Review: Capital in the Twenty-First Century: The “Savior of Socialism” Proves the Worth of Capitalism 9

Capital In The Twenty-First Century by Thomas Piketty, translated from the French by Arthur Goldhammer, Belknap Press/Harvard University Press, 2014, 696 pages  

“The distribution of wealth is one of today’s most widely discussed and controversial issues.”

Thomas Piketty

Thomas Piketty, a 42 year old Frenchman and resident of Paris, has produced, his endeavor of 18 years, a 696-page hardcover book titled Capital In The Twenty-First Century. It is supposed to be an economics book. It is not. It is an assemblage of bad historical analysis, a compilation of worthless data, graphs, charts and equations and an incomprehensible, incomplete, contradictory and unworkable pseudo-scientific, fortunetelling-pretentious and socialistic narrative devoid of economics qua economics. Flatly, the book IS intellectually-purblind flapdoodle! So, it will appeal to populist economists stooging for their career politician patrons. 

“Intellectual and political debate about the distribution of wealth has long

been based on an abundance of prejudice and a paucity of fact.”

Thomas Piketty

Piketty’s purpose is to be the savior of socialism. Did I mention … Piketty is French. Culturally-embedded in socialism and steeped in Marxism, irrespective of the history of notoriously failed and failing socialist economies, across time and the world, Piketty unabashedly and unobjectively sets out to resurrect the Marxist dogma: Capitalism bad; redistribution of wealth – “From each according to his ability, to each according to his need“ – good. Indeed, Piketty asserts that the heretofore failures of socialism and government interventionism, which would include the deaths of millions and the loss of trillions of dollars in wealth, is merely the result of insufficient data; which he, serving the common good, has now provided. Na zda-ró-vye tovarish!

“I am interested in contributing, however modestly, to the debate about the best way to

organize society and the most appropriate institutions and policies to achieve a JUST social order.”

Thomas Piketty

There are poor people around the world, and income inequality, and Piketty emotionally believes that governments SHOULD do something about it. Toward this end, Piketty gathered a couple of centuries worth of historic economic data, from 20 countries, in order to analyze and understand income inequality (not what causes it). He then manipulated, massaged and manicured the data, ran it through the “I am interested in contributing” filter, and created new definitions, theorems, a bank of formulae, indices, and other econometric gimmickry with which world-impacting “appropriate institutions” can then socially-engineer and impose mathematically-modeled economic policy on societies, in order to force a JUST social order into existence.

Putting the Distributional Question Back at the Heart of Economic Analysis

Piketty never questions the appropriateness, feasibility or consequences of government intervening in an economy. In fact, for him government economic central planning is an unquestioned MUST, whereas he lives by the 1789 code (it’s France … there are several versions) of the French Declaration of the Rights of Man and the Citizen, article 1, which essentially gives “society”, ie the government, the right to determine a citizen’s value: “Social distinctions can be based only on common utility.” Property rights and individualism are not part of a Piketty JUST social order! Piketty believes that wealth distribution should be at the heart of economic analysis. Make no mistake, distribution means taxation: worldwide wealth taxes, higher marginal income tax rates, 100% inheritance tax, etcetera. Piketty immorally and unethically endorses using government as a gun to steal from producers to give to takers. His only economic analysis is to ask how much ammo, what caliber, and whom to hit first. But, and again, the mainstream economists charged with fabricating cover for political plundering are clamoring all over Piketty’s savior-of-central-planning drivel.

Piketty’s Two Questions … But Why? 

“Do the dynamics of private capital accumulation inevitably lead to the concentration of  wealth in ever fewer hands, as Karl Marx believed in the nineteenth century? Or do the balancing forces of growth, competition, and technological progress lead in later stages of development to reduced inequality and greater harmony among the classes, as Simon Kuznets thought in the twentieth century?

These are the questions I attempt to answer in this book.”

Piketty reveals, with his first question, a very deluded mindset and a total lack of economic qua economic thought (I will come back to this notion). Anyone … ANYONE … who would relate, quote, respect or in any manner or fashion consider anything Karl Marx would believe or say is beyond the bounds of credulity. In the body of his monolith Piketty doesn’t challenge Marx’s assertions about Free Market Capitalism. Rather, he accepts them as true, then claims that it is government application of econometric-based political economic designs, popularized and expanded by Simon Kuznets, that have mitigated, though not sustainably as yet, the capitalistic negatives predicted by Marx. Interestingly, Piketty never gathers data to evaluate the impact of government-econometric-designed economic interference on income inequality … hmmm? It’s called a blind spot. He has many.

