The "Chamley-Judd redistribution impossibility theorem"

The great source of inequality in today's America is capital gains - the rich, whether they be Wall Street, Corporate or Techno-Oligarch make the big bucks from capital appreciation.  And the redistributionist left insists that any solution to said inequality must include rather swingeing taxes on capital (the current toast of the beggar thy neighbor crowd - Prof. Piketty - recommends 80% overall) or the whole bloody thing is just a put up job to win votes.  And this is a big  problem.  To put it simply, if you tax capital you get less of it, which means you get less productivity which means you lower workers wages.  Garret Jones, an Econ Professor at George Mason University explains in a little more detail:

 It's obvious that higher taxes on capital deter long-run investment and long-run planning. Reasonable savers care about after-tax returns on their savings, which explains why tax-free municipal bonds are often able to offer lower interest rates than taxable U.S. government bonds. The Boston University economist Christophe Chamley and the Stanford economist Kenneth Judd came up independently with what we might call the Chamley-Judd Redistribution Impossibility Theorem: Any tax on capital is a bad idea in the long run, and that the overwhelming effect of a capital tax is to lower wages. A capital tax is such a bad idea that even if workers and capitalists really were two entirely separate groups of people—if workers could only eat their wages and capitalists just lived off of their interest like a bunch of trust-funders—it would still be impossible to permanently tax capitalists, hand the tax revenues to workers, and make the workers better off.

Why? Because the tax on capital would shrink the supply of machines, which workers use to become more productive and earn more. In the (too) simple world of economic models, the Chamley-Judd result shows that, for instance, a capital tax that raised revenue equal to 1 percent of gross domestic product (GDP) would cut wages by more than 1 percent of GDP. It's impossible to "redistribute" income to workers in a way to raises the average worker's total income. What you gain from the government check is more than lost in your weekly paycheck.

And tragically for our left wing looters, the models and math that lead to that conclusion are rather non-controversial and mainstream as economic tools go - I suspect even Paul Krugman believes in them.  If I were Al Gore I'd say that the 'science' is settled on the question of whether taxing the bejesus out of capital will lead to less of it being deployed.  I suppose you could deepen the Neo Marxist bender that Democrats seem to be on right now and pretend that you can 'force' capitalists with accounts that can shift countries in a millisecond to invest in negative return projects because...."Hope and Change" or some other such nonsense but I think we know that that course of action has about as much chance of success as a North Korean has of living to retirement age just because Kim Jong "The Crazy" Un tells him to.

So at the end of the day Msr. Piketty's 'Big Idea' turns out to be that the we should cut off our growth nose to spite our envious face.  Indeed, one has to only look at the wonder that France has become (can you say 'flaming banliue police no go zone'?  I knew you could) to get excited by that brilliant brainwave. The French are so clever.

That being said, never, never, ever underestimate the tribal, blinkered parochialism of our bien pensants.  After all, there is a huge hidden benefit to massive redistribution for those that hold political power:  they get to pass out the loot.  The one indisputable outcome of a vigorous program of 'get the rich' redistribution is a redistribution of power from you and I to the fixers and favor runners in Washington.  Which is why Le Piketty is the hottest thing since sliced brioche among our leftist intelligentsia.

Power, baby, it's always about the power.*

*That's not to say that there aren't intelligent ways to reduce the scale of plutocracy and Scott Sumner makes a pretty good case for them - particulary high marginal taxation of 'sumptuary' consumption here.  To his list I would add: eliminate "to big to fail" subsidies of the banks (via John Cochrane here) and legalizing recreational drugs - or more accurately:  leveling the playing field between the poor's 'illegal' recreational drugs and the rich's "prescription based, so called ethical" recreational drugs.  The elite always get what they want.  After all, they have all the lawyers and money.  It's respect for other human