Book Review - Equality: What it Means and Why it Matters

In this episode, Rik from Planet Vulcan reviews the collaborative effort of Thomas Piketty and Michael Sandel to pitch their scheme of confiscatory taxation in their new book, in the name of the nebulous concept of equality, for the undefined and undefinable "common good", in order to counter the effects uneven luck distribution, the machinations of an imaginary malicious oligarchy, and perceived patterns of accidental historical processes. They back up their pitch with claims of piety - they are supposedly the heroes who will place limits on the evils that emerge from the operation of markets. 

Rik demonstrates that neither man has even a weak grasp of how an economic system functions.  To them, the "economy" is a black box, and they believe that it will continue to crank out goods and services even if their proposed interventions create perverse incentives, and interrupt the evolved and evolving feedback loops that make the whole system work, and the existence of which our heroes are unaware.

It is likewise clear that their proposed scheme could only be implemented by totalitarian government, in spite of the lip service they both pay to liberty and democratic government; and that the implementation of their scheme would make the poor, and everyone else, poorer, even in the doubtful case that it actually were to reduce the disparities they lament.  

Transcript

Book Review - Equality:   What it Means and Why it Matters

 Good day to you, and welcome to Fascinating!  I am your host Rik, from Planet Vulcan.  My ongoing mission on Planet Earth:  to plant seeds of a way of thinking, a way that is based on an understanding of evolutionary processes, with the ultimate aim of helping to sustain and increase the momentum of Earth’s long arc towards prosperous and happy societies, founded on ideals of liberty and justice.

 Senior contributing editor Prego de Nada has been collecting sayings about “last refuges”.  Here is what he has found so far: 

 Isaac Asimov wrote that “Violence is the Last Refuge of the Incompetent” in his Foundation novels; 

 Samuel Johnson was quoted by his biographer Boswell as saying “Patriotism is the Last Refuge of the Scoundrel”; 

 Oscar Wilde wrote that “Seriousness is the Last Refuge of the Shallow”.

 Thank you, Prego.  

 I propose another last refuge to add to this list: “Piety is the last refuge of the despoiler”.  

 This saying is inspired by the theme of the jointly authored new book, “Equality:  What it is and Why it Matters”, by Thomas Piketty and Michael Sandel.

 The New York Times describes these men as “two of the world’s leading thinkers”.  If the Times assessment is correct, then we can only conclude that thinking is something Earthlings are not especially well cut out for.  

 The lack of sophistication in their respective thought processes is embarrassing, particularly when they presume to opine on economics, about which neither of them knows or understands much of anything; and most of what they think they know is wrong (i.e., ecnarongi).

 Michael Sandel was the subject of a book review previously published on this podcast in Season 3, where we argued that Sandel’s ideas, as laid out in his book “The Tyranny of Merit” are a virtual catalog of ecnarongi.

 This man, who believes he has both the wisdom and the standing to redesign the worldwide socioeconomic order from the ground up, understands pretty much nothing about how an economic system functions.  

 He takes the economic system as a black box, which he believes can be relied on to continue to crank out ever more goods and services regardless of meddling, interventions, and disruptions of evolved feedback loops; he focuses all his attention on how the goods and services, for which he assumes this magical origin, are distributed unevenly, and repeatedly harps on the theme that the uneven outcomes are virtually all a matter of luck.  

 Therefore, he concludes, we must collectively confiscate the incomes and the wealth of the “lucky” ones and redistribute it, because not to do so would be to reward these lucky ones for something they do not deserve!

 And although he, and Piketty as well, claims to support individual freedom and democratic processes, it is clear that the schemes they propose could only be put into effect by totalitarian government.

 He dismisses the notion that high income in today’s world usually means that the earner has created high value, and says that even if it’s true, this is just a further illustration of uneven luck distribution.

 So much for the wisdom.  It is an ongoing mystery why these two men, and so many other Earthlings, believe they have the standing to coercively intervene in human affairs when they don’t like what they see; the reason it remains so mysterious is that none of them seems to perceive any need to explain what gives them this right.  It is treated as a given.

 This attitude is apparently a hangover from medieval times, where the royals and nobles ruled by divine right, and just plain folks had to put up and shut up.

 Divine right was the go-to excuse in medieval times for the exercise of unquestioned authority, just as in our time the go-to excuse is piety.

 And that’s what their book is all about:  the two of them engaging in an extensive and far-ranging dialog about how they would advise the lord of the manor to run his domains, how to plan, and how to intervene in order to make the plan work.

