Monday, December 21, 2015

Kenneth Arrow
In the neoclassical picture, consumption is the ultimate end of the economy. The rich accumulate for ultimate consumption, perhaps of generations in the far future, or, in some significant part, for philanthropy. Piketty seems instead to have a picture of the economy as a process of automatic accumulation, without regard to planned consumption. Estates grow at the market rate of return (100% saving out of property income). This is not a realistic account of how rich people – or indeed anybody – treats their income. It also leads us to ignore the politics of how this wealth is actually consumed.
It's been a long time since I understood economics as more than the study of stupidity, but I'm still pulled up short when I'm reminded how much the exclusive study of stupidity makes you stupid.

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