Georg Simmel: Expansion of the Dyad

The two person, or two group "dyad" is a particularly important social grouping, according to George Simmel in The Sociology of Georg Simmel translated and edited by Kurt H. Wolff. But what happens when you expand the dyad to three people, to the "triad?"

Back to start: The Unknown Sociologist.

"The appearance of the third party.. [means an] abandonment of absolute contrast." In Simmel's view, it introduces three kinds of group formations. The third person might be a non-partisan mediator; he might be a "tertius gaudens" or someone who benefits from a two person quarrel; and he might even be someone who uses a dispute between two people to divide and conquer them. Let us look at each in turn.

The Non-partisan and the mediator. In many cases the addition of a third person can weld the two-person dyad together; the child "closes the circle by typing the parents to one another." But just as significant is the non-partisan mediator.

The non-partisan shows each party the claims and arguments of the other; they thus lose the tone of subjective passion which usually provokes the same tone on the part of the adversary.

In other words, the non-partisan "deprives conflicting claims of their affective qualities" and forces the parties to view a dividing issue more objectively than in pure adversary combat. "[A]ntagonism of the will is reduced to intellectual antagonism." Notice though that the mediator is not an arbitrator; he does not decide the issue; only the parties can do that. But the mediator must be viewed by both sides as neutral, either because he is equally close to each party, or equally distant.

Another impartial third element is the arbitrator, to whom the two parties render up the power to decide their issue. This requires not just a joint faith in the neutrality of the arbitrator, but "confidence in the objectivity of [his] judgment" beyon mere mediation.

As an example of mediation, Simmel offers the British King Henry III. His relations with the barons and prelates descended into constant conflict, and both parties came eventually to resort to a third element previously "kept out of state matters." We are talking about the beginning of the House of Commons.

The Tertius Gaudens. Here we have a third party that "draws advantage from the quarrel of two others", he is literally the third who rejoices at their difference. This party is similar to the third element that divides and conquers, discussed below, but does not need to be active in splitting the two parties. He may merely befriend one party to annoy the other. But the iconic case is two parties competing for the favor of another, as in two suitors for one woman. On the largest scale, the tertius gaudens is played out in the competition between producers for the favor of the consumer. Notice that the advantage of the consumer only applies when the producers do not collude with one another. In politics, the position of a third party is not as absolute, because a political party is not free to abandon its declared positions on the issues of the day; there is often only a narrow room for maneuver between two parties competing for the favors of a third party. A similar situation occurs in demarcation disputes between labor unions on a job site. If unions bid for their workers to do the job then the lowest bid wins. But if the unions collude to decide what pay should apply to each job then their basic interest, high pay, is preserved from attack by the employer.

Divide and Conquer.  In any three-element relationship the opportunity exists for the third element to take advantage of a quarrel between two others. In "divide and conquer" we deal with the situation where "the third element intentionally produces the conflict in order to gain a dominating position." There are many examples of this strategy, beginning with the prohibition by a sovereign ruler of any associations, thus heading of any combinations of people that might form a head of rebellion. The Anglo-Norman kings made sure that the estates of each feudal lord were widely scattered to make it difficult for any lord to become sovereign in a single contiguous district.  Similarly, employers often refuse to negotiate with a combination of employee unions. They prefer to negotiate with each one separately. The Incas liked "to divide a newly conquered tribe in two" and place a supervisor over each, with "slightly different ranks." This encouraged rivalry between the supervisors and prevented united action against the Inca. There are two basic strategies for divide and conquer. One is to get the two parties to fight each other. Where this does not work, then the third party combines with one other "long enough for the other to be suppressed, whereupon the first party is an easy prey for him."

It is easy to see why "two's company but three's a crowd."

Next: Subordination under an Individual

George Simmel: The Individual and the "Dyad"

We think of sociology as the individual and society. But Georg Simmel in The Sociology of Georg Simmel translated by Kurt H. Wolff takes us to a more basic consideration, the individual and the "dyad", or the individual as part of a two-person social relationship.

But first, consider the situation of the "isolated" individual. Actually, we are not talking here about an individual that is "physically alone" as one might be on a walk in the mountains. The feeling of isolation is much more intense

when one is a stranger, without relations, among many physically close persons, at a "party", on a train, or in the traffic of a large city.

