Masaccio: Piketty Shreds Marginal Productivity as Neoclassical Justification for Supersized Pay

Yves Smith comments on Masaccio: Piketty Shreds Marginal Productivity as Neoclassical Justification for Supersized Pay.

One of the main agendas of neoclassical economics is to give Panglossian defenses of the current order a veneer of intellectual legitimacy. If our system is the result of individuals and businesses behaving in logical ways, at least in the minds of economists, surely the outcome is inevitable, and therefore virtuous, or else those operators would do things differently. The Big Lie in all of this is that neoclassical economics takes power completely out of the equation. While it does assume selfishness, in that everyone is out or himself to maximize his utility, it also assumes atomized actors who lack the power to influence markets. …

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One widely repeated bit of propaganda in the US is that how much people earn reflects their worth in an economic sense. Given how important business is in American society, maintaining this belief is critical to maintaining legitimacy; otherwise, more and more people would see corporate executives not as captain of enterprise but individuals by luck or connivance, got in a position where they could exploit a system that gives them control over assets and cash flows with perilous little in the way of controls over them (there is a vast literature on principal/agent issues in large corporations).

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Masaccio concludes:

Neoliberals have convinced the vast majority of our fellow citizens that they and they alone are responsible for their fates. They took risks and they lost, but it was their choice. I can hear Rick Santelli ranting in the background. At the same time, neoliberals insisted that governments everywhere bail out the filthy rich and their corporations, especially their financial corporations, and governments obliged. So, we screw the productive members of society and reward the slugs, all in line with neoliberal theory.

Neoclassical economics undergirds the neoliberal project. Piketty slashes at a piece of that foundation with his attack on marginal productivity. What now is the justification for the absurd compensation of the filthy rich? Tort law failed to deal with the sins of the bankers. Why aren’t they in jail? One more block pulled from the Jenga pile of vicious ideas so beloved of the rich and their government agents.

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This was all explained by Marx over 160 years ago. The ruling class creates a superstructure to maintain control. And part of that superstructure lies in the sphere of ideas.

One of those ideas is neo-liberalism. It is not the only one maintaining control. There are also ideas about religion, gender, sexuality, the need for a hierarchical society, etc.

And let's not forget that naked force is also part of the superstructure. When ideas fail, the guns come out. Arguments are then won with bullets, not words.

We must tread carefully when confronting the Capitalists. They got where they are by being utterly ruthless. Each bomb dropped in Gaza, Syria, Iraq, Sudan, Somalis, Iran, Afghanistan is a warning to all the subject peoples of the world that they mean to stay in business for as long as possible.