The questions are very prominent in his presentation and yet this second question is also revealing of delusion and failed economic knowledge. The first question is to inject the idea of communism on-the-extreme-left. The references to Kuznets’s thoughts of “balancing forces of growth, competition, and technological progress” are implicitly and inferentially meant to convey Free Market Capitalism on-the-extreme-right; thereby feigning a fair and balanced presentation.

However, Kuznets is not a capitalist … he is a fascist. And he too is on the left. Piketty doesn’t seem to know the the near total similarity between communism and fascism (see the recommended reading list following the review). Basically, these political economic ideologies differ only by scope, world vs state, and methodology of economic control: communism – total ownership of the means of production; fascism – private ownership of productive means which are then controlled by statute, fees, taxation, regulation, etcetera. Kuznets’s ideas of hardcore government control of the economy by mathematical-modeling practices are far from capitalistic. Communism and fascism are two sides of the same coin: Socialism.

Though he is an adherent of Kuznets’s methodologies, Piketty does acknowledge his failed real-time results: index-driven fortuneteller-predictions that never come true … ”growth, competition and technological forces” not responding per formulae. Piketty, erroneously, attributes this failure-to-perform to an insufficiency of data. That the entire premise of measuring & manipulating static point-in-time economic history in order to effect future economic results is altogether bogus, is never addressed. Blind spot. It is, unfortunately, the methodology in practice by today’s mainstream economist central-planners. Incidentally, how many of them can you name that saw the 2007 – 2008 Great Recession, or any event, coming? Kuznets, by the way, is the godfather of the GDP, CPI and all manner of useless and easily-politicized, never-been-right and “whatever-you-want-it-to-mean” economic indices and other useless empirical junk!

Now, consider, Piketty believes mathematical-modeling of historic economic data is necessary and appropriate for government; it ought to, it SHOULD, control the economy. He thinks econometrics, as significantly instigated by Kuznets, failed only because of data insufficiency. He believes that more complex models can be constructed wherewith governments could   manage (and predict, foresee, soothsay) the “growth, competitive and technological forces”; and with them constrain the Marx-envisioned inherent failures of Free Market Capitalism toward sustaining income equality … phew! Piketty’s 696-page data dump book IS econometric’s missing data … the putative salvation of prescriptive socialism.

So, why has Piketty posed these two questions? Because he had already decided the answers before he undertook the study 18 years ago. He merely constructed these supposedly fair and balanced questions as a pretense to scholarship. He’s a Hoax, Scammist, Flim Flam Econologue. He fits right in with mainstream economists who will use this pretend data as new cover to hide behind. Proven failed and empty, the Keynesian misdirections and excuses have run out of credibility. Piketty might be a saviour, not of socialism … that can’t be saved … but, it is seriously hoped, of the asses of mainstream economists. But sorry, no salvation is contained in Piketty’s data. 

Piketty’s Failure: How Wonderfully Ironic! 

If you don’t know what Free Market Capitalism is, you can be convinced it is the principle economic system at work in the world when it isn’t. And it isn’t.

If you don’t know what Free Market Capitalism is, you can be made to believe it is the source of all manner of economic adversity and social ills when it isn’t. And it isn’t.

Piketty would have you believe both of these false ideas. What follows is an example of Piketty’s ignorance of Free Market Capitalism and his readiness to blame income inequality on it. Typical of myopic socialists.

On page 31, of 696, of his study, Piketty presents his chart 1.1 which supposedly reflects the path of income inequality from 1910 to 2010. It charts the percent of national income held by the top 10% in the USA. Piketty’s entire study is about the analysis of this chart and it’s implications. He goes to great lengths to prove that his study is thorough beyond any question. It should be noted, however, that he never examines the period-to-period character of the 10%. What portion of the top decile earned their wealth as against being privileged by government? Is there mobility between the deciles? Aren’t these holes in his comprehensiveness”?

He sees a major “divergence” of incomes beginning around 1970, exceeding prior periods of inequality, and continuing until today: the rich getting richer at the expense of the poor. He attributes the disparity to Free Market Capitalism. Please consider, If Free Market Capitalism IS NOT the proximate cause of this divergence, his entire presentation is empty and false; merely falderal. It’s falderal! 

Below is a chart which incorporates his data line of inequality, from chart 1.1, for the period 1955 to 2010 as compared to the FED funds rate for the same period. By the bye, I’m just a retired cabby and I figured this out in 18 minutes … wait ’til you read what the professional socialist Piketty came up with in 18 years. (Click on the chart to enlarge it.)