In other words, isolation is not the aloneness of an individual; it is the separation of the social individual from the rest of society. "As a conscious feeling on the part of the individual, it represents a very specific relation to society."

But then there is freedom, which seems at first glance to be closely related to isolation, but it is decisively different. On the one hand we can see that society -- as  "the state, the party, the family... friendship or love -- quite naturally... would extend their claims over the whole of man." Against this relentless pressure to conform to the expectations of others, "freedom emerges as a continuous process of liberation" for personal independence and also the right to remain dependent. On the other hand "the individual does not just want to be free, but use his freedom for some purpose", including "the extension of his will over others."

Thus we see that "isolation" and "freedom" are not external to the notion of humans as social individuals, but particular instances of genuinely human "sociation." The "dyad", the relation between two individuals or two groups is equally social. And the dyad has a particular characteristic unlike the isolation or freedom of the individual or a group of three or more people; if one person drops out of the dyad, it ceases to exist. The point is that any large group can be immortal; but the dyad cannot.

Simmel writes at length about the characteristics of the dyad. He starts with triviality. We tend to value things that are unique and rare, and undervalue things that are routine and commonplace. Clearly, a dyadic relationship, with its daily repetition of the commonplace, can descend into triviality, and "the tone of triviality frequently becomes desperate and fatal."

Then there is intimacy. For Simmel intimacy refers to the "ingredients that its participants contribute to [the relationship} and to no other" if they are regarded to be essential, forming the "affective structure" which the two show to each other and to nobody else. It is clear that intimacy is closely related to the exclusive nature of the dyad; intimacy withers as soon as a third element is introduced into the relationship.

Obviously the iconic case of the dyad is a monogamous marriage, and yet is isn't. For marriage typically leads to children, and then the dyad is broken. And marriage does not exist in isolation as merely two people. There is the family in general, the children, and the fact that marriage is "socially regulated and historically transmitted." Men and women are not just confronted by each other in marriage, but by the collectivity itself.

There is another curious characteristic of the dyad. It does not permit the two members to slough off duties and responsibilities to the larger group, as when people expect society to do what is properly their own responsibility. In a dyad there is a "co-responsibility for all collective actions." You can push a responsibility on the other member, but the other member can push right back. You can't hide behind the group or blame the group, because the other person cannot be fooled. In other words, it is hard to be a "free-loader" in a dyad.

Simmel now considers the "expansion of the dyad," or what happens when you introduce an additional member into a two-person relationship. It could intensify the relationship, or it could distract it. And it could provoke jealousy. Once you introduce a third member into a dyad it becomes possible to overrule a member with a majority of the others. This is fine if you are a person with "strong individuality" that wants to fight rather than blend in. It's not fine for the "decided individual" that will avoid groups "where it might find itself confronted by a majority." Also, as soon as you expand a dyad into a group you risk the lowering of individuality to the group level that is particularly evident in crowds.

Thus the decisive change for a dyad is the first additional member: the first child to a marriage, but not the subsequent child. And the same applies to bigamy(!). The addition of the third wife is nothing compared to the addition of the second wife. Notice that in Rome there were two Consuls, not three. Yet there is a different relation between two political parties, where "who is not for me is against me." But when two parties dissolve into a single mass movement there is no room for opposition or disagreement. There is only "yes" and "no" for the whole collectivity.

Next: Expansion of the dyad.

The Shallow Conceit of the North London Luvvie

Back in the 2000s Ross Ashcroft was briefly a BBCer and then an assistant theater director. But after the crash of 2008 he has reached for bigger things and in 2012 released a documentary on all the troubles of the world, entitled Four Horsemen. It got tons of awards at film festivals. It's available on YouTube.

You would expect that it to be pathetically banal and devoid of almost anything that might qualify as an idea. Why would it? You tell me. Where in the world would a theater person in today's London ever run into someone with an idea that wasn't safely approved by the left-wing culture that dominates the minds of everyone in the arts?

But let's take a look at Four Horsemen anyway.

The Four Horsemen of this modern apocalypse are: the rapacious financial system, escalating organized violence, abject poverty for billions, and exhaustion of our natural resources. Filmmaker Ashcroft reviews these problems in four sections of his documentary.

