The Parable of the Fish Capitalist
Once upon a time, on a small island in the middle of a vast ocean, toiled a primitive society of one hundred people who ate only fish. Each person was able, using only his hands, to catch a single fish each day, and each fish provided the catcher with enough nutrition for roughly a day.
Because everyone’s wealth or lack thereof was essentially equal, this was a society of perfect economic equality. Everyone earned the exact same income—one fish per day—and everyone was equally and horrifically poor. The island people went naked or wore garments hastily woven from leaves. They lived in caves, under bushes, or in shabby lean-tos. They did their best to fend off attacking animals, and occasional pirates, with sticks and rocks. They had no technology aside from simple, handmade tools; no transportation except walking and swimming; no entertainment except singing around the campfire or playing rock-toss games or the like; no health care except the local witch doctor’s potions and prayers. But for the lack of fast-food restaurants, tents made from petroleum products, mobile devices, Internet service, nearby emergency clinics, and bongs, the island was an Occupy Wall Streeter’s dream come true.
In Piketty’s terms, the private rate of return on capital in this island society, r, was zero—because there was no capital income and almost zero capital—and the rate of economic growth, g, was likewise zero. It was a society in blissful leftist perfection where r = g, and no one had to worry about the “terrifying” consequences of expanding capital or inequality. Of course, people frequently died from complications in childbirth, infectious diseases, accidental injuries, animal attacks, and countless other normal circumstances and conditions of primitive society. And, consequently, the average life span was thirty years. But never mind that, for this society avoided the “destabilizing” condition in which r > g.
Now one innovative fellow, Grock, got to thinking about a new way to catch fish, and, over the course of much mental effort, he developed an idea for a contraption akin to what we have come to call a net. Inspired by his idea, Grock committed himself to spending some of his rest time working on a physical version of the net. Once in a while he even skipped fishing for a day and went hungry to work on the project. He had no certainty that all this time, effort, and hunger would amount to anything useful, but he took a risk to see his vision through.
When the net was completed, the project had taken Grock a total of eighty hours of work—the equivalent of ten workdays, or the time equivalent of ten hand-caught fish. Excited, but with some trepidation, Grock waded with the net into the cool waters one morning, and . . . joyous day!—by sundown he managed to catch two fish, a feat he soon would learn that he could repeat every day. That night, Grock jubilantly celebrated his invention—the first piece of substantial capital on the island.
Importantly, Grock did not do anything to harm anyone in the process of creating or using the net, nor did anyone help him in the process of producing it. Of course, he incurred considerable pain and expense himself to make it, and he did so with no guarantee that it would work. But the effort was all his. He alone designed and wove the net. Grock was a sole proprietor, and he was perfectly peaceful.
But Grock’s neighbor, Pike, became gravely concerned about Grock’s innovation. Pike confronted Grock the morning after Grock’s first day of catching two fish.
“Think of the terrifying consequences of your fish net,” Pike warned. “Prior to your creation of that device, we lived in blissful utopia in which r = g, but now r > g! Before, both r and g were zero, but now the capital stock—your net—is worth ten fish, and, given that you now catch an extra fish per day, the private rate of return on capital is one fish daily. But total daily output has not grown by the same percentage; instead, it has grown by only one percent on the first day, from one hundred to one hundred one fish (ninety nine the rest of us catch plus your two). And every day hereafter (with existing capital), g returns to zero. Not only is r > g; r is much greater than g! Just think where this could lead...
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