Not A Result Of Capitalism 2

One of the most important economic events in history was Nixon’s (“We are all Keynesians now”) severing of the US dollar, the world’s reserve currency, from the gold standard. Fiat money and perpetual inflation was made the norm. And every economist ought know that this is an automatic transfer of wealth from the less fortunate to the largest financial institutions and those close to government. There is no other political or institutional factor in our time which has had a greater impact on the world’s economy. Yet Piketty absolutely ignores this event; let alone notices it’s effect on income inequality, as he conjures up one lunacy after another:

“The increase in inequality since 1970 has not been the same everywhere,

which again suggests that institutional and political factors played a key role.”

 

“We subsequently see a rapid rise in inequality in the 1980s, until by 2000 we

have returned to a level on the order of 45–50 percent of national income. The

magnitude of the change is impressive. It is natural to ask how far such a trend

might continue.”

 

“I will show that this spectacular increase in inequality largely reflects an

unprecedented explosion of very elevated incomes from labor, a veritable

separation of the top managers of large firms from the rest of the population.

One possible explanation of this is that the skills and productivity of these top

managers rose suddenly in relation to those of other workers. Another explanation,

which to me seems more plausible and turns out to be much more consistent with

the evidence, is that these top managers by and large have the power to set their

own remuneration, in some cases without limit and in many cases without any clear

relation to their individual productivity …”

 

“In particular, the very high level of private wealth that has been attained since the

1980s and 1990s in the wealthy countries … directly reflects the Marxian logic.”

 

“The process by which wealth is accumulated and distributed contains powerful

forces pushing toward divergence, or at any rate toward an extremely high level

of inequality.”

These are but a few extractions of Piketty’s analysis about the period 1970 to 2010 … and they are all wrong.

Almost immediately one can see, per Piketty’s own inequality chart data as compared to unconstrained FED funds rate manipulation data, inequality rises near symmetrically with the intentional reduction in the FED rate. It isn’t just “suggested”; the FED IS the cause. Piketty, however, cannot acknowledge this because it would rip the bottom out of his entire “pitch”: Free Market Capitalism is not the cause of inequality … government intervention in the economy IS! Specifically, it is manipulation of the price structure (the interest rate is the primary price), through monetary policy, that unnaturally shifts wealth to those connected to financial institutions and those closest to government. Here is the irony: Piketty proves the validity of Free Market Capitalism while attempting to resurrect socialism! Thank you, Monsieur! 

It can be shown that, for all periods, it IS government intervention that creates the inequality the interveners claim they want to end. Some words of Upton Sinclair come to mind: “It’s hard to get a man to understand something if his job requires he doesn’t understand it.” Piketty and the mainstream economist central planners would be out of work if they actually faced the truth. Incidently, 57% of all mainstream economists work directly for government; another 30%+ are indirectly dependent. Of course there’s a lot of “Yes, senator, I support your program”. 

Piketty’s Marxian monster is one nonsensical – and previously discarded – economic notion after another. He doesn’t grasp that there is no distribution of income, favorably or negatively, in a Free Market Capitalistic system. All wealth is allocated by consumers … they are kings and queens of an economy and of a truly JUST society. They determine what producer satisfies needs and wants most successfully. It’s consumer meritocracy! Nobody from General Foods ever shows up at the door with a threat of imprisonment if you don’t buy. Further, Piketty holds to the long-ago-tossed idea that capital is homogeneous. Capital is heterogeneous, and it is the putting together, by an entrepreneur, of the right combination of capital to serve consumers’ demands, in an uncertain environment, that determines profit or loss. Remember, an entrepreneur pays wages well in advance of sales revenue. There is absolutely no such thing as a guaranteed or certain rate of return on capital such as Piketty chronically and erroneously incorporates in his formulations. Phooey on you, Piketty! 

There are “Save My Restaurant” shows on TV these days (Kitchen Nightmares with chef Gordon Ramsey and Restaurant Impossible with chef Robert Irvine are two). The show’s chef hosts enter a failing restaurant, uncover the reasons for the failure, then make the corrections to set the business up for success. These reataurants always have multiple problems but always the primary one is that the food absolutely sucks … horrid fare … and the owner(s) and/or chef refuse to believe it. Nobody is eating in the esatblishment and they insist, “My customers love my food”. What customers? Piketty, and the mainstream economists (socialists) are like these restaurant owners.

