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Whatever It Is, It Isn’t Economics

Here’s a letter to a long-time reader of Café Hayek:

Mr. Flores:

I did indeed read Saez’s and Zucman’s recent New York Times op-ed, but I wrote no letter or post in response. For a thorough demolition of it I recommend this essay by Phil Magness.

But I’ll here add that when I try to understand how anyone could endorse proposals such as confiscatory taxation and the other interventions peddled by Saez and Zucman, I find the task to be nearly impossible. Their proposals reveal a belief that material wealth is created and maintained independently of human effort – that wealth is a gargantuan blob of homogenous stuff that simply happens and grows of its own accord. (The proposition that wealth grows automatically is a central tenet of Saez’s and Zucman’s more-famous sidekick Thomas Piketty’s 2014 tome, Capital in the Twenty-First Century.)

For these writers, because wealth happens independently of human choices and action – because wealth is a mysteriously granted gift of nature – wealth happens independently of economic and social institutions. In the Piketty-Saez-Zucman view, nature’s only real failure is that, although she generously creates wealth and rains it down upon humanity, in her distribution of this rainfall she’s careless. Nature rains too much of the wealth she creates down on – or allows too much of this wealth, as it falls, to be captured by – some lucky people. Too little wealth, thus, is left for the rest of humanity.

If the Piketty-Saez-Zucman understanding of reality were correct, confiscating wealth from the lucky and giving it to the unlucky has no consequence other than a more equal ‘distribution’ of wealth. Because the initial ‘distribution’ of wealth is a result only of nature’s randomness, government orchestrated ‘redistribution’ of wealth neither works any injustice nor affects the amount of wealth available to humanity.

Adam Smith launched economics in 1776 by inquiring into the nature and causes of humankind’s wealth. If Piketty-Saez-Zucman are correct, however, Smith was misguided in looking for the causes of wealth among human attitudes, actions, and institutions. The old Scot could have saved himself the time and trouble of writing a 1,000 page book simply by jotting down on a note pad “Wealth has no human causes. It’s a gift of nature. End of story.”

And so if Piketty-Saez-Zucman are correct, the entire discipline of economics is and has forever been a ludicrous waste of time and energy. The fact that these three writers boast PhDs in economics and serve on prestigious faculties of economics is, therefore, an irony as stunning as ironies get.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030