Greg Mankiw had a piece recently in the New York Times regarding the hot, hot topic of capital accumulation over time--the subject of Thomas Piketty's new book, Capital in the Twenty-First Century.
Mankiw's piece makes some good points, although I am biased (his text was the one we used in my macro class and it is brilliant).
I haven't read Piketty's book yet. I will be finished my classes soon and I will have a month to knock it out. I have been reading some of the reviews and saving others. Few econ books engender the amount of discussion of Piketty's book, so I am looking forward to it, even if he is channeling Marx's spirit.
Shortly after Mankiw's piece runs, Paul Krugman weighs in on the topic.
First, I have to say that one of the things that truly distinguishes Paul Krugman from anyone that you would want to spend any time around is his astonishing arrogance. Right off the bat, he is chiming in on the matter because "other people" have asked him to comment on it. Because, you know, otherwise he's got other topics to exposit upon disingenuously. So he indulges us for a few minutes on what Mankiw gets wrong.
Krugman takes two positions on Makiw's thesis. The firs from an economics standpoint, the other from political economy.
Among other things, Mankiw makes the point that inherited wealth is typically saved/invested. This helps everyone as a source of capital for things like bright, shiny object we like to be distracted by and the jobs necessary to make things happen. It also makes the cost of borrowing cheaper as it expands the source for loanable funds.
Krugman "catches" Mankiw in not seeing the "opportunity cost" involved in letting people who earn their money pass it along to their heirs. You see, there are alternatives. Or at least one alternative. And since it's Krugman, you can guess that the alternative is... the government.
Because the government can do things with the money that will be more beneficial to the common man who didn't earn someone else's money. The government could take a wealthy decedent's money and pay down the deficit, but that wouldn't do anything further than what those greedy heirs would have done.
The government could also use the money to pay for "social insurance and/or social goods" and says that Mankiw "forgetting" about the alternative that Krugman favors is "assuming his conclusion;" that the so-called trickle-down benefit is the most desirable.
What Krugman doesn't see is that he is assuming his own conclusion: that the redistribution of wealth is a legitimate function of government. He is free to believe in whatever he wants, but neither Greg Mankiw nor anyone else is obliged to share his belief.
He could try to use his considerable intellect and charm to try and persuade those who don't share his assumptions. Or he could stick to ad hominem and mendacity. I wonder which he will choose?
