Christmas reading: McCloskey on Piketty

By James Zuccollo 25/12/2014

It’s taken me a month to read it but Deirdre McCloskey’s essay on Piketty’s Capital is just as persuasive as you’d expect. Print it and read it with your family over Christmas!

The review doesn’t break any new ground but it is eloquent and engaging. Her central themes are:

  1. The Industrial Revolution and Great Enrichment have increased incomes by 2,900% over the past two centuries. They have elevated the poor to a state of wealth, relative to their lot even fifty years ago. It is that increase in the absolute lot of the poor that we should be ethically concerned about, not the relative inequality that Piketty focuses on. Considering their capabilities and dignity, not simply incomes, is even more encouraging because of advances in, for example, access to education.
  2. Piketty focuses on the accumulation of physical capital but the engine of growth for the past 200 years has been human capital. The exclusion of human capital from his calculations is particularly problematic because it is owned by the workers, not the capitalists. That growth has enriched the poor by magnitudes more than redistribution could achieve.
  3. Wages and capital returns are important price signals that generate a response from supply. Stifling those signals damages the efficiency of the economy and retards the very growth that will help the poor.

0 Responses to “Christmas reading: McCloskey on Piketty”

  • I don’t think redistribution is the answer but I do think too much inequality increasingly tilts the playing field and this in turn prevents large chunks of the population achieving anything like their potential. It also produces an increasingly ungenerous spirit particular among those who inherit wealth but not brains.

  • I’ll go further. The industrial revolution produced huge economic growth but that was due to the exploitation of fossil fuel (coal) on a huge scale, the urbanization of a predominantly rural population and the expropriation of foreign lands and resources. A figure of 80 million souls due to the slave trade has been calculated and that doesn’t count the cost of lives blighted and shortened by factory work and unhealthy sugar rich food, alcohol and tobacco.To compare human welfare prior to and post the industrial revolution in selective economic terms is just ridiculous. Prior to automation and computerization schooling was essential for the Capitalistic enterprise. Numeracy and literacy was necessary for the growth and penetration of the money economy. Now that many “developed” nations can do without an educated workforce and domestic manufacturing to the same degree, governments are showing signs of reneging on that Enlightenment ideal.The following quotation gives an incite into the shallowness of her economic thinking. Progress, economic and scientific has always been about co-operation. The Chicago school have always misunderstood that.
    ‘Economics tends to be treated as a boy’s game, it’s all about competition, sort of like football,” she says. ”Women think more in terms of co-operation, which is a great engine in a modern economy. I’m not necessarily better at playing the boys’ game now but I’m a better economist as a social scientist, a real economist.”