 These two are devout and unquestioning followers of the White Man’s Burden tradition, which we discussed in a Season 4 essay, where white Europeans in the 19th and early 20th century graciously consented to bring non-white non-Europeans up to their standards of civilization – a tradition which found new life in the early and modern progressive movements in America.

 And, of course, in a way that echoes the sentiments of white European colonialists as they offered their version of “help” to the non-European world, their conversation is loaded with so much self-congratulation and virtue-signaling that it discourages any attempt at parody.

 Thomas Piketty is someone else who all of his life has been a wannabe despoiler.  He is a socialist economist (an oxymoron) who has made a career out of studying inequality.

 He claims that economic inequality is inherently problematic, because when people compare themselves to others who are better off it makes them feel bad.  It never seems to occur to him that a better solution to this problem than the confiscatory taxation and redistribution he proposes is to stop encouraging people to compare themselves to others, and to stop fanning the flames of envy – it’s the foundation of his career, after all.

 In his most famous publication, “Capital in the Twenty-First Century”, he claims to demonstrate from historical evidence that rates of return on investment have on average been greater than the overall growth rate of the economy; r > g, and he believes this relationship will always hold.  He claims that this phenomenon leads to a tendency over time for wealth to concentrate.

 There are so many things wrong with his argument that it is difficult to know where to begin.  Let’s begin by pointing out that the historical evidence for this phenomenon is nowhere near as clear and conclusive as he claims, not least because his studies were confined to data from the European and North American experience; and even in many of the European countries he surveyed the phenomenon he describes was not in evidence.

 And not only that, the evidence is taken from various political regimes at various times; and which have far different internal economic relationships from each other.  It’s far from clear that it makes sense to agglomerate this data and treat it as a single phenomenon.

 But let’s grant for purposes of discussion that his conclusion about r being consistently greater than g is right, even though it might in truth be a fatal flaw in his argument.  

 First of all, return on investment of inherited wealth is not the only source of wealth accumulation.  Wealth is an accumulation of income that has not been consumed, be it the income of yourself or the income of your ancestors.  And return on investment is only one source of income, and in the case of many of today’s wealthy, not the primary source.

 We can also point to the fact that wealth does not accumulate if income is not saved, nor does it accumulate if it is saved but then squandered, as it so often is by profligate members of wealthy families. 

 There is an old Chinese saying which is applicable here - “Rags to riches to rags in three generations”. 

 There are just too many holes in the argument, and in the interpretation of the evidence; you therefore cannot logically conclude that he made the case that humanity is facing a crisis that requires intervention (not that enthusiasts of intervention need anything more than this just-so story to be convinced).

 And what about the role in the production of goods and services, especially the innovation introduced by these people - those who have become wealthy, not through inheritance, but through their own efforts?  Goods and services do not simply appear magically, and they will stop appearing if we shut down the processes that lead to the production.

 And what about human capital, which arguably has more value in today’s world than physical capital?  

 Human capital refers to the economic value of an individual's knowledge, skills, competencies, and other attributes that contribute to their productivity and potential to generate economic output. It encompasses the education, training, experience, creativity, health, and other personal qualities that enable individuals to perform work and create value.

 And which is owned by the humans who possess it.  

 Piketty simply dismisses this notion explicitly, and for a very lame reason, namely that human capital cannot be alienated in the way that physical capital can.

 So what?  Even if it cannot be alienated, it can still be used by its possessors to enhance their ability to produce and create value, even if they cannot profit from selling this form of capital to someone else, as they could with physical capital.

 And don’t tell professional golfer Zach Johnson that human capital cannot be alienated.  Zach got his start in professional golf with the help of sponsorship from a group of supporters in his home town of Cedar Rapids, Iowa, to whom he pledged, and later paid, a share of future earnings.

 And probably the most damning evidence which undermines Piketty’s thesis is what we see if we just have a look at the world around us; unless you are willfully blind, you cannot help but notice that, even if it is true that wealth and income disparities are rising, the poor are less poor than they have ever been in all of history, and the betterment of their lot is due almost entirely to the entrepreneurship within a system of substantial economic freedom many Earthlings now enjoy, and which Piketty and Sandel propose to effectively abrogate by introducing perverse incentives and treating producers as milch-cows to support their schemes.

 Do we seriously want to make the poor poorer just so they won’t have to feel as much envy?

