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Uber vs. Piketty

Thomas Piketty famously argues that owners of capital grab ever-larger shares of wealth, and that the single best ‘solution’ to this alleged problem is a global tax on wealth and high rates of income taxation. Problems galore fill Piketty’s book – including his failure to recognize that market-driven innovation and competition are incessantly creating new capital while reducing or even destroying the value of older capital, all in ways that move new flesh-and-blood people into the central ranks of the ‘capitalists’ while moving others onto the periphery of those ranks.  (Twelve years ago Mark Zuckerberg, the son of a dentist, was no one’s idea of a capitalist.  He’s now worth close to $40 billion.)

While working together earlier this week on a business trip to California, my Mercatus Center colleague Ashley Schiller and I were chatting about Uber and the assaults that governments are now launching on this amazing innovation.  Ashley had a brilliant insight, which I share here with her kind permission: Uber (and other ‘sharing economy’ innovations, such as Airbnb) allow ordinary people to turn their consumption goods into capital goods.

Uber enables someone who would otherwise drive his or her car only for personal use to drive his or her car for paying customers – that is, to drive his or her car in an income-earning (and, hence, wealth-enhancing) manner.  Uber enables a consumption good to easily become a capital good for however long the car owner chooses to operate as an Uber driver.  For whatever number of hours car owners use their personal cars as Uber (or Lyft) cars, part of value of those cars becomes part of the value of an economy’s capital stock even if formal statistics do not yet register it as such.

Uber and other sharing-economy innovations create more productive capital and create more capitalists.  Government interventions against Uber and other sharing-economy innovations are, therefore, government interventions aimed not only at protecting the value of existing capital (and established capitalists) from the forces of creative destruction, and such interventions are not only obstacles to market forces that improve consumers’ access to goods and services; in addition, such interventions are assaults against market forces that increase the amount of wealth-producing capital that ordinary people are able to own, control, and profit from.

It’s more than a little ironic that France gives the world not only an economist who insists that massive taxation is required to prevent existing owners of capital from growing ever more rich and powerful at the expense of those of us who today are not relatively significant owners of capital, but gives the world also the single most obnoxious example of government intervention that blocks market forces from doing what the French economist says cannot be done by the market and must be done by the state.

UPDATE: Over at BleedingHeartLibertarians, Steve Horwitz furthers this discussion.