Karl Marx versus Thomas Piketty

Both [Marx and Piketty] protest economic disparities, but move in opposite directions. Piketty advances into the domain of salaries, income and wealth; he wants to temper these extremes and give usto alter the slogan of the ill-fated Prague Spring of 1968capitalism with a human face. Marx advances into the domain of commodities, work, and alienation; he wants to undo these relations and give us a transformed society.

This is from UCLA historian Russell Jacoby in the New Republic. The rest of the article is not that great, to be honest (I’ll bet you ten bucks that Jacoby – whom I never took during my time in Westwood – is an old man; I can safely assume this because of the praise he lavishes upon Karl Marx at the expense of Piketty and other economists), but I thought this excerpt was a good opportunity to enhance my argument that Murray Rothbard was a great Cold War scholar and a terrible role model for the world we live in today.

Rothbard’s argument – exemplified by this excerpt that Adam provided in the ‘comments’ threads a while back – devastated the Marxist notions of the world held in the 1960s and 1970s, but Rothbard’s argument simply does not grapple with Piketty’s. It’s a whole new ball game, and one that newer scholars who have built upon Rothbard’s foundations are now grappling with. It does us no good to continue parroting a line of reasoning that has long since outlived its usefulness.

11 thoughts on “Karl Marx versus Thomas Piketty

  1. I don’t have a ton of time but let me make a couple of points.


    “For instance, according to a report—not mentioned by Piketty—the top 25 American hedge fund managers earned $21 billion in 2013, well over twice as much as the combined income of approximately 150,000 American kindergarten teachers. That means the work of one hedge fund manager equals the work of about 17,000 kindergarten teachers.”

    This is economic ignorance. You can never say two entirely different tasks are somehow equal simply comparing average salaries because units of “Teaching” and units of “Hedge fund Managing” are incompatible. This was proven by Rothbard (of course) in his attack on Irving Fisher’s theory of purchasing power.

    “What is an average? Reflection will show that for several things to be averaged together, they must first be totaled. In order to be thus added together, the things must have some unit in common, and it must be this unit that is added. Only homoge- neous units can be added together.

    Thus, if one object is 10 yards long, a second is 15 yards long, and a third 20 yards long, we may obtain an average length by adding together the number of yards and dividing by three, yielding an average length of 15 yards. Now, money prices are in terms of ratios of units: cents per pound of sugar, cents per hat, cents per pound of butter, etc. Suppose we take the first two prices:

    7 cents and 1,000 cents
    1 pound sugar 1 hat

    Can these two prices be averaged in any way? Can we add 1,000 and 7 together, get 1,007 cents, and divide by something to get a price level? Obviously not. Simple algebra demonstrates that the only way to add the ratios in terms of cents (certainly there is no other common unit available) is as follows:

    (7 hats and 1,000 pounds of sugar) cents
    (hats) (pounds of sugar)

    Obviously, neither the numerator nor the denominator makes sense; the units are incommensurable. Fisher’s more complicated concept of a weighted average, with the prices weighted by the quantities of each good sold, solves the problem of units in the numerator but not in the denominator

    P = pQ + p ′ Q ′ + p ″ Q ″
    Q + Q ′ +Q ″
    The pQ’s are all money, but the Q’s are still different units. Thus, any concept of average price level involves adding or multiplying quantities of completely different units of goods, such as butter, hats, sugar, etc., and is therefore meaningless and illegitimate. Even pounds of sugar and pounds of butter cannot be added together, because they are two different goods and their valuation is completely different. And if one is tempted to use poundage as the common unit of quantity, what is the pound weight of a concert or a medical or legal service?:” – Man economy and State Page 838.


    “Inasmuch as Marx and Piketty look in different directions, so do their solutions. Consistent with his alarm over inequality and distribution, Piketty proposes a progressive global tax on capital, which will “stop the indefinite increase of inequality in wealth.””

    First of all all taxes are in fact taxes on capital or on income..

    “In a sense, all taxes are taxes on capital. In order to pay a tax, a man must save the money. This is a universal rule. If the saving took place in advance, then the tax reduces the capital invested in the society. If the saving did not take place in advance, then we may say that the tax reduced potential saving. Potential saving is hardly the same as accumulated capital, however, and we may therefore consider a tax on current income as separate from a tax on capital. Even if the individual were forced to save to pay the tax, the saving is current just as the income is current, and therefore we may make the distinction between taxes on current saving and current incomes, and taxes on accumulated capital from past periods. In fact, since there can be no consumption taxes, except where there is dissaving, almost all taxes resolve themselves into income taxes or taxes on accumulated capital.”

    Next, I don’t see how this is any sort of burden that modern libertarians need to worry about. Taxation of capital has been proven by many Austrian economists to drain resources from the economy and to stifle the accumulation of capital which is the basis for the modern standard of living. What Piketty suggests isn’t to raise people up to the level we in the west currently enjoy but to lower our standard of living to benefit the third world due to the fallacy that the west “lives off the back” of the third world. This belief has also been disproven:

    “Even for the poorer areas of the Earth, the growth of the last fifty years has been quite remarkable. Excluding the developed nations of North America, Western Europe, and Japan and focusing only on the so-called Third World, we find that per capita economic growth, improvements in life expectancy, and declines in mortality from disease and malnutrition outstripped the performance of the most advanced nations of Europe, Britain, and France, during the Industrial Revolution of 1760–1860 (see Williamson 1993, p. 12). Indeed, the economic growth of China, South Korea, and Taiwan has been so rapid since the 1960s that their people have seen material improvements in thirty or forty years that took the British, French, and Germans a century or more to attain.

