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Piketty’s main point is that if the return on capital is greater than the return on labor then over time you will get inequality. But like... what would a world

by frisco 7y ago

Piketty’s main point is that if the return on capital is greater than the return on labor then over time you will get inequality. But like... what would a world in which that is not true look like? What would it even mean for labor to scale? I’ve thought about this a bunch and cannot imagine what such a system would look like or how it would work, except for maybe utopian socialism, which basically isn’t physical. What kind of system is he proposing in which capital doesn’t create leverage?

adventured 7y ago
Every path along that road goes back to the same thing, including Piketty's: extreme control by a very small group of people over everyone else. Piketty is merely suggesting control by a different group. The non-wealthy often respond very positively to that, thinking their sandwich will be bigger and they'll have some enhanced influence - which never actually happens in practice. The types of people that pursue power in very concentrated systems of any sort, almost never like to share their accumulated power. You have to either nationalize wealth and production formally (Socialism), so that bureaucrats or authoritarian citizen boards/panels (or the military as often happens) govern the use & distribution of all wealth and production; or you have to aggressively regulate all possible uses of private wealth, which also requires similar authoritarian control groups for oversight & dictate, that will de facto rule as fascist entities (a veneer of private ownership scenario). This is Socialism vs Fascism, in which one formally nationalizes and doesn't usually bother to pretend about who owns & controls what; and the other de facto nationalizes but leaves you with fake property ownership & control (which they can and will revoke at any time). If you want to pursue any Piketty style premise, all roads go to the same place. There will be no exceptions, there has never been an exception. You can vary the details, it doesn't matter, you get inherently violent, humanity crushing authoritarianism in every scenario if you actually pursue it very far. Piketty requires authoritarian-heavy structures, you can't redistribute and equalize enough in any other manner. We've already figured out the furthest you can go before you tip over: various European nations have experimented out in the open with very hefty welfare state concepts for generations now. They've taken it as far as it can go, before tipping into authoritarianism. Several have had to roll back their burdensome welfare states at times, including eg Sweden, as they rolled into stagnation. It's a challenging balancing act that requires careful management to continue operating well. Piketty has proposed nothing new, these are very old ideas and they've all been trialed in the real world repeatedly, all have failed repeatedly. Piketty is a rehash for modern times, Marx lite. The only response you will ever get when you point out that it has all been tried already, is: well, they didn't crush enough skulls (insert alternative fantasy story here: they didn't invent a technocratic utopia smart AI solution that was good enough to achieve harmony), or it would have worked.
- mrpopo 7y ago
  > They've taken it as far as it can go, before tipping into authoritarianism. Can you expand on that? What countries are you talking about? > as they rolled into stagnation. In today's context of over-abundance: why is "stagnation" a bad thing?
  - AnimalMuppet 7y ago
    > What countries are you talking about? adventured listed at least one - Sweden. > In today's context of over-abundance: why is "stagnation" a bad thing? In today's world where too many people still live in extreme poverty, stagnation is condemning millions of people to misery and/or death.
    - mrpopo 7y ago
      > adventured listed at least one - Sweden. Yes, I would like to know exactly when Sweden accidentally turned to authoritarianism. > In today's world where too many people still live in extreme poverty, stagnation is condemning millions of people to misery and/or death. Extreme poverty is not a problem of stagnation of the economy, it's a problem of extreme inequality. Growth is but a workaround to this.
- chillwaves 7y ago
  Socialism is simply the workers own the means of production. A hybrid model exists in Germany which mandates that workers are representative by half of the board of directors. Democracy is compatible with socialism, so are free markets. Owning money to control businesses is not. The people who do the work are in charge.
  - kortilla 7y ago
    > hybrid model exists in Germany which mandates that workers are representative by half of the board of directors. That doesn’t make sense, the board doesn’t own the company.
  - 7y ago
mrpopo 7y ago
> What kind of system is he proposing in which capital doesn’t create leverage? Creates less leverage (per unit). Make it less efficient for a single investor to invest a lot and reap all the profits, giving more room for multiple people to invest instead.
billjings 7y ago
The world and social structure we grew up in was a world where that wasn't true. This idea that you can start a business and pull yourself up by your own bootstraps - that's made possible by the fact that the return on labor is greater than the return on capital. YC is kinda built on that idea: work hard, get rich. The other kind of society is one in which the best way to establish a secure place for yourself is to take secure control of some piece of income generating property. Piketty uses Jane Austen's novels to show what these societies look like: marriage and other political arrangements become far more important than how hard working you are. Hard work and toil is generally associated with the poor. So Piketty's argument is that, while we may believe we are in a pull-yourself-up-by-your-bootstraps society of hard work, the numbers show that we are in fact in a work-your-political-connections-to-establish-control-over-productive-capital society. So it should be no surprise that HN is a great place to find counterarguments for Piketty's theories. :) But that's his theory, and I believe it's worth keeping an open mind as to whether it's true. If it were, we would see that it's easier to get richer by already being rich or making friends with the rich than it is to get rich by working to build something yourself.
- kortilla 7y ago
  Isn’t that trivial to refute then by showing the huge portion of millionaires/billionaires that aren’t generational?
  - billjings 7y ago
    Maybe? If r only exceeded g in the past 20 years or so, though, we would expect that most of the wealthy would have acquired their wealth at a time that g > r. Point being that wealth is a lagging indicator. If I'm 25, I'm making my way in a different world than the one my grandfather grew up in.
- AStellersSeaCow 7y ago
  I think he's cherry piketting data.
xapata 7y ago
I don't think the proposal is to cease return on capital, but to reduce it to a level which maximizes some other aspects of the system, perhaps even overall growth.
crazygringo 7y ago
From what I understand, not the "return" on labor but just economic growth via productivity increase of labor. [1] And a world in which the return on capital is equal to, or less than, economic growth is simply one where capital gains are taxed more -- enough so that they're less than economic growth. It's literally that simple. I'm curious what you're having trouble envisioning about such higher tax rates? It doesn't seem to have anything to do with utopia or even socialism. [1] https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce...

