Picketty’s r>g

Follow up on art and science in my last post:

In my last post I discussed Balzac’s prescient understanding of evolutionary science evident in his story Pere Goriot. I was reading Balzac because Thomas Piketty stimulated my curiosity in his admirable book Capital in the 21st Century. To illustrate the changes in capital and distribution of wealth from the 18th century until today Piketty cites authors from back then such as Balzac and Jane Austen who wrote frankly about the moneyed classes, how much income they needed to live well and the amount of capital needed to sustain that level independently of any work they might do, because, as Piketty explains, the income from work alone would support only a meager existence. Piketty’s book was well received when it first came out in 2013 in part because he gathered a monumental data set from historical and modern sources in order to analyze the evolution of capital since the 1700s and in part because his analysis is erudite and cautious in values yet strong in its conclusions. Thank you, Monsieur Piketty.

Thus he was able to confirm the economic basis for Balzac’s and Austen’s portrayals (and though unmentioned Thackeray’s Vanity Fair and much of Dickens as well). Capital was a difficult book for me as I lack any education in economics; Piketty helps by keeping an historical frame and emphasizing basic concepts in several ways. For the 18th century he shows that, in short, to live “comfortably” required an income of 50 -60 times the average income of that period and that could not be achieved through merit by working hard and smart in a profession but could by amassing capital either through inheritance or through commerce, as old Goriot did but then gave away for his daughters’ dowries. In post-Napoleonic France the top 10% held 60-70% of the wealth (the aristocracy), the next 40% held the rest, while the bottom 50% had virtually no wealth at all—they lived day by day in a state of perpetual poverty and near starvation.

Piketty contrasts this state of affairs with ancient hunter-gatherers where equality was the more the rule. The tribal leader and warriors might have gotten the choicest cut of meat but resources were shared and not accumulated because wealth is hard to transport. In an agricultural society like England and Europe in the 18th century wealth was accumulated as farm land and then the industrial revolution marked a transformation of capital from agricultural resources to ones for industrial production, e.g., factories, transportation, control of natural resources. This did not mark any change in the inequalities of wealth. What did affect the inequality were the two world wars, which decimated much of the old wealth (for awhile) and allowed a middle class to develop. The bottom 50% still had next to nothing but the 40% above that had more and the highest 10% held just a little less. I do not think the top 1% or .1% suffered much loss at all.

Now consider modern times when the top .1% holds 20% of the wealth, the top 1% holds 50%, the top 10 % holds 80-90%, leaving the bottom 90 % to hold, if they can keep it, the remaining 10% (this part of the middle class owning their own homes). The bottom 50% as is historically the norm holds nothing. He further states that the trend in the 21st century is to increasing inequality of wealth soon to approach the extreme levels of 1910 (think Downton Abbey before WWI initiated a period of change that temporarily lessened the gap between rich and poor).

These changes reflect what Piketty calls a basic (ah, both simple and complex) law of economics, r>g. ‘r’ is the rate of return on capital that historically Piketty shows runs from 3 to 10 per cent (the rich get the greater return while the rest of us make do with the lesser). ‘g’ is growth and may comprise increased population, education and skills (that lead to increased productivity), or technological innovation. Piketty demonstrates that while increased ‘g’ is a force for equality, the power of ‘r’ is a force for inequality and ‘r’ is growing in political and economic power as I write. Piketty presciently says that the rising ‘r’ and inequality from globalization would result in an upsurge from those left behind of isolationist nationalism and that is a large part of the story of western civilization this year, ain’t it?

I appreciate anyone who marshals extensive data sets for analysis and development of their ideas and Piketty did all of that. Having finished the book, I began to think about the r>g law of economics and wondered how it might play out from the perspective of sociobiology. I mean, a law is a law and could be expected to reflect some important underlying dynamic that contributes to the viability of a population. Piketty shows how the transitions from hunter-gatherer to agricultural to industrial to information-age global societies reflect this law; now how about its roots in our evolution? Frans de Waals and others document social structures in other primates and how these affect the distribution of resources. Certainly rich natural resources supports population growth that then affects the sustainability of those resources. Rich or scarce natural resources may also engender conflict and competition with other groups.

Piketty’s main argument from this law r>g is that it leads to inequality and that there is no necessary counter-balance to keep wealth distribution equal enough for social viability. Capitalism can run amuck unless democratic processes exert some controls. Certainly dictatorships like North Korea and oligarchies like Russia create and maintain huge inequality to the detriment of most. While humans gather and hold wealth in our own special ways, other animals also do so in their special ways. Consider squirrels and nuts, bees and honey, rodents and grain, etc. Many animals develop technologies, e.g., apes use sticks to gather termites and rocks to smash nuts. Are there corollaries of r>g for other species? How are alpha males curbed so others have enough? De Waals documents gender differences and dynamic alliances in primates. How does mammalian social organization based upon empathic connections distribute resources? I will re-read some of de Waals in the future with an eye to this facet. Travel on.

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