Picketty recognizes socialism and its mechanisms aren’t working. Does he try to see a new and different way? Not on his life. He’s too intent on screwing with your life. Unlike in the restaurant shows, where there is a host with cash to induce the owner/chef to face reality, there is no easy way to change the perspective of the left – to convert its emotional irrationality into objective thought. Tough trick! For the indoctrinated believers in socialism there is only the drive to do more of the same “and maybe this time it’ll work”. Einstein had some thoughts on that: he called it insanity. It won’t ever work.

Freedom is always freedom from government.

Previously, I mentioned Piketty’s failure relative to economics qua economics. By this I mean, economics is the study of the processes, methods and interactions between humans as they go about satisfying their needs and wants. It is the study of human action. It is descriptive not predictive or action-driven. Piketty isn’t interested in studying economics. He is intent on studying how to control and manipulate humans as mere numbers through economic means. And he fails to see that this control and manipulation is the cause of why he seeks to control and manipulate in the first place. Piketty is too ignorant to see that he doesn’t see. Perhaps he’ll see the reading list below. (Something burns eternal?) 

Now, in addition to the graphic and deductive evidence of Piketty’s failure to rehabilitate socialism, the primary reason he is doomed to fail; the primary reason socialism can never succeed; the irrefutable and unavoidable common sense reason why government management of the economy is an absurd impossibility is … 

Friedrich Hayek gave it the name, “The Pretense of Knowledge Fallacy”: There is no person, career-politician, Chairman & Board, commission, panel, bureau, special committee or anyone or anything else that can ever possess the knowledge necessary to manage the entirety or any part of an economy. Further, any attempt to do so must be implemented through the politically-influenced and policy-driven bureaucratic system – thereby insuring failure … PERIOD!

Mr Piketty’s book, except for unintentionally proving that government causes income inequality, is worthless, and his endeavor is doomed. Piketty fails to comprehend that inequality arises when government economic intervention distorts free exchange into an unnatural 3-party, buyer-seller-government, lose-lose-win by coercion, framework. He just doesn’t understand that there can never be a sufficiency of data, nor a mathematical model, by which you can emulate the free and willing, person-to-person, win-win interaction of hundreds of millions of people making trillions upon trillions of decisions about what they think is best for themselves as they allocate dollars/wealth through natural exchange. Governments cannot legislate or impose a false reality.

“Socialism fails because it’s based on the emotion of SHOULD.

Free Market Capitalism succeeds because it’s based on the reality of IS.”

Ludwig von Mises

 

 

by Don L    cabby #268

Posted under by Jillian Becker on Tuesday, May 20, 2014

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  • Burro

    Well, I’ll be damned! Don El #268. You have done yourself proud!

    I am amazed you managed to plough through the monster created by the Pikster as I reckoned only dead economists could stand it. As a matter of fact, I too am lurching through it with a beady eye to a review, but I have been waylaid by the number of reviews on which I am keeping a tab. It seems all government busy-bodies, leftist politicians, African potentates with power to steal, and “good” persons naturally on the left all adore the piece. One of them is the dreaded Krugperson whose review was the personification of grovelling worship in my opinion. On the other hand, anyone who has a job or a gas bill to pay has severe doubts about it.

    So let us start at least making an initial note on the playing field so we know what we are dealing with. How many of us can spend 18 yrs on a project such as this? Only the privileged few I’d say. So then, let us look at the author to see if he is such a lucky Beast.

    He is indeed! Born in France, always a bad start to an Englishman, in Clichy (or was it cliche?) in 1971. He went to the Ecole Normale Superior (ENS) to study maths and economics. For those readers with little knowledge of this institution it is is one of the several “Enarque” schools, others being ENPC, EHESS, INRA, SP & CNRS which cater to the elite of France and inculcate them with the “correct” (notice I did not say right) attitudes and political biases.

    He then proceeded to the EHESS for his PHD, which was done partly under the London School of Economics’ watch. He then went to MIT in the US, not widely known for training bus drivers. In 1995 he returned to France and the CNRS, then in 2000 to the EHESS and in 2006 he headed the “Paris School of Economics” which selects persons from the Enarque schools for study etc. In a nutshell, this chappie is an outright Enarque, a privileged man, who has attended the cream of the establishment’s training schools in France which, to state the obvious means he is an outright Socialist with no hope of ever seeing any other world-view. If you doubt this, he was an early member of the “scientific orientation committee” of A Gauche en Europe, which means To the Left in Europe a group of high-ranking influencers who appear to sit about and talk. This group was established by Michel Rocard (a Socialist) and Dominique Strauss-Kahn (DSK), a now-disgraced Socialist politician seeking a new career as a writer. DSK’s first piece will be entitled, “How to Find Your Trousers in the Dark”, to be soon followed by “Hanky-Panky for Dummies”, destined to both be “hot” sellers I’d say.

