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Quotation of the Day…

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… is from page 80 of Steven Pinker’s wonderful 2018 book, Enlightenment Now [2] (footnotes deleted; original emphasis):

The need to explain the creation of wealth is obscured yet again by political debates within modern societies about how wealth ought to be distributed, which presupposes that wealth worth distributing exists in the first place. Economists speak of a “lump fallacy” or “physical fallacy” in which a finite amount of wealth has existed since the beginning of time, like a lode of gold, and people have been fighting over how to divide it up ever since. Among the brainchildren of the Enlightenment is the realization that wealth is created.

DBx: So true.

Thomas Piketty, with his 2014 Capital in the Twenty-First Century, is believed by many to have offered a powerful case for governments to use their power to massively redistribute wealth. Yet Piketty treats wealth creation as automatic – as ‘given’ from the perspective of human beings. At each moment in time, as Piketty sees matters, global wealth is fixed. Except in periods of extremes, such as great wars and great depressions, wealth grows over time. But wealth, in Piketty’s telling, grows by some mysterious process that has little or nothing to do with human institutions or choices.

The real world, of course, is not at all like Pikettyworld. Unlike in Pikettyworld, in the real world wealth must be created and recreated anew, continually. Wealth neither ‘just exists’ nor grows automatically according to some formula. Wealth creation requires effort, saving, risk-taking, and creativity all directed by prices and profits and losses as these arise and adjust on markets in which people as consumers are free to spend their incomes as they choose and people as producers, while not entitled to consumer patronage, are free to compete in whatever peaceful ways they like both to keep and to increase consumer demands for their goods and services. And all of the preceding requires – of course – secure private property rights and contract rights enforced by the rule of law, but it requires also a widespread acceptance, even admiration, of – one might say an enlightened attitude toward – the bourgeois activities that drive this market process [3].

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