Monday, June 9, 2014

Anti-Piketty: He Even Gets "Père Goriot" Wrong

The liberal sensation of the spring has been Thomas Piketty's Capitalism in the Twenty-First Century in which the good French professor brandishes Jane Austen and Honoré de Balzac at us in order to prove that r > g and the rich will go on getting richer and the poor poorer unless.

Unless we set up a cadaster of global wealth to make every rich person completely transparent, set up confiscatory income tax rates on the 1% and tax them 1-2% of their wealth every year.  What could go wrong?

Otherwise we'll find ourselves back in the extreme rentier income inequality so richly evoked by the novels of Jane Austen and Honoré de Balzac.

Of course Piketty's phony-baloney good-time rock and roll inequality of r > g, that the rate of return on capital is always bigger than the rate of growth, is nonsense.  First, because a major component of the rate of return on capital is simply time preference, that you must pay people not to spend their money on present goods.  Second, because a lot of capital is needed just to maintain the existing stock of capital before it can be used to create growth.

But the other argument, that the rich will keep getting richer and the poor poorer, unless... is also phoney-baloney good time rock and roll too.  At least according to Balzac.

So let's get back to Balzac, and particularly Père Goriot, the novel that Piketty wants us to accept as a moral of the grossly unjust rentier society. (Rentier means a holder of French government bonds, or rentes). I'd seen Père Goriot as a TV serial decades ago, but had never read it.  Now I have.

The term "Père" is meant to be patronizing, as we would say "old man Goriot" or "Geezer Goriot."  But the gravamen of the novel has nothing to do with the inevitable rich getting richer.  It is about the folly of people that are ready to spend away their entire fortunes to get a leg up in the social world of beautiful women, fashionable salons and the well-connected.

Both Goriot, impoverished businessman, and Eugène de Rastignac, an impoverished young noblemen, think nothing of money except as a leg up into the world of the beautiful people.  Goriot had a flourishing business as a grain merchant; he'd started up using revolutionary connections in the 1790s and he used the fortune he'd accumulated to launch his girls into high society with big dowries.  Then he sold the business to save his daughters the embarrassment of having a father in "trade."  Then he gave away the proceeds of the business sale to provide his daughters with cash to buy stuff.

Rastignac arrives in Paris with an introduction to a wealthy relative, and soon sees that he'll need money to cut a dash in high society, so he sends to his mother and sisters for money.  Then he is given a lesson in social climbing by Vautrin, a man in the criminal underworld: marry the rich young heiress, says Vautrin.   Nobody in the Paris of 1819 seems to have any idea of actually working for a living, except Goriot, who has an idea for making pasta in Russia.

The inescapable moral of Père Goriot is that money runs through peoples' hands like water, because they are not really interested in money, but in the things that money can buy.  And they are perfectly content to spend today's money on the hope of social climbing tomorrow.

So Piketty has got it completely wrong.  The best way to lighten the load of the rich is not to tax them out of their gourds but to encourage them to spend money on social climbing.  And think of all the jobs that creates for tailors, hatters, dressmakers, milliners, coachmen, farriers, stables, and on and on.  Not to mention professors with cunning ideas to increase the power of government.

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