6:30 Empires. Empires do end, and the west has not yet come to terms with its fading supremacy. And it makes sense, from Gen. Glubb's life cycle of empires, 250 years from pioneers to conquest, commerce, affluence, intellect, and ending in decadence. Imagine an overextended military, conspicuous consumption, living off the state, and an obsession with sex. And debasement of the currency. In our decadent age everyone scrambles for the spoils amid the distraction of bread and circuses. And the baby boomers did it! Meanwhile millions of people go to bed every night hungry. So why are we still struggling to distribute wealth fairly?

16:45 Banking. Is the problem "systemic?" We review the evils of fractional-reserve banking, fiat currency, and we get the usual focus on greedy bankers and Goldman Sachs, and the evil of forcing mortgages on poor people. It's all based on the notion of "growth forever." Did you know that 97% of the money in the world is "debt?"

50:51 Terrorism. Ashocroft's got a "root cause" explanation of terrorism. The "inherent iniquity in our system of money, banking and politics has not just had consequences domestically," but also globally. Terrorism is thus a push-back against western neo-colonialism. First there's the military and its contractors, then the consultants and contractors that get the contracts from foreign aid and World Bank loans. But the aid benefits the local elites, and the people have to pay back the debt. Then there is Chile. Yes, we can still haul Noam Chomsky in front of the camera to remember that the US intervention in Chile in 1973 amounted to terrorism. But with all this outrage is it any wonder that people have no recourse but to resort to terror?

1:02:52 Resources. We have got to the end of the benefits of economic growth; the more we grow the more we create poverty. It's a question of competition vs. cooperation. We need a progressive move from globalization to localization, production not consumption.

1:13:00 Progress. There's a tendency to Hollywoodization these days. Everything must be a story with a beginning, a middle, and an end. There's got to be a villain, and usually a sacrificial victim. So it's hard to see that the system is flawed.

So what's to be done? We need to make societies more equal and reduce income difference; that will help solve environmental problems. We need to understand that the problem is pretty simple. It's about power, and its about democracy. So we need to sweep away the disinformation of neoclassical economics and the academic gatekeepers with the cleansing truth of the internet. And we need to question the system of fiat money. It all comes down to a three point plan:

1. Return to gold as the basis of money, and maybe stage a debt jubilee, since debt is slavery.
   
2. Tax consumption instead of labor.
   
3. Return to a system with workers owning the place where they work and produce.

It's hard to know where to begin in analyzing such a precipitate of shallowness, but let's start with the three point program.

Yes, going back to gold and ending fractional-reserve banking is a great idea, but it's a good idea to realize why we have a fiat currency and persistent inflation. The reason is that governments are forever running out of money, or crashing the economic system with their economic interventions. The easiest way for a government to "get out of a jam" is to print money, devaluing debt and stealing the savings of ordinary people. Any big government program, whether a war on fascism or a war on poverty, ends up with a lot of government debt, and ends up with some kind of debt default.

That's why banks are such a problem, whichever party is in power. Ever since the Dutch invented the National Debt in the 16th century the government's debt has been the foundation of the credit system and the credit system has been the foundation of the rest of the economy. The banks are merely intermediaries between the government debt and the rest of the economy. The reason that bankers seem to be manipulating the system is that they are being tossed around by the machinations of the government's debt and cheap money operations. The first and most important government program is the program to sell the government's debt; that debt gets sold to bankers who are directed to use government debt for their reserves. Over time, the government regulates the banks in more and more detail, and over time the bankers learn how to manipulate their masters in the phenomenon we call "regulatory capture." Thus "greedy bankers."

In the run-up to the Crash of 2008 the government manipulation was particularly egregious because the US government had developed a policy over decades to extend "affordable housing" to subprime mortgage borrowers (i.e. minorities). The government mortgage twins, Fannie Mae and Freddie Mac developed policy to force banks to originate more and more subprime (i.e. low down payment, low credit rating) loans. But who would buy these loans from the banks and Fannie and Freddie? Simple. The investment banks like Goldman Sachs repackaged the loans and with a bit of financial trickery and sold securities that were rated AAA and could therefore be bought by pension funds and insurance companies. It all worked as long as the band kept playing.