    In short we have a privileged academic, moving in Socialist/Communist/Political circles, with a huge bias to the left, so I guess he does not spend much time in the boozer with “the lads”.

    To be fair to him, I thought I would go behind the image to find the real man. I thought I would begin by calling the Chairman of the Paris School of Economics for insight, one Francois Bourguignon – can you believe these French names?

    Alas Mr. B was not available, so I asked to speak to Mr Piketty. Now my French is not what it used to be, so I thought I could tempt said person to talk by the promise of a fabulous meal of giant pork chops at a local restaurant I know well should he pass by Northern California. Sadly, when the man came to the telephone he began in French and I responded likewise and in seconds he hung up. I fear I may have erred and called my communicator a fat pig. Such is life, an opportunity lost. Next call I will pose as a Muslim Cleric and that should do the trick!

    So there we have it. The Pickster is a TOTAL Socialist, and why not bash the rich? Well #268, I have a terrible confession for you. Many, many years ago I too advocated the same end-policy the Pick-your-brain came up with. There I was, sitting in the College Lodge, King’s College, Cambridge, 1972 I believe. The King’s Economists were in session, and in my hand was a large glass of sherry. The fire blazed, and I was to present a paper which a tutor said I should expose to the gathered mighty and famous. And famous they were – OK – I know you think I love to drop names but what the HELL!

    My paper was titled, “Retribution and Redistribution, a Policy for the Future.” In it I presented the glories to come by a simple device – setting up a wealth tax at a rate that exceeded the return on assets. This would liquidate the rich in a generation if the rate proposed, 8% was held in place on all assets – and then we could achieve Utopia – as I had calculated the long-run return at twixt 2 & 4%. Oh, what joy!

    An elegant lady sat in the pre-eminent location called Joan, turned to the man on her left and asked, “why did we not think of this before Mr Kaldor?” The man replied he had no explanation. He looked across the coffee table and said, “Richard, what do you think?” Baron Kahn responded, we can’t think of everything can we now?” ” I think it a good idea, ” said Mario Nuti, one of my tutors, and Luigi Pasinetti agreed, saying he could look at it “as a real idea”. The Matriarch turned to me and asked, “and will you be pursuing Economics at King’s in the future in addition to borrowing the Financial Times every day (which she was evidently upset by) from the College reading room?” “No,” I replied, “Mrs Robinson I want to start companies and speculate in stocks.” A certain silence hung in the air for a good few seconds.

    The drinks were finished, the fire died down, the august group dissipated and I was never again offered the privilege of presenting to such a forum.

    Yes, a Utopia missed. We can all dance around maypoles so happy with our nanny state. Just before we head to the guillotine…………..or worse…………dependence.

    I’ll be in touch #268.

    • Don L

      LOL…

      I enjoyed his comment of having experienced the American Dream whereas he had been to America for 3 years and felt good to have been recruited by college near Boston. He returned to Paris,,because the economists he dealt with were too simplistic…not sufficient data, from where, he admits, he rarely travels.

      I sorta brought a “does this challenge my knowledge of Austrian/Free Market Economics?” If it did I’d dig. If it din’t, recognized as already dead doodoo, I skmmed. If it got into equations and formula constructions…I dismissed as purely useless (especially the fixed ROI on capital). So, I got through.

      And, after, as far as I believed, he’d given his horse & pony show away in the intro. When I saw his Chart 1.1, looked at others, I immediately overlapped the DOW and S&P 500 charts over them and saw his idiocy. His diversion data chartline mirrored the transfer of wealth to stocks and commodities and inversely and symmetrically the FED rate reductions, inclusive of the FOMC and other directly-linked easing/liquidity operations. What was amazing is his not seeing the ’71 Nixon dollar/gold separation.

      Looking at his chart…the divergence begins right at that period…ya’d think a g’yd look at that, wudancha pawthna?