 And if we focus on how the rich and the not-so-rich actually live the days of their lives, the disparities are much smaller than the income and wealth disparities might suggest.  These days, even the world’s poorest generally have ample food, and more and more Earthlings all over your planet are achieving a middle-class lifestyle, and live in comfortable dwellings with plentiful amenities.

 We must acknowledge further, if we wish to cover all the bases, that the wealth of the rich is for the most part invested in productive assets, and not just sitting in a money bin al la Scrooge McDuck, and which incidentally if not intentionally benefits everyone.  Do we really believe that this wealth would be better utilized if it were to be confiscated and placed under the control of agencies of government, or simply distributed and frittered away?

 We should also acknowledge that Sandel and Piketty actually make a legitimate point when they say that wealth can be used to acquire political influence, to the detriment of those who are not politically connected.  

 But wouldn’t a better approach to this problem of corrupt alliances between government and business be to focus, not on the fact that people are buying influence, but on the fact that influence is for sale?  

 There ought to be some way of incentivizing the behavior of elected representatives so that they are not tempted to profit from the sale of influence, often euphemistically called “constituent service”.

 Since many of those who are drawn to a career in politics seem to tend naturally towards behaving without scruples, we could perhaps get them to behave as if they were in fact scrupulous by paying them so lavishly that they can live a permanently luxurious lifestyle without engaging in the corruption, and to snatch this lavish pay away from them if they engage in corruption anyway.

 What about the piety alluded to above?  Both men, who see nothing wrong with violating individual rights to property, at the same time emphasize the idea that “we” must put moral limits into place on what goes on in markets, in the name of the “common good”, without dealing with any potential problems of who it is that gets to define morality or the common good, or even equality.  They wish to institutionalize what can only be characterized as theft as a solution to unequal outcomes.

 Like the song says, “There Ain’t Much to Add After all the Subtractin’s Done”.

 A cynic might be forgiven for concluding that Professor Piketty, and Professor Sandel too, began their respective studies with their conclusion, which is that rich people’s income and wealth should be confiscated – if you want money, you go where the money is.  

 And if they can show that high income and wealth accumulation are the result of accidental historical processes, luck and/or an inherent flaw in their caricature of capitalism, rather than something which these high income and high wealth people have a legitimate claim to, then Q.E.D.  Let the plundering begin!

 I recommend that you have a look at the critique of Piketty’s work published by the eminent American economist and historian Deirdre (formerly Donald”) Nansen McCloskey, in her essay "Measured, Unmeasured, Mismeasured, and Unjustified Pessimism."  

 Among other critiques, McCloskey points out that Piketty, who laughingly goes by the title of economist, can’t even keep straight the difference between movement along a stationary demand curve in response to a price change, and the shifting of the demand curve, and is clueless about supply responses to price changes.

 She goes relatively easy on Piketty throughout the essay, goes out of her way to praise what she thinks he gets right, and to excuse his ignorance of price theory because within the French educational system price theory is not considered an important thing to know, she says.

 A rare notable exception is Veronique de Rugy, a French-American economist who earned her PhD. at the Pantheon-Sorbonne, and who in spite of this has acquired a deep and sophisticated understanding of price theory and all that it implies. 

 The Pantheon-Sorbonne is one of 13 autonomous universities that was formed after the breakup of the original Sorbonne (University of Paris) in 1970.

 McCloskey is an example of a TRULY great thinker on your planet, as is de Rugy; and McCloskey’s essay, penned in response to Piketty’s book, is beautifully done, as are her numerous other works.  You can also hear her insightful ideas in interviews on numerous YouTube videos.  

 In a sane world, McCloskey, de Rugy and their ilk would be the ones in the limelight, not the likes of Piketty and Sandel.

 Earthlings will have made some serious progress in the evolution of planetary civilization when men in the White Man’s Burden community, like Piketty and Sandel, are no longer held up as the epitome of deep insight, compassion and righteousness.  These two are among the first who need to get the message:  PLEASE, STOP HELPING!

 I invite you to have a listen to the next Fascinating! podcast and a look at the next video on our YouTube channel.  You can find access to all podcasts and videos on our web page, fascinatingpodcast.com.

 Please recommend Fascinating! to your friends if you find the lessons from nature in these essays personally valuable.

 Theme music:  Helium, with thanks to TrackTribe.

 Live long and prosper.

 Practice the art of winning without defeating anyone.

 Savor your experiences.

 Treasure your memories.

 Anticipate a happy and rewarding future.

 And respect nature’s wisdom.