If you read old stuff like Lombard Street by Walter Bagehot you get to understand how how the credit system works. It needs two things. And it needs debtors that can make their payments. And it needs debt that is properly collaterialized, so that the principal can be repaid if the debtor fails to service the loan.  When you get a situation where either of the two requisites are in question then you get a crisis of confidence; people start to wonder if their counterparty is sound or whether they might fail in a crash. So when the government floats about a trillion dollars in mortgages that are badly collateralized to borrowers that can't afford any downturn and maybe even can't afford to make payments right now... Well you get a financial system that is extremely fragile and will crash as soon as things start to go south and people really start to worry and take their money out of the market. Of course, you'll expose all kinds of bad apples when the market crashes, but the villain at the bottom of the story is not the greedy banker but the government that's mucking about with the credit system to give money or affordable home mortgages to its supporters.

So that's why we have fiat money. What about taxing consumption instead of labor? It's a good idea; that's what we all had in the 19th century during times of peace. But when the government gets above a certain size, consumption taxes become a real burden on the poor. And then you need to start taxing income. We could only return to a consumption tax system if we reduced government down to about 10-15% of GDP instead of the 35-40% of GDP right now. We could do it if we ended government pensions including Social Security, government health care such as Medicare, and government education.

The final item in Ashcroft's plan is to let the workers own the factors of production. There is already a government program to encourage this, the Employee Stock Ownership Plan or ESOP. But critics say that it's not such a good idea for ordinary employees to own a share in their employer's business. What happens if the company goes broke? Then the worker loses his job and his savings. There is another way to do this: privatize Social Security and let workers buy ETFs featuring the S&P 500 and the NASDAQ 100. Then workers get a part ownership in the income-generating potential of the whole economy. It's called diversification.

Now let's go back to the Four Horsemen.

Rapacious Financial System. The only way to fix this is to downsize government radically, so that government and its financing needs do not bulk so large in the financial picture. We have crazy banks because we have crazy governments.

Escalating Organized Violence. Yep, it's a problem, but it's localized at the borders of Islam. The Muslim peoples, particularly the Muslim Arabs, are having a horrific time, partly due to the west carving the Arab lands up a century ago at the end of World War I. Part of it is due to the pre-individualist, tribal society in the Middle East. Probably we are going to face a world war over Islam, and it ain't gonna be pretty.

Abject Poverty for Billions. Actually, people in the world are emerging from poverty at an astonishing rate, led by the economic growth in China and India. There has never been anything like it, ever. But then, as Deirdre McCloskey says, there has never been anything like the Great Enrichment of the last two centuries from $1 per capita per day to over $100 per capita per day in the rich countries, ever. Here's the chart on declining world poverty from the conservative think tank AEI. Don't trust the conservatives? Here's the word from the World Bank.

Exhaustion of Natural Resources. Trust the north London luvvies to be the last to know about the fracking revolution. Back in 2011 when, presumably, Four Horsemen was in production the revolution in shale oil and gas energized by horizontal drilling and hydraulic fracturing was already common knowledge. There isn't a crisis in natural resources. And if we should start to run out we have our internet billionaires that can't wait to live out their boyhood sci-fi fantasies and go mine the asteroids.

That leaves just one thing, the Glubb theory of empires and our terminal "age of decadence." To have a north London luvvie worrying about that is, well, it's a start. But, in my view, the "root cause" of decadence is the problem of creativity, the people in the arts. In my world view there are three kinds of people: Slave People --  peasants and workers; Responsible People -- knowledge workers, business people, and merchants; and Creative People. The Creative People are the big problem because they cannot be happy unless they can do something original and creative. Almost anyone can be a slave; almost anyone can learn to be responsible. But with creativity, many are called but few are chosen.

The great problem of the modern world is what to do about disappointed creative people, and to stop them before they pull down the temple in impotent rage. You could start with the problem of a 90 minute documentary that is beautifully crafted but that retails a nonsensical farrago of half-digested north London conventional wisdom.

Dr. Ha-Joon Chang, Renegade Economist? Oh Please!

One of the talking heads on Ross Ashcroft's Four Horsemen documentary is Dr. Ha-Joon Chang, an economist who's a Reader at the University of Cambridge in England.

In this video under the "Renegade Economist" brand Dr. Chang rehearses lefty talking points on "neoliberalism."

I didn't really know what neoliberalism was when I watched the video; I just knew that it was a term that lefties swung around as a kind of pejorative. It turns out that it was developed by spanish-speaking activists opposed to Gen. Pinochet's regime in Chile. See Wikipedia.