      His fixation on classes is the same failure of socialism everywhere..IT IS NOT THE SAME PEOPLE…infact, in the 2000 – 2014 period of really aggressive divergence, natioanal incomes dropped by 6% to 51-55K?. In the Washington DC metro it rose 12% to over 84K. Government employees Bank/finance community and cronies made out. You can’t look at income inequality and not look at who’s getting the bucks and how and why. His “plausible” explanation is that upper management gets to set their own salaries…OK, that too! LOL

      Later,

      Don

      • Burro

        Well, Don El #268, I just want to say all rumours of The Burro being seen in the company of Socialists are false and entirely fabricated, although I did have to go underground for a while to get the “dirt” on the Pickster. I actually went to the statistics at the BLS to sniff about the musty archives for insight and I got it in bus-loads. I will be back soon to you on my findings but I wanted to touch on another item prior to that. I have only reached Chapter 6421 in the P’s book and these things take time!

        The fabulous Jill forwarded an e-mail to me and it appeared to be from your good self. It was most flattering to one and all, but it got garbled in transmission, and I noted a description of a certain person, believed to be me, as an “effeminate English prostitute”. Now look here Old Chap, I have been called many things in my time but effeminate – never. I will have you know I gargle with gravel every morning to keep my voice deep, crack walnuts in with my elbows on a regular basis, and never open a door – I simply hit it with my head. So there!

        Now, English, well not much I can do there. It used to mean something once, but now, it means a Phd in welfare accretion. And prostitute? You naughty man! I will have to state I have never sold my body once. I certainly tried – as for example at a fundraiser where I auctioned myself along with the entire board of the Stanford bachelors, but we/I got no bids…………

        That, of course, was before my talents became recognized, and as a result of my prowess becoming discovered, I now have to live in secret and hide myself behind other names such as The Burro. Purely for your files several of my others are: The Stallion, El Gordo, The Mountain Goat, and El Maximo. Let’s see you match that you saucy blighter!

        Well, as a foretaste to more of the Pickster, right at the beginning of his house-brick he essentially states two things: that r>g, and r is constant or growing. In that he utterly misunderstands mathematics, in spite of having been trained as one.

        If r>g then over time the asset growing will eventually become all of GNP or whatever measure as it gets bigger and bigger absolutely and as a portion of the pie. This assumes none of the return, r gets spent, which is clearly wrong. History has also shown it does not happen, so r>g leading to concentration of incomes/wealth as he defines it has not only not happened, it will not happen.

        In addition, one MUST separate a gross return from the reinvestment return. In other words, if I invest in a business and get a yield of 10% cash on my original investment, should I invest more $$ to get more 10%’s? Well – yes – if that investment is possible and alternatives are not available which are better. But in free enterprise the answer is usually NO – why? – because at some point you will saturate your market and investing more money will not work well. To clarify this imagine you have a shoe repair business and have 100% of the local market. There is a limit to how many shoes you can repair. If you then invest in strippers at your front door to entertain clients while shoeing them you will indeed raise your costs, but not attain the 10% as you have reached. Your re-investment rate of return will be 0%.

        If you want more explanation John Mauldin has an article provided by Gav-Kal covering similar points. The correct response of the shoe-fixer should be be to either replicate his business in another unsaturated market, go overseas, or milk the “cash-cow” of his existing business to invest in an entirely new, high-yield business IF IT EXISTS. The response here is essentially the “portfolio management” approach of the Boston Consulting Group, but Bruce Henderson the founder would probably choose a different business description.

        One other action by the shoer would be to spend the dough – which in fact is what typically happens as the producer of the $$ usually leaves it to a lot of inheritors who then become “professionals” and piddle it away.

        Mathematically, if r>0 then Dr, the first derivative is not = r, but 0. If Dr = 0 then Picky-boy is up the creek. Concentration of wealth cannot occur. The static interpretation of an economy is flat out wrong. Personally, I’d watch the stripper action, and I’ll bet it is big stuff. A clever shoer would then invest his cash in a stripper business and probably have a lot to show for it! Not to mention give the shoe business the boot. I must stop this afore I put my foot in it. Sorry for the outburst.

        Now, the real problem with the P his utterly ignoring of what is income. I will show you soon staggering statistics which even I, The Burro, a God among Jack-Asses was stunned by. Watch this space Don El #268, or face dire consequences.

        • Don L

          LOL…Lets begin with (it was supposed to be) “typical effeminate english professor”. Sorta on the Peter O’Toole model. Prostitute…LOL. I do not know how that sentence ending got distorted…sorry!

          Now, my friend Burro (famous; of notoriety hiding behind nom de plumes of weird and interesting choice) I believe you are a victim of your many years of economic indoctrination. So many are. You delve into Piketty’s BS econometrics…verifying formulai. To what end. The moment he introduced this mathematical explanation he already violated economi principles – economics qua economics. economics bein a thought process: rational, reasoned, logical. The mathematics, characteristic of all “planning-based” (socialistic) is mathematical modeling of static economic history which is meaningless gibberish. You fall into the trap of paying attention to him rather than immediately dismissing him.

          I do understand and loved your shoe guy with ladies of the afternoon…most shoe repairs are brought to the shop by women…their own and hubby’s. maybe gigalos? LOL. Doesn’t change the investment question.

          Was it you that linked me to the London Financiakl Times article on P’s fudged data? That was a great read.

          Oh, I differ with you. Irrespective of P’s mumbo jumbo…wealth can be concentrated by action of the FED. My chart shows that with or without including P’s chart 1.1 data. This of course, brings us back to the naivete of Friedman thinking public servants actually serve and that monetary control can be free of politics; notwithstanding the absurdity of planning any percent of “controlled/managed” inflation. It’s all bad and does concentrate wealth. But, especially for the US of A…inflation being a tax…what in the constitution gives a private bank the power to tyax the nation?

          I saw Steve Forbes (Forbes magazine…ran for pres here) explain the insanity of anybody controlling currency stability (like the FED)…He likened it to the FED cotrolling time: you have a cake mix and the package says bake for 45 minutes. But the FED keeps changing the # of seconds in a minute…so how do you know what 45 minutes is? What’s the value of a dolar? the stability of the currency…the ability to plan a business.

          I ramble. I don’t have that many to enjoy econ with. I look foward to more fun with Burro!

          • Burro

            Good to see you above ground and compost menthol #268. I have some bad news for you:I was trained as a mathematical economist! Yup. By the great Champernowne of the Champernowne constant fame. Champy (as his mates knew him) or DG (David Gawen) as his illiquid liquid friends knew him was a great chappy. We used to sit in King’s garden in Cambridge and as DG was a rather big man, he liked big numbers, so we discussed big numbers.
            Hardly anyone in the undergraduate `school could do mathematics which naturally brought undesired attention the the Burro, who with four legs could count much better than humans. Training by the superb Frankie J. Budden also helped and DG was most interested in number-theoretic solutions to difference-differential equations thrown up by volatile interactions in the economy. This did cause some problems however, as the solutions have a bad habit of being, like members of the opposite sex, “touchy” and prone to wild swings.

            Well, DG discovered I could do Newtonian approximations to solutions in my head. It seemed the only reasonable place to do them to me, but then I went and cocked it all up by getting a 100% result in a mathematics exam (the next result was 60%). DG summoned me to the Garden to investigate my genius and as a founding member of the Illiquids based on lack of cash flow, proceeded to solve all problems. This was, of course, solutions based on liquid refreshment of unlimited quantity brought by a Butler.

            DG and I then found shared knowledge and interest in several things. One was gambling in the stock market, which Burros like very much. Really big numbers, which are also popular if preceded by “$” with Burros, and then, lo and behold a miracle occurred. DG was very interested in certain aspects of economics but no real experience in them. The poor chap had descended from the lads what came over in 1066 with Billy the Coonqueror and occupied Devon, was part of a famous family and quite well off. He had no knowledge of the proletariat and the wonderful life of suffering. The Burro had loads of experience of the proletariat, a bunch of drunken peasants lurking in the North looking for a bit of bovver. Brought up on a diet of oats adulterated with iron filings, The Burro, knew all about the suffering to purge the soul and related subjects, not to mention the disgusting personal habits lack of any self-control can bring. Bingo!! The Burro had the knowledge and DG the info source.

            You will love what I am about to tell you: DG spent the largest part of his life then producing a book: the title…………………………….Economic Inequality and Income Distribution! Our friendship was sealed. It was further sealed when another very famous mathematical economist David ? presently advising the Labour Party in England, was giving a lecture on, of all things, wages. Since he had never had a wage in his life this surprised me. Well, DG was there and mentioned he could not get to grips with the work. In the middle of the lecture, the Burro wagged his tail, let out a snort, and David asked what the problem was. The problem was the solution to the equation meant wages would be negative and as the Burro put it, “the workers may be upset by this”. They would have to pay to go to work. David changed the numbers but the negativity increased. Then the Burro pointed out the situation would only get worse as the set of solutions approximated a quintic, and the Galois set of solutions had no solution expressible in radicals. IE the lecturer was “buggered”. DG loved it.