    When we read about the great civilizations of ancient Egypt and Rome or of the Aztecs and the Incas, we tend to compare them with the empires of Britain or the growth of the United States. This comparison, judged in economic terms, is highly misleading. Although the great civilizations in Egypt and Rome were able to construct big buildings, the vast majority of their citizens, by today’s standards, were dirt poor.

    What is unusual about the developed world since the 1700s is that—beginning with Britain and then spreading to all of Western Europe, North America, and much of Asia—the population rose dramatically and was accompanied by an even more sustained rise in income per person. At first, particularly in the eighteenth and early nineteenth centuries, this was more a matter of rising population without falling per capita incomes. Overall improvements in material prosperity seemed so modest that even contemporaries such as Adam Smith did not appear to notice that they were living through what historians would later label the Industrial Revolution. Eventually, the changes were so dramatic that everyone could see that the daily lives of even the common laborers of Britain, France, Germany, and the United States had been greatly transformed. The reason for this transformation was the accumulation of capital, which was due in turn to technological improvement and to the fact that these societies had large doses of economic freedom. The twentieth century saw this transformation spread to a large part of the world.”


    Piketty offers nothing that hasn’t already been revealed as fallacy a dozen times over. Just more white guilt, shoddy economics, and egalitarian nightmares.

    • Adam,

      Thank you for your great contribution, as always.

      Unfortunately, by relying upon Rothbard, we still have yet to grapple with Piketty’s argument. For instance, your first Rothbard quote (on comparing different tasks) does a marvelous job of debunking Jacoby’s example, not Piketty’s. Jacoby is a Marxist historian who earned his tenure during the 70s and 80s when Marxism was considered a respectable research paradigm. In other words: the Rothbard quote you conjured simply debunks another Cold War argument, not a current one.

      I guess you could make a point by arguing that Rothbard is still useful because there are still Marxists around, but such a point would do nothing to debunk my initial argument about Rothbard’s expiration date.

      You are right that taxes can be on either capital or income (or land). What does this fact (and the subsequent quote from elsewhere used to bolster it) have to do with Piketty’s argument about a global tax on wealth? I ask because I cannot see the connection. I also forgot that you cannot divide by zero, so this is not a trick question.

      Likewise, I did not realize that “[w]hat Piketty suggests isn’t to raise people up to the level we in the west currently enjoy but to lower our standard of living to benefit the third world due to the fallacy that the west ‘lives off the back’ of the third world.” I have been keeping shoddy track of the discussion on his book but I’m fairly certain he focused on wealth inequality in OECD states and has been criticized by many development scholars for doing so. Are you sure you are not knocking down a straw man? Don’t worry if you are, Dr Delacroix does it all the time so you’re in fine company!

  2. In my decline, I am increasingly grateful for every mention of my name, even in disparagement!

    I don’t think I spend any time knocking down strawmen. The impression arises from the fact that I nearly always address the intelligent ignorant and rarely even try to reach the rarefied heights, where you, Brandon fly so gracefully. (That’s often by riding skillfully warm air currents.)

    I mean that I left academia a while ago, and graduate school in another century.

    • From Marx and Engles themselves? Not many, to be honest. Their writings are largely irrelevant to our world today so I have mostly read Marxist works rather than the works of Marx himself (I outsource to Dr Delacroix for more details on this distinction). This distinction, between Marx himself and Marxists, is important to remember for my argument.

      Formally, I can think of only three texts I’ve had to study. For an honors course on Western civilization I had to read The Communist Manifesto for the umpteenth time.

      I also had to read Engels’s Origins of the Family… – all 300 pages – for a course on anthropological theory as well.

      Both required readings were used as examples of old theories that have been swept away into the dustbin of history.

      The most important writing I was required to study was Marx’s work on free trade (he was a proponent, of course). Ironically enough, I was drawn to Marx’s work on free trade by a “neoliberal” (Clintonian Democrat to American readers) political science professor teaching a tough course on political economy.

      I’d provide sources for these readings but I understand that the works of Marx and Engels are currently being held under copyright. If you want to find Notewriters who have read more of Karl Marx’s work (or Engels’s) then you’re going to have to find those of us who went through graduate school back in the 1970s and 1980s.

      Update (a good question, indeed): Upon reflection, I seem to remember reading an anthology of Marx’s work on the 1848 “revolution” as well. What stood out to me most about those writings was not the deep insights of events going on, but rather Marx’s very vocal support for the Prussian state’s war against France due to his petty rivalry with the French socialists at the time.

      I’ve also read excerpts of Marx’s work on imperialism, but it was only in tandem with later works criticizing Marx’s support for European imperialism (same thing with the liberal JS Mill).

    • That paper looks pretty dope Professor Amburgey (I only looked at the abstract). Is there any way you can get readers an ungated pdf?

      Just curious: Would you agree that there is a big difference between what Marx wrote and what Marxists of the past thirty or forty years have to say?

      I respect Karl Marx immensely, if only because men in power today still loathe his name, but the sheer volume of people claiming his mantle makes it difficult to sort through not only his own writings but also present-day works that actually grapple with his thoughts. I think that philosophers and anthropologists (and, apparently, sociologists!) tend to be the most insightful Marxists today, with historians, economists, and literature experts (?) making up the ass end of Marxist thought, but again my readings of Marx himself are limited by time constraints.

  3. “Just curious: Would you agree that there is a big difference between what Marx wrote and what Marxists of the past thirty or forty years have to say?”


    “Terry: You win!”

    Given all the time I wasted reading Marx, I’d say I lost big time. If I had it to do over again I’d read Grundrisse and stop.

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