But before you can trash neoliberalism, you have to define "liberalism." For Dr. Chang, liberalism is a 19th century social economic theory that had a rather narrow view that everything should be run on market principles. They didn't quite realize you needed bankruptcy and limited liability laws. (Actually Marx was prescient on this, says Dr. Chang, arguing in the 1860s that limited liability was the future of capitalism). And, of course, these 19th century liberals thought that democracy was a rather bad idea, since the people would vote for an income tax and destroy incentives for wealth creation. This liberalism, of course, was completely discredited in the first half of the 20th century, through two world wars, the rise of communism, the Great Depression, and the rise of social democracy in western Europe.

What about neoliberalism? It's a remake of the old 19th century liberalism, according to Dr. Chang, but it has been modified at the margins. Now it doesn't oppose democracy directly, and endorses limited liability. It wants to maximize the domain of the market -- where one dollar, one vote rule dominates. But it still wants to diminish the domain of the state and democratic policies. It still believes that the most important freedom is freedom of property, and profit-seeking should be the only motive, and that "poor people should be punished." This ideology has been promoted very aggressively by "bad people" (Chang kinda swallows the "bad" on the video) "with a lot of money and power," so the whole world has come to accept this as the truth. Since the financial crisis of 2008 there has been some rethinking, but frankly there is too much power, money and intellectual prestige at stake for this to go away quickly.

Of course, this is a left-wing "narrative" that amounts to an apology for power, as the postmodernists teach us. Only the postmodernists generally spend their energies unmasking evil bourgeois apologies for power, rather than their own noble educated ruling class apologies.

I think the first thing to understand is that conservatives and libertarians think we are trying to understand the world, not change it. That makes us the opposite of Karl Marx who said in his Theses on Feuerbach: the point is not to understand the world, but to change it." What everyone from Marx to Mill was thinking in the mid 19th century was: what on earth has just happened, and what will happen next?

My take on the 19th century liberals is that they were trying to understand what had happened since the start of the industrial revolution. They were thinking: how should be understand this new world, and how can we preserve the beneficial changes? In fact, everybody thought, from Malthus to Ricardo to Marx, that it couldn't last. That's what Marx's "immiseration" thesis is about. He rightly saw that the ruthless efficiency of capitalism would extract the maximum out of the workers as the capitalist firms ruthlessly reduced prices.

But Marx, and all the static thinkers before and since, misses the whole point of capitalism. It is not about accumulation of wealth. It is about sudden, and repeated innovation, what George Gilder calls "surprise." The textile revolution was a complete surprise; nobody saw it coming. And it created fabulous wealth, not to mention cheap clothes for the masses. When that was petering out along came another surprise: steam railways and ocean steamships. Now for the first time ordinary people could travel -- travel the world -- and bulk goods like grain could be profitably transported across the world. It was a complete surprise. Tons of money were made, and famine was eliminated in Europe. Just as the railway revolution was at its height, along came the illuminating oil revolution. A clerk working in a commission merchant's store noticed the barrels of oil in the store, and decided to get into the new mineral oil business. Oil prices came down by 80 percent and John D. Rockefeller became a billionaire and invented modern philanthropy. Then came the electrical revolution, then the auto revolution, then the electronics revolution. Then the information revolution. The point about all these revolutions was that they were complete surprises; nobody saw them coming. The upshot is that per-capita income in real dollars has increases from $1 per day to $100 per day in 200 years. There has been nothing like it in human history. Ever.  The whole thing has been a complete surprise.

Now the question is: how does this system, or this organism, or this emergent phenomenon work? And what should be its relation to government, to society, to religion? In the 1970s, when "neoliberalism" reared its ugly head, the western world was going through a patch of "stagflation." Establishment minds decided that the world was becoming ungovernable, and that we should get used to the idea that the future would not see much growth. In fact we had to adjust ourselves to "The Limits of Growth." Nothing could be done, as the song says.

Well, not to worry. Along came a bunch of renegades, led by Bob Bartley at The Wall Street Journal. They proposed a program of hard money, lowered marginal tax rates, and reduced administrative regulation. This program was inspired by the Austrian economics school led by Ludwig von Mises (an Austrian Jew) and F.A. Hayek, and it was backstopped by "public choice" theory that argued that all regulation of business ended up in "regulatory capture" of the regulators by the regulated. Implemented by Reagan in the US and Thatcher in the UK, the result was a surprise: sky-high energy and commodity prices crashed, and a 20 year boom followed, interrupted only when people got overexcited by the internet boom in the 1990s.

