Talking Tuesday: Piketty's Crumbs

Economist Tim Kane critiques so-called "inequality economists" like Thomas Picketty who argue that we are no better off than our forebearers of a century ago. Kane points out that this sort of neo-progressive thinking is ignorant at best, and willfully misleading at worst. 

“Three years ago, Thomas Piketty’s Capital in the Twenty-First Century (2013) made its author the most famous economist in the world. The book caused a sensation by highlighting rising income and wealth inequality in the United States and Europe, especially in its jarring claim that inequality is just as bad today as it was a hundred years ago. Piketty writes: ‘The poorer half of the population are as poor today as they were in the past, with barely 5 percent of total wealth in 2010, just as in 1910. Basically, all the middle class managed to get its hands on was a few crumbs.’

“These two sentences sum up a profound irony—the central contradiction of modern progressives. They do not believe in progress. A century ago, America’s first progressives believed very much in the power of their reforms. Theodore Roosevelt was proud to protect the environment. John Dewey was busy promoting universal education. Alice Paul was busy fighting for a woman’s right to vote. They succeeded. Today, neo-progressives would have us forget all that, and maybe it’s because economic hindsight is anything but clear.

“As a professional economist, I find myself haunted by Piketty’s book. After reflecting on the issue many, many times, attending conferences, and reading dozens of scholarly papers, I keep coming back to his disturbing comparison of our time to the year 1910. Why 1910? He could have picked 1960 or 1800, I suppose, but the year 1910 seemed to float in the back of the mind like a silent paradox. Have we nothing but crumbs to show for a century of capitalism?

“One way to value the progress enjoyed by everyday people is to imagine having to do without all of the material things we have that our ancestors lacked. How much money would you be willing to accept to give up indoor plumbing for a year? Having water on tap in every home in 2010 offers us no point of comparison to 1910. The current crisis of toxic tap water in Flint, Michigan has caused an uproar, but it’s in part a story that shows how much we take clean tap water for granted. Most homes have five or more taps between the kitchen, bathroom sinks, shower, and washing machine. The cost of tap water across the United States is roughly half a penny per gallon, which is surely far less than the actual value we get from it. But few homes in 1910 had any taps. Treating water with chlorine to cleanse it of toxins was first done in 1908.

“How much money would you demand to give up modern public goods such as highways or emergency fire and ambulance services? How much is air conditioning worth to you? What about penicillin? Entertainment of any kind that is not live? The ability to travel to Australia from Minneapolis in a day’s time for the price of five men’s suits? Recorded music, movies, and cable television? How much would you have to be paid to surrender the Internet for a month? No Facebook. No Netflix. No email. No Google searches. No Google Maps.

“These are Piketty's crumbs."

~Tim Kane, Piketty's Crumbs, Commentary Magazine, April 14, 2016

Read the whole thing.

The very fact that many of us sit in temperature controlled environments, sleeping in comfortable beds, with the leisure to read such things on tiny screens with vast computing power that we can carry around in our pockets proves Piketty wrong.  I'm not an apologist for capitalism--I think unfettered capitalism has very serious issues--but it does unquestionably bring about economic progress and a better quality of life overall.  Let us remember the past, and be wary of the tunnel logic and ahistoricism of our age.  We forget at our peril.