only to "model" them as inherently "flawed" in order to stroke his own ideological predilections.

And Peter Klein wrote:
Robert Solow, in a glowing review of Piketty's book, states: "The key thing about wealth in a capitalist economy is that it reproduces itself and usually earns a positive net return." But this is nonsense from the point of view of microeconomics, entrepreneurship, uncertainty, innovation, strategy, etc. 

But a "democratization" of capital is bizarre. Dilorenzo is correct. He has no conception of human action as a process. And Klien is correct, his view of capital is nonsense.



  1. Thomas DiLorenzo has written: Solow SEEMS to have no conception of human action as a process of plan coordination.

    That needs to be a stronger statement. No non-Austrian in the galaxy has the slightest familiarity with the conception of human action as a process of plan coordination, especially the role of undistorted vs. distorted or non-existent prices in the process.
    Further, whether it is anti-Free Traders or Keynesians or alt-righty genetic nationalists, they also fail to grasp this process. Thus, terrible problems will arise unless “the government”, which they conceive as a mysterious omniscient magic spook or nanny like Mary Poppins, is directed to plan and resolve these horrible but non-existent problems.

    All problems in society, especially in the economic sphere, are blamed upon a lack of the proper focus of the magic spook. Of course, the masses, who cannot manage their own affairs without the aid of the magic spook, are given the task of electing the proper political guides who will direct the magic spook. Our analysis, explaining that these problems are all caused in the first place by reliance upon the magic spook, simply does not register at all.

    And Trump sees himself as the greatest magic spook in history.

  2. ─ Part of today's inequality problem could be reversible ─

    Yes, the communists proved as much - they made everybody equally poor.

    ─ [...] I hope Piketty can help with that.─

    You mean by repeating more Marxian tropes and putting up utter falsehoods? Yeah, that helps.

    ─ I have occasionally written that we may need to somehow democratize capital (like funded social security etc) so that profit income is more widely distributed ─

    Oh, my gawd. This "Nobel Prize Winner" is rehashing the old, tired and severely debunked (elegantly, I might add, by Eugen von Bohm-Bawerk) Marxian theory of profits. The implication above is clear: undemocratized profits, i.e. obtained by private individuals, are ill-begotten by "definition".

  3. I think from now on, whenever he is referred to, it should be as Robert 'Barbara' Solow.