Were the 19th century liberals a bit slow on relaxing bankruptcy laws? Maybe? But once the economy got moving, we could afford leniency on bankrupts, because there was always more where that came from. But go back to Middlemarch and the financial troubles of Dr. Lydgate. Should he have been able to escape his creditors, the local High Street merchants, after his ludicrous profligacy inspired by his empty-headed social-climbing wife? And what about limited liability? Well, the story on that goes back to the South Sea Bubble of 1720. After that crash, people thought that limited liability was a dangerous invitation to fraud. Limited liability got revived in the mid 19th century when it just became obvious that you just couldn't assemble the capital needed when each investor was liable for the debts of the bankrupt enterprise to the limit of his entire fortune. Limited liability protects the small investor, who doesn't have to keep an eye on the CEOs of the companies in his stock portfolio. His liability is merely that he can lose the entire value of his stock equity. My daughter's Wall Street father-in-law thinks that today's investment banks should return to partnerships, where the owners are the bankers and their entire personal wealth is on the line when the market crashes. Maybe there should be an exception on limited liability for bankers.

The argument of neoliberalism is an argument between elites. Should big corporations be regulated by the market and simple rules to penalize fraud, and incentives making it costly to pollute the environment? Or should they be regulated in detail by the assignees of the educated ruling class? It should be clearly understood that establishment economists like Dr. Ha-Joon Chang are not disinterested bystanders in this question. They are the chaps that get to do the regulating, and apply what Deirdre McCloskey calls the "sweet use of the monopoly of violence in government" to the corporate chieftains. But then what? Obviously the corporate CEOs do not just sit there when the Changs and the Grubers come calling. They learn how to manipulate the regulators, and execute a program of "regulatory capture." The result is what we racist-sexist-homophobes call "crony capitalism."

I suppose if we are honest, we right-wing nut-cases should admit that "crony capitalism" is a pejorative.

A couple of points: I don't think that 19th century liberals were really against democracy. Here's Wikipedia on John Bright, who along with Richard Cobden symbolizes 19th century "Manchester" liberalism. He "headed the reform agitation in 1867 which brought the industrial working class within the pale of the constitution" and gave them the vote. Conservative Prime Minister Disraeli famously one-upped the Liberals and passed universal male suffrage in a program called "Tory Democracy." So where is Dr. Chang coming from on this?

Then there are Reagan and Thatcher. The big thing about them is that they successfully appealed to the upper working class, and the left has never forgiven them. It was Reagan that enticed the "Reagan Democrats" out of the Democratic Party; in 2014 the white working class voted Republican by 30 points. And it was Thatcher that appealed to the "C2s" in Britain by passing a program for them to buy their "council houses." Just last week a Labour front-bencher resigned after sneering at "White Van Man" in a tweet.

Dr. Chang is right that there are a lot of people pushing the idea of a market-place relatively free from government power. But there are also a lot of people like him pushing the idea that corporations should be minutely regulated and supervised by government. And they are passing laws to do this, big, comphrehensive and mandatory programs like Sarbanes-Oxley in 2002 and Dodd-Frank in 2010, including the Consumer Finance Protection Bureau on which Sen. Elizabeth Warren (D-MA) did the Grubering. These are huge regulatory actions that have submerged corporations in a tsunami of paperwork. And no doubt they will all end in tears as the big corporations learn how to game them and use them to beat up their small-business competitors.

Let's at least be clear about one thing. Dr. Chang is not a "renegade economist." Nobody that "served as a consultant to the World Bank, the Asian Development Bank and the European Investment Bank as well as to Oxfam and various United Nations agencies" is a renegade. He just isn't!

There's a catchphrase that describes Dr. Chang. He's what politicians call a "safe pair of hands."

Piketty: Deirdre McCloskey Weighs In

Back in the spring the intellectual world was convulsed by a book about capitalism written by a Frenchman, Thomas Piketty. The book, Capital in the Twenty-first Century argued that the return on capital was always bigger than the economic growth rate (expressed as r > g) and this would mean that the rich would forever get richer and richer.

Since the left is currently focused on "inequality" you know that this is a Bad Thing. How can we solve this problem? Easy. All it takes is higher taxes on high incomes and a global tax on capital.