by frisco 7y ago

adventured 7y ago

Every path along that road goes back to the same thing, including Piketty's: extreme control by a very small group of people over everyone else. Piketty is merely suggesting control by a different group. The non-wealthy often respond very positively to that, thinking their sandwich will be bigger and they'll have some enhanced influence - which never actually happens in practice. The types of people that pursue power in very concentrated systems of any sort, almost never like to share their accumulated power. You have to either nationalize wealth and production formally (Socialism), so that bureaucrats or authoritarian citizen boards/panels (or the military as often happens) govern the use & distribution of all wealth and production; or you have to aggressively regulate all possible uses of private wealth, which also requires similar authoritarian control groups for oversight & dictate, that will de facto rule as fascist entities (a veneer of private ownership scenario). This is Socialism vs Fascism, in which one formally nationalizes and doesn't usually bother to pretend about who owns & controls what; and the other de facto nationalizes but leaves you with fake property ownership & control (which they can and will revoke at any time). If you want to pursue any Piketty style premise, all roads go to the same place. There will be no exceptions, there has never been an exception. You can vary the details, it doesn't matter, you get inherently violent, humanity crushing authoritarianism in every scenario if you actually pursue it very far. Piketty requires authoritarian-heavy structures, you can't redistribute and equalize enough in any other manner. We've already figured out the furthest you can go before you tip over: various European nations have experimented out in the open with very hefty welfare state concepts for generations now. They've taken it as far as it can go, before tipping into authoritarianism. Several have had to roll back their burdensome welfare states at times, including eg Sweden, as they rolled into stagnation. It's a challenging balancing act that requires careful management to continue operating well. Piketty has proposed nothing new, these are very old ideas and they've all been trialed in the real world repeatedly, all have failed repeatedly. Piketty is a rehash for modern times, Marx lite. The only response you will ever get when you point out that it has all been tried already, is: well, they didn't crush enough skulls (insert alternative fantasy story here: they didn't invent a technocratic utopia smart AI solution that was good enough to achieve harmony), or it would have worked.

