Daniel Shuchman reviews Thomas Piketty’s 685-page Keynesian tome Capital in the Twenty-First Century. Excerpt:
A professor at the Paris School of Economics, Mr. Piketty believes that only the productivity of low-wage workers can be measured objectively. He posits that when a job is replicable, like an “assembly line worker or fast-food server,” it is relatively easy to measure the value contributed by each worker. These workers are therefore entitled to what they earn. He finds the productivity of high-income earners harder to measure and believes their wages are in the end “largely arbitrary.” They reflect an “ideological construct” more than merit.
If not for high-income earners and their “arbitrary” wages, the jobs of the first sort wouldn’t exist. Their wages transmit useful knowledge in nascent markets. Those wages vary greatly depending on success in creating demand. Business start-ups can go broke in 3 years or go nova.
The free market is unmoved as to whether high-income earners “merit” or deserve their wages. Replicable, secure jobs exist in large, well-established industries, where demand already exists thanks to innovators who took risks to bring their products to market decades ago. On the leading edge of technology, where ingenuity and initiative create demand, jobs are not replicable nor are they secure.
Affinity for static, predictable markets is classic Keynesianism and a recipe for long-term stagnation. While assembly line jobs are good for those who can stand them, there is no room for creativity in mass production of consumer goods. Man is not an economic unit, but an individual endowed by God with a will. Creativity is needed to grow the pie. Yoking men to machines goes against the nature of economics, to improve material conditions and alleviate burdens. Picketty’s proposed 80 percent tax on income greater than $500,000 will effectively eliminate regenerative free enterprise, freeze us in our current material conditions, and drain the country’s wealth.
Consumer spending was the “silver lining within a dour first-quarter growth report,” said Andrew Wilkinson, chief market analyst at Interactive Brokers LLC. But that enthusiasm is somewhat tempered because consumers tend to have little choice in spending on utilities and medical care.
Forced purchase of health insurance courtesy of President Obama and Chief Justice Roberts created lots of demand, but no growth.