The Fairy Tale of Capitalism: CEOs, Growth and Prosperity of Society

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The Fairy Tale of Capitalism, or FTC, is a mythology, as is the Wild West, portrayed in thousands of movies, radio and television programs.

Once upon a time, Growth measured Prosperity in the Society. “Growth of GDP”, the kind of Growth they had in mind, was perhaps the Professors’ favorite hymn. In “Growth of GDP”, sung often, Growth led and Prosperity followed. Some listeners envisioned enlarging the Aristocrats' wealth and letting the Downward Trickle distribute the Prosperity to the 99 Percent. But that is another story.

Ali Amir Beg (ca. 1558),  image: Wikimedia.org
Society, of course, was all the people, the Aristocrats, the Nine Percent, the 90 Percent, everyone. The Society organized itself into groups called Firms to find, gather, produce and distribute stuff.

A CEO Chief Executive Officer, sometimes called the President, was the Manager who outranked all other Managers in a Firm. The CEO could tell any of the Workers or other Managers what to do. By hiring appropriate Staff, the CEO worked to improve the Shareholders’ part of GDP10, and incidentally the CEO’s part.  

There were many kinds of CEOs. Some founded the Firm, the usual case with the smaller Firms. Many were Managers who had pleased the previous CEO, often by their performance at other Firms. For older or larger Firms, especially those in which the previous CEO was Aristocratic, the CEO was an Aristocrat from birth. Sometimes a Board selected for CEO a Worker who had become a Manager and who had shown talent.

The Staffs did not include the CEOs. But not uncommonly a member of the Staff was chosen for CEO. Some of the Staffs became CEOs when an Aristocrat wanted a person of demonstrated talent, instead of a son or niece or paramour of presumed talent, to manage a Firm, reminiscent of the Ottomans.

GDP50 grew slowly then shrank.

People understood the Economist Piketty only slightly better than other Economists, because he presented many pictures. The pictures showed the Prosperity wasn’t evenly shared among the Society. GDP01 was not much smaller than GDP90. Piketty’s pictures showed GDP50 grew ever more slowly as the years had passed and then shrank. GDP90 slowed to nearly nothing. GDP10 grew nicely, though ever more slowly. In later years, overall GDP growth sometimes outpaced GDP10. GDP01 grew rapidly over the years, though with variability. 

Responding to the unsettling conflict between Piketty’s pictures and their favorite song, some Professors added a few verses to “Growth of GDP” describing how even though redistribution allocated much Growth to the Ten Percent, that was necessary if the Ninety Percent were to get any. But most continued to sing the classic form, which members of Government understood well, owing to their frequent discussions with the Staffs, who the Professors educated. 

The Economists held Economist Saez in high regard for the arcane mathematical runes with which he always punctuated his expressions. Saez, a frequent collaborator with Piketty, had unusual talent for pictures among Economists. Saez described how the Supercompensation that the Boards paid the CEOs in the period following the great wars grew to about 40% of the aggregate incomes of the Aristocracy. But that’s another story.

I’m grateful to my friends who reviewed a prepublication draft and offered helpful comments.

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Ali Amir Beg, “Janissary Recruitment in the Balkans” (1558, Wikimedia) https://commons.wikimedia.org/w/index.php?curid=22361418

Daniel Brockman, “The Fairy Tale of Capitalism: Workers, GDP and Economists” (Mar 17, 2017) https://daniel-brockman.blogspot.com/2017/03/the-fairy-tale-of-capitalism-workers.html

“Koprulu Mehmed Pasha” (Wikipedia) https://en.wikipedia.org/wiki/K%C3%B6pr%C3%BCl%C3%BC_Mehmed_Pasha

Thomas Piketty, “Capital in the Twenty-First Century” (2014, English translation) http://amzn.to/2fJg7Oi

Saez, Piketty and Zucman, "Distributional National Accounts: Methods and Estimates for the United States" (NBER Working Paper NO. 22945, Dec 2016) https://eml.berkeley.edu/~saez/PSZ2016Slides.pdf

Emmanuel Saez, https://eml.berkeley.edu/~saez/


  1. Once I taught at a Catholic university, and we got a new college president who wanted to measure the “success” of our graduates. His proposal was to collect data on their salaries at 5 year intervals after they graduated. Some of us objected. Suppose the graduate wanted to be a Catholic priest with a vow of poverty? Or volunteer for no salary at an NGO overseas in a third world country? Or suppose the graduates’ family was independently wealthy and the graduate didn’t have an income?

    I’m so tired of hearing the justification for change by saying, ”It will create more jobs.” [I just replace the word ‘jobs’ with ‘slaves’ when I hear that.] What ever happened to the creation of leisure? Why not measure the prosperity or success of an individual or group by how much leisure time is produced? Not idle time, as that would reward unemployment, but down time, time not spent producing something that will be sold or thrown into the economy. Time that ‘produces’ a joy in someone.

    I watch people work their asses of 40 to 60 hours a week in order to have a week-long vacation at the beach where they do nothing except sit on the beach, relax, do a little fishing or beach-combing. Step back and look at this from a larger perspective. We’re working in order to do nothing! Leisure seems to be the real goal or purpose of our efforts. So, why isn’t leisure the measure of economic success? The 10% or 1% would have a hard time controlling leisure or making much profit from it, unless they make leisure a consumptive process, which I guess they have already with off-road vehicles and paddle-boards.

    Just curious, Dan, if any of the economists that you have read have ever proposed leisure as a measure of success? How could leisure be measured? In this view, a $20K/year employee working only 25 hours a week, coaching his son’s little league game daily may be WAY MORE successful than a Donald Trump.

  2. Thorsten Veblen, "The Theory of the Leisure Class". The measurement of leisure is the time, energy, labor, and money used for purposes not clearly productive. For example, a lady's high-heeled shoes or a gentleman's necktie show that the person adorned has time to spare for decorations that require special effort and practice and not only aren't productive, but partially disable the adorned one. But such leisure pursuits have the purpose of making the pursuer more reputable, more admired by other members of the community. Indeed, the degree to which a person enjoys the admiration of others, though difficult to quantify, may be a measure of the leisure that person enjoys.

    Veblen asserts the priesthood, to the extent not visibly useful overall, performs vicarious leisure for the major donors among the worshipful, and the community then admires the donors for the extensive uselessness they have instantiated.

    Sports can be invigorating, but they can also absorb much expenditure beyond the demands of physical fitness, as you have observed with paddle-boards and off-road vehicles. The grand example of leisure as a consumptive process is perhaps the Superbowl. Go Bucs!