mrpopo 7y ago
> They've taken it as far as it can go, before tipping into authoritarianism. Can you expand on that? What countries are you talking about? > as they rolled into stagnation. In today's context of over-abundance: why is "stagnation" a bad thing?
- AnimalMuppet 7y ago
  > What countries are you talking about? adventured listed at least one - Sweden. > In today's context of over-abundance: why is "stagnation" a bad thing? In today's world where too many people still live in extreme poverty, stagnation is condemning millions of people to misery and/or death.
  - mrpopo 7y ago
    > adventured listed at least one - Sweden. Yes, I would like to know exactly when Sweden accidentally turned to authoritarianism. > In today's world where too many people still live in extreme poverty, stagnation is condemning millions of people to misery and/or death. Extreme poverty is not a problem of stagnation of the economy, it's a problem of extreme inequality. Growth is but a workaround to this.
chillwaves 7y ago
Socialism is simply the workers own the means of production. A hybrid model exists in Germany which mandates that workers are representative by half of the board of directors. Democracy is compatible with socialism, so are free markets. Owning money to control businesses is not. The people who do the work are in charge.
- kortilla 7y ago
  > hybrid model exists in Germany which mandates that workers are representative by half of the board of directors. That doesn’t make sense, the board doesn’t own the company.
- 7y ago

mrpopo 7y ago

> What kind of system is he proposing in which capital doesn’t create leverage? Creates less leverage (per unit). Make it less efficient for a single investor to invest a lot and reap all the profits, giving more room for multiple people to invest instead.

billjings 7y ago

The world and social structure we grew up in was a world where that wasn't true. This idea that you can start a business and pull yourself up by your own bootstraps - that's made possible by the fact that the return on labor is greater than the return on capital. YC is kinda built on that idea: work hard, get rich. The other kind of society is one in which the best way to establish a secure place for yourself is to take secure control of some piece of income generating property. Piketty uses Jane Austen's novels to show what these societies look like: marriage and other political arrangements become far more important than how hard working you are. Hard work and toil is generally associated with the poor. So Piketty's argument is that, while we may believe we are in a pull-yourself-up-by-your-bootstraps society of hard work, the numbers show that we are in fact in a work-your-political-connections-to-establish-control-over-productive-capital society. So it should be no surprise that HN is a great place to find counterarguments for Piketty's theories. :) But that's his theory, and I believe it's worth keeping an open mind as to whether it's true. If it were, we would see that it's easier to get richer by already being rich or making friends with the rich than it is to get rich by working to build something yourself.

kortilla 7y ago
Isn’t that trivial to refute then by showing the huge portion of millionaires/billionaires that aren’t generational?
- billjings 7y ago
  Maybe? If r only exceeded g in the past 20 years or so, though, we would expect that most of the wealthy would have acquired their wealth at a time that g > r. Point being that wealth is a lagging indicator. If I'm 25, I'm making my way in a different world than the one my grandfather grew up in.
AStellersSeaCow 7y ago
I think he's cherry piketting data.

xapata 7y ago

I don't think the proposal is to cease return on capital, but to reduce it to a level which maximizes some other aspects of the system, perhaps even overall growth.

crazygringo 7y ago

From what I understand, not the "return" on labor but just economic growth via productivity increase of labor. [1] And a world in which the return on capital is equal to, or less than, economic growth is simply one where capital gains are taxed more -- enough so that they're less than economic growth. It's literally that simple. I'm curious what you're having trouble envisioning about such higher tax rates? It doesn't seem to have anything to do with utopia or even socialism. [1] https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce...