Piketty's 'Capital': 21st Century Problem, 20th Century Solution
Economic blogs are abuzz with French economist Thomas Piketty's new book, Capital in the Twenty-First Century. It has been heralded by fans as the defining work in economics of this era. In it, the researcher of income inequality provides "compelling" and ample evidence (75 pages worth -- of footnotes!) for capitalism's natural tendency to funnel wealth disproportionately.
I'll take for granted that the book is groundbreaking. But here's the problem: Piketty (and all his fans) are realizing this potentially serious 21st Century problem while trying to remedy it with 20th century solutions. After all the research Piketty put into American and European economic histories, his magic formula is... raising taxes. Oh, but this time he wants to do it like this: "an annual global wealth tax of up to 2 percent combined with progressive income tax rates as high as 80 percent."
I'm betting when Picketty wrote the book, he was less enthusiastic about this tired call to action than he was for the impressive historical case study he put together.
His problem, as is the case for almost all policy-minded people, is that they don't see the diminishing importance of policy. We're in a time where solutions aren't found in the well-worn script of where to place the line of government action. They're found in removing the need for the "line of law" at all.
Case in point: Organ Markets
For years, Libertarians have been backing the legalization of human organ markets. Meanwhile, the vast majority of medical professionals across the world (except for in Iran where they have a kidney market, and consequently, don't have a shortage) have made clear the obvious ethical problems with opening up the market for human organs, have not seriously considered supporting a law change, and so here in the U.S. more than 6,500 die each year before they are able to receive a transplant.
According to Libertarians, a market would provide these dying people with their life-saving answer. Even opponents to markets don't disagree with this. But consider the ramifications of opening such markets. People with money will have a door to life that poor people don't. People in duress could be exploited for the money; these organs won't go for cheap.
It's a debate not about right vs. wrong, but about choosing the least bad. And today it's accepted almost universally that the people who die in wait still do not justify the hypothesized greater harm of removing the law and allowing them buy a life extension.
But one day soon the debate will change. Actually, it will simply go away.
We won't have to argue about whether or not (or, in the case of drinking and gambling, to what degree) law should be implemented to solve such social ills. The need to buy a scarce kidney from a donor will be eliminated altogether because we will have developed the technology to grow them.
Imagine that. Growing a replacement kidney using existing kidney cells. No drawbacks, all the benefits. And the argument over legalizing organ markets (and the money and manpower prohibiting them) is rendered moot.
Such a technological solution isn't a morality-based plea to move of the legal line. It's a truly forward-looking measure that not only solves a problem, but represents a whole new way of addressing the countless issues around the world.
Back to Piketty.
Assuming Piketty's work is accurate, the issue at hand is potentially serious -- whether Conservatives want to admit it or not. (This is another benefit of technology-based solutions. Legal ones challenge ideologies, divide people into sides, and important facts get ignored.) For instance, large disparities in wealth are associated with a host of problems stemming from the discontent of those on the losing end. So Piketty wants to see money more democratized. Nothing wrong with that. But he wants to do so using laws, so small government people react negatively, further ingraining the unfortunate but inevitable stereotype of not caring about the poor. (Never mind that conservatives give more to charity than liberals. Proof that they, too, want to see money in the hands of more people who need it.)
What we ought to do is handle this issue the same as we'll solve the organ shortage, not by finding the legal sweet spot, but by removing the need for such law at all via a technological advance.
Google is not out there making policy statements about whether to lower the blood alcohol limit or strengthen the punishment of DUI offenders. They're solving the problem of human driving error by creating self-driving cars. Similarly, if you want to see money more evenly distributed, don't seek the monopolistic power of the state (which, by the way, is also a huge reason why money ends up in the hands of a few.) Seek a technological solution that will supersede anything that can be done with legislation. For this, I suggest that Piketty and company start by looking a little closer at that economic darling of a story for 2013; the technology that allows cheaper, faster access to money; that democratizes wealth (and yet, somehow, outspoken members of the Left hate this technology!) Take a look at virtual currencies. I’m not saying this technology is the answer to all the economic problems in the world, but the technology will help more people, more efficiently than any law ever could.
Welcome to 2014, the "digital" social age. The leaders this century and beyond will be those who are truly progressive and don't seek to find answers using last century's methods. Interestingly, Piketty recognizes, then dismisses, technology as a solution as pointed out in the Washington Post, “If one truly wishes to found a more just and rational social order, he warns, it is not enough to count on the caprices of technology.”
But that's because Piketty looks at technology as an economic sector rather than as a society-shaper.