I read the whole thing so you wouldn't have to and I blogged on the book with commentary on each chapter, starting with the introduction here. Broadly speaking, the book is balderdash. Of course r is greater than g. The rate of return on capital is connected to time preference whether or not there is any growth. If you want to borrow money you have to pay for it; you have to pay the capitalist for the fact that when you repay his money in a couple of years you need to pay him for the fact that right now money in two years is worth less than money in the hand right now. Because time preference.

Now Deirdre McCloskey, economist and author of the "Bourgeois Era" books celebrating bourgeois dignity and virtue, has weighed in with a long review of Capital in the Twenty-first Century. It will appear in the Erasmus Journal of Philosophy and Economics. Her judgment is scathing. Piketty set out, she observes, to write a book that surveyed the modern world with a view "at once economic and political, social and cultural".

But he has not achieved it. His gestures to cultural matters consist chiefly of a few naively used references to novels he has read superficially—for which on the left he has been embarrassingly praised. His social theme is a narrow ethic of envy. His politics assumes that governments can do anything they propose to do. And his economics is flawed from start to finish.

 Exactly. For instance he offers Balzac's Pere Goriot as a tableau of life in the accumulating rentier class. But Goriot is a novel about how people with money will gladly throw it all away for the chance to climb the social ladder. It also turns out that people without money are happy to throw other peoples' money away in order to climb the social ladder.

Now McCloskey's great virtue is her story-telling. Her "Bourgeois Era" books retell the economic miracle of the last 200 years as the Great Enrichment in which per capita income in real money went from $1 per day to $100 per day. But all the Left can think about is that there are still people that haven't got their share.

And yet the left in its worrying routinely forgets this most important secular event since the invention of  agriculture—the Great Enrichment of the last two centuries—and goes on worrying and worrying, like the little dog worrying about his bone in the Traveler’s insurance company advertisement on TV, in a new version every half generation or so.

What does the left (and sometimes the right) worry about? I'm glad you asked that. McCloskey has a little list:

[G]reed, alienation, racial impurity, workers’ lack of bargaining strength, women working, workers’ bad taste in consumption, immigration of lesser breeds, monopoly, unemployment, business cycles, increasing returns, externalities, under-consumption, monopolistic competition, separation of ownership from control, lack of planning, post-War stagnation, investment spillovers, unbalanced growth, dual labor markets, capital insufficiency (William Easterly calls it “capital fundamentalism”), peasant irrationality, capital-market imperfections, public choice, missing markets, informational asymmetry, third-world exploitation, advertising, regulatory capture, free riding, low-level traps, middle-level traps, path dependency, lack of competitiveness, consumerism, consumption externalities, irrationality, hyperbolic discounting, too big to fail, environmental degradation, underpaying of care, overpayment of CEOs, slower growth, and more.

And now, of course, net neutrality. The whole point is that "'capitalism' is doomed

unless experts intervene with a sweet use of the monopoly of violence [my bold] in government to implement anti-trust against malefactors of great wealth or subsidies to diminishing-returns industries or foreign aid to perfectly honest governments or money for obviously infant industries or the nudging of sadly childlike consumers or, Piketty says, a tax on inequality-causing capital worldwide.  

Like I said, McCloskey is great with words, and that's a good thing in an economist. It's also a good thing in a writer.

I could do on and on quoting her bon mots, but I won't. Instead I'll close with this.

A big problem in Piketty's book, according to McCloskey, is that he doesn't really tell us why inequality is a bad thing. He is no better than intellectual fluffball Glencora Palliser (nee M'Cluskie) who says in Phineas Finn that "Making men and women all equal. That I take to be the gist of our political theory."

Well, you can have your M'Cluskies (although we love our McCloskeys). But I'll take Madame Max Goesler, the incomparable rich young Viennese widow who in the end gets the hand of young Phineas, courtesy of Anthony Trollope. The only way to find out why is to read the book. But I will give you a hint: Character.

The best chap I've found that discussed freedom and equality intelligently is the German sociologist Georg Simmel. It just happens that I blogged on his analysis of equality and freedom in the 18th and 19th centuries last week.

Georg Simmel: Numbers and Social Life

We moderns like to think that we invented numbers. Back in the old days life was organic and natural, centered around the family and the village collective. But Georg Simmel in The Sociology of Georg Simmel translated by Kurt. H. Wolff reminds us that enumeration was not an invention of the absolute monarchs and their bureaucracies. Numbers in social life go further back than that.

