Episode 218: Why (r > g) Matters

March 14, 2023

Central Thesis

Ad-supported media protects wealth and privilege by promoting economic narratives that are not based on empirical evidence but rather on faith-based adherence to the status quo. Extreme income inequality is a social cancer perpetuated by this system.

Key Arguments

• Economic Orthodoxy Protects Wealth: Mainstream economics, particularly in the US, prioritizes theoretical models over empirical data, often serving to justify existing power structures and wealth accumulation. Economists who challenge this orthodoxy are marginalized, preventing critical perspectives from gaining mainstream traction.
• The Kuznets Curve is Propaganda: The Kuznets Curve, which suggests inequality naturally decreases with economic development, was embraced during the Cold War to justify the "free world" and downplay wealth disparities. Piketty's research refutes this curve, demonstrating that inequality is not a natural phenomenon but a result of political choices and cultural values.
• R > G Drives Inequality: Piketty's core argument that the rate of return on capital (r) exceeding the rate of economic growth (g) leads to inherited wealth growing faster than the economy. This concentrates wealth, undermining meritocracy and social justice.
• Ad-Supported Media Serves the Wealthy: Media outlets reliant on advertising revenue are incentivized to promote narratives that support the interests of advertisers, who are often wealthy individuals and corporations. This creates a system where critical perspectives on wealth inequality are suppressed.

Notable Passages

• "This obsession with mathematics is an easy way of... of acquiring the appearance of scientificity without having to answer the far more complex questions posed by the world we live in."
• "The Kuznets curve thus became canon in economics. Why? Again, hey, it was the Cold War, and economists were largely becoming a vanguard against creeping communism."
• "People with inherited wealth need save only a portion of their income from capital to see that capital grow more quickly than the economy as a whole."
• "Meritocracy is bullshit. It doesn't exist. It is merely the excuse the wealthy today have given themselves to differentiate themselves from the wealthy of Austin and Balzac's ages."

Rhetorical Approach

Jim employs a combination of academic citations (Piketty, Kuznets), historical context (the Cold War, the Gilded Age), literary analysis (Austen, Balzac), and sarcastic commentary to construct his argument. He uses personal anecdotes and accessible language to break down complex economic concepts. The use of humor, such as the joke at the beginning, serves to highlight the absurdity of wealth inequality.

Connections

• Episode 20 Non-heterodox Scientificity – Explores the idea of faith in economics.
• Episode 81 Pulpits, Bully and Otherwise – Mentions topics economists cannot discuss.
• Episode 19 by George – Refers to Henry George's ideas on land and rent.
• References Chuck Collins' book The Wealth Hoarders, Tomas Piketty's Capital in the 21st Century, and Nassim Nicholas Taleb's The Black Swan.