Here’s a letter to a Cafe patron whose brother just read Thomas Piketty’s Capital in the Twenty-First Century:
Mr. Tyler Stewart
Dear Mr. Stewart:
Thanks for your e-mail.
I commend your brother Wallace for having carefully read Thomas Piketty’s Capital in the Twenty-First Century.
You say that Piketty convinced Wallace “fully” that a fundamental feature of capitalism is that returns to owners of capital “are destined to grow quicker than worker pay.” I’m afraid that I cannot in a letter cover the many problems that I have with Piketty’s analysis. Let me instead recommend to you – and to Wallace – two of my favorite reviews of Piketty: that of Deirdre McCloskey, and that of my colleague Garett Jones.
If Deirdre’s and Garett’s reviews do not dent Wallace’s confidence in Piketty’s thesis, I suggest that you then advise Wallace to put his convictions into action by becoming a capitalist. I know that he’s still in college, but if Wallace really believes that the value of capital is destined to grow so handsomely and assuredly, he should invest every spare cent that he can come by in shares of stock. It’s easy to do.
Indeed, if the main reason Wallace is in college is to enhance the income that he’ll earn over his lifetime, he should immediately quit college in order to invest in stocks, business start-ups, and other tradeable assets all the money that he’ll save by having no tuition bills to pay. If Wallace’s belief about capitalism is correct, he’ll see the folly of spending so much time and treasure on enhancing his skills as a worker (since workers are doomed to be dominated by capitalists). Wallace should instead become one of those capitalist by immediately commencing work full-time on starting businesses as well as on investing in stocks and other financial assets.
I quickly add that I beg you not to actually implore Wallace to quit college. Such a move would be foolish. But your brother should understand that a principal reason why such a move would be foolish is precisely that Piketty’s thesis is flawed: no investments that Wallace (or anyone else) makes today in businesses and financial assets are “destined” even to grow at all in value, and they are certainly not “destined” to grow faster than is the value of Wallace’s labor. The very fact that Wallace is now in college likely testifies to his wise failure really to take Piketty seriously.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
