A cartoon, like a picture, is worth a thousand words. Nonetheless, I’ll risk adding a few more to this one.
In case you haven’t heard, French economist Thomas Piketty’s book, “Capital in the Twenty-First Century,” is a runaway best seller. In Professor Piketty’s view, under capitalism, the rich get richer (because they own the high-return capital) and all others just scrape by. As a result, income inequality grows. His solution: tax the hell out of the rich. He advocates a global graduated tax on anyone with more than $1.4 million in net worth and an income tax of 80 percent on any income over $500,000 or so.
Perhaps Professor Piketty has spent too much time under the hot Riviera sun or teaching graduate classes. He has somehow forgotten some of the basics taught in Economics 101: incentives matter to behavior and, if you want less of something, put a tax on it. In Professor Piketty’s idealized world, as in the cartoon, we will have a much more equal standard of living. Unfortunately it will be at a standard that most of us would find unsatisfactory.