There is a lot of media praise for Thomas Piketty, a French economist and his new book, Capital in the Twenty-first Century. The basic theme of the book is that the rich get richer and everyone else gets poorer. Piketty’s solution is confiscatory taxes on wealth to reduce the amount of capital in the hands of “capitalists”. He believes this will force capital into the hands of more productive members of society such as entrepreneurs and then the benefits will be more widespread throughout society. It’s a mish-mash of failed ideas about capital, labor, inequality, entrepreneurs, free markets, and economic progress. It is “economics lite.”
We have forgotten what money is. Money is easy to understand, but most people have no idea what it is. We all know that barter is an inefficient way to foster economic growth and money is a good thing for the economy. But money isn’t a piece of paper. Here is a fable to illustrate this.