March 19, 2016

With respect to inequality it behooves us all to stop demagogues from opening appetites that cannot be satisfied

Sir, Tim Harford adds valuable elements to Piketty’s r>g inequality discussions, those that have so many redistribution profiteers drooling in anticipation. “Capital ideas in a time of inequality” March 19.

To Harford’s initial discussions on rates of returns we must keep in mind that the ownership of the capital measured, might be constantly changing. And it is very hard to statistically reflect the continuity value after discontinuities like wars, and other potential wipeouts and resets. And the effect of the survivorships bias on returns, though very hard to measure, might be huge over time.

When it comes to this issue of growing inequality, which is serious indeed, I have always been more for analyzing what could be distorting the allocation of wealth, and in how we can open up opportunities for all to participate in its creation.

And since from the evidence it seems we do need a pro-equality tax on wealth, it is also important to make certain that the redistribution is done in a cost effective way. In my country, Venezuela, I always propose that our net oil revenue should be shared out to all citizens, instead of being concentrated in some political besserwissers’ hands. In this respect it is with a lot of enthusiasm I now follow the idea of universal basic income being studied in Finland and lately in Canada.

But, in all this debate, instead of referring to measured balance sheet wealth, should we not better always think in terms of realizable and transferable wealth? For instance, what about all that wealth stored in art hanging on private, or stored away in the cellars of public museums? If we want to transfer part of that value to the poorer in any significant way, how do we proceed? I mean this is very important, because to open up appetites, ignoring these cannot be satisfied, is precisely what dangerous demagogues do.

Friends, if we had managed to keep the profiteers out of the redistribution, would not the current inequalities be lower? Should not redistributing income and wealth max cost 2 percent?

@PerKurowski ©