Afternoon Must-Read: Paul Krugman: Sympathy for the Trustafarians

Paul Krugman: Sympathy for the Trustafarians: “A number of people have asked me to comment on Greg Mankiw’s…

…strange piece, oddly disconnected from the real concerns about patrimonial capitalism…. If there’s one thing I thought economists were trained to do, it was to be clear about opportunity cost. We should compare accumulation of dynastic wealth with some alternative use of resources–not assume, as Mankiw in effect does, that if not passed on to heirs that wealth would simply disappear. Maybe he’s assuming that the alternative would be riotous living by the current rich, but that’s not a policy alternative…. But the larger criticism of Mankiw’s piece is that it ignores the main reason we’re concerned about the concentration of wealth in family dynasties–the belief that it warps our political economy…. Not only did people like Teddy Roosevelt openly talk about this problem, so (as Thomas Piketty points out) did Irving Fisher in his 1919 presidential address to the American Economic Association. What’s curious is that conservative economists are well aware of the danger of ‘regulatory capture’… yet blithely dismiss (or refuse even to mention) the essentially equivalent problem of democratic institutions hijacked by concentrated wealth. I take regulatory capture quite seriously…. I take plutocratic capture equally seriously. And this is not an issue you can deal with by claiming that the benefits of capital accumulation trickle down to workers…. ‘More capital is good’ is not a helpful contribution to the discussion.

June 24, 2014

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