            David had never heard of Galois. Initially responding that it was a French cigarette used in smoking to impress French babes in expensive Parisian cafes the Proletariat Lovers frequent. No said the Burro: Gally was indeed a French git, but killed in a duel over a babe at 21, who wrote his seminal work the night before in 1832 and essentially revolutionized group algebra but not for forty years or so. The Burro, sensing he might not do well in the course, beat a hasty retreat to the Garden, where DG regaled him with wild oats and Grand Cru.

            DG took up Econ after Keynes spotted his prodigious mathematical talent. DG then took on Keynes in 1933- 1936 in the great argument between Keynes, and the Pigouvians. Keynes believed workers negotiated wages in money terms, essentially suffering a money illusion. The Pigouvians argued real wages were the key. No one apparently thought of asking the workers, who would have answered both – as DG did.

            Anyway, the point to all of this is simple: mathematical economics has its place, but as Arthur Okun said of the market, it must be kept in its place.

            Last of all, the info I will send on to you later will be an eye-opener. As a teaser I ask you, “How can a man spend 1.73x his income?” And I agree we should dismiss Pikanino – I will be back to you.

            Stay well and laugh a lot.

            • Don L

              Great story. Yes,respective of the economy and entrepreneurs trying to bundle assets toward success (futures calculations, etceteras), math has an important place. Just not as a means of establishing economic policy for governments to manipulate the goverened.

              As I recall, your son, too, has quite a head for math. “In your head”…I nedd paper and pen to do any calculating…or these days a calculator. I did not go to univesity ’til I was 30. I was worried as I would be competing for grades with all these sharp minded 18 and 20 somethings…I couldn’t afford a calculator back then and the kids couldn’t do math without one…I aced them out…very proud to have finished at Arizona State Univ. Cum Laude, within 3 years (carried extra hours) with a BS in Marketing.

              We have the stock market in common…although I used high end software to do the calculations: Nirvana Systems – OmniTrader is their platform.
              At one time was was an expert on the application of the Guppy Multiple Moving Average Indicator. I, unasked, presented Nirvana’s owner’s with a marketing idea which they adopted…I was awarded with free sofware for life..

              Before I got sick and was laid up for a couple years, I was very good at trading the S&P mini ES 1 – 5 minute charts. That was exciting times. Now, I can’t sit in a chair more than 15 minutes at a time…I’m getting into this too much.

              So, I look forward to your new data. As always your admirer…nothing on the lips!…Don L Cabby #268!

            • Burro

              Ahoy there #268! The fabulous Jillian forwarded an e-mail with info on it to enable me to send forth illumination on unemployment. It will be done as soon as I nip down to the Independent Institute and get a few more copies.

              I did dig out the 100,000 trillion note, but I just could not bring myself to part with it……………….so,,,,,,,,,,,,I have ordered a complete set of the notes from one to 100,000 trillion for you. It may take a day or two but staggering wealth is in your future.

              Gono, the Central Banker in Zimbabwe at the time of the hyperinflation, commented that Bernanke was pursuing policies just like his. Oh, dear #268, doesn’t it make you feel good to know we are in sound hands with our betters managing so well for us? Gono is now working as a farmer and should feel right at home working with a bunch of rabid animals. His boss Mugabe is still, of course, still in power. Let us all hope he lives forever, for as we know, if he does not when the word gets out he is on his way to Hell, all of the former occupants may leave and head back to earth and where would that leave us? I know, I know, they are already here as Democrats……………….

              For your edification I went back to the files and checked out a couple of my old teachers/lecturers and was not made too happy by it. Joan Robinson in particular was a shocker. After a distinguished career as an economist she not only went to the loony left but into leftist hyperspace.

              Apparently she became enamoured with the North Korean communists and thought they were all a very nice bunch of young men, just misunderstood. Hard to believe. In the good old days England was sustained on political sex scandals and spy cases and now this! Place has gone to the dogs……no let me rephrase that, to the Imams………

              Stay well and solvent.

              The Burro

            • Don L

              Thank you Burro. Hyperinflation…it scares the beegesus outta me and others haven’t a clue. The FED has been pumping out not less than 65 billion a month for over nearly 8 years with a FED Fund rate at near zero for the same period…the first sign of an increase in the FED rate…look out below.

              Again thanks and I look forward to our next exchange. (This capitalistic expression from the great Spock; who fostered equality)

              Live long and prosper!