Back to start: The Unknown Sociologist.

But the point of numerical subdivision is the one proposed in James C. Scott's Seeing Like a State. Numerical subdivision replaces subdivision by kinship and tribe. In the Germanic tribes, they divided the whole into Hundreds, that is 100 men, and this became a subdivision also in Britain. Even today, members of Parliament that wish to resign their seats are appointed steward to the Chiltern Hundreds.

The point is that in numerical subdivision a society starts to organize itself on abstract principles rather than kinship principles. It is the first step towards the abstract social structure that we have today.

Another interesting question is the numerical minimum for a social gathering we call a "party." When two or three people gather formally, it "never constitutes a 'party.' But we do have one when we invite say, fifteen of our closest friends." The number in question is the decisive factor, and society has recognized the importance of number when "sumptuary laws prescribed the exact number of persons" allowed to escort a couple at their wedding. And so the question arises:

How many soldiers make an army? How many participants are needed to form a political party? How many people make a crowd?

We think of our present age as uniquely obsessed with number. But number has been important for quite a while.

Next: The individual and the "dyad".

Georg Simmel: 18th and 19th century views of freedom

Society want to be an organic whole of which "individuals must be mere members." But the individual rebels against total absorption into the whole, writes Georg Simmel in The Sociology of Georg Simmel translated and edited by Kurt. H Wolf.

The individual strives to be rounded out in himself, not merely to help round out society.

This conflict between the whole and the individual is insoluble. The individual's striving for wholeness appears as egoism, compared to the altruism of serving society. But society itself "is an egoism that does violence to the individual". Thus comes freedom, to referee a boundary both for society and for the individual. The 18th century and the 19th century offered different ways in which freedom could be understood and implemented.

Back to start: The Unknown Sociologist.

In the 18th century the old social forms -- the old aristocratic privileges, the "despotic control of commerce," the "still potent survivals of the guilds, the intolerant coercion by the church, the feudal obligations of the peasantry" -- seemed "an unbearable limitation" on peoples' energies. Thus it invented freedom from obligation and coercion and equality to level the ranks.

But the freedom of the individuals to pursue their energies immediately creates problems.  The 18th century idea of freedom assumed equality between individuals and the abolition of ranks, but individuals are not equal. Freedom allows the powerful to accumulate power, the moneyed to accumulate money, and the clever to outshine the stupid. This is what socialism was invented to cure.

"[S]ocialism" does not refer to the suspension of freedom. Rather, socialism suspends only that which, at any given degree of freedom, becomes the means for suppressing the freedom of some in favor of others. This means private property.

 There is an "antimony between freedom and equality" that only Goethe seems to have seen.

Equality, he said, demands submission to a general norm; freedom "strives toward the unconditional." "Legislators or revolutionaries," he pointed out, "who promise at the same time equality and freedom are fantasts or charlatans."

How then did the 18th century not grasp this problem? It is because of Kant, who posited an abstract and idealistic ego which is really identical in every man. And then there is Kant's categorical imperative:

Act in such a way that the principle governing your will could at the same time be valid as the principle of a general legislation.

The 18th century "based equality upon freedom, and freedom upon equality."

This ideal broke up in the 19th century into two tendencies: "toward equality without freedom, and toward freedom without equality." The first is obviously socialism.

The second tendency is a new individualism. The individual that had broken "the rusty chains of guild, birth right, and church" now wanted "to distinguish himself from other individuals."

The important point no longer was the fact that he was a free individual as such, but that he was this specific, irreplaceable, given individual...

This new individualism might be called qualitative, in contrast with the quantitative individualism of the eighteenth century... At any rate, Romanticism perhaps was the broadest channel through which it reached the consciousness of the nineteenth century.

Simmel summarizes all this in a majestic paragraph that still resonates unabated with us a century later.

[T]he doctrine of freedom and equality is the foundation of free competition; while the doctrine of differentiated personality is the basis of the division of labor. Eighteenth-century liberalism put the individual on his own feet: in the nineteenth, he was allowed to go as far as they would carry him. According to the new theory the natural order of things saw to it that the unlimited competition of all resulted in the harmony of all interests, that the unrestricted striving after individual advantages resulted in the optimum welfare of the whole.

Simmel looks to a higher form in which the two ideas of "personality as such and of unique personality as such, are not the last words of individualism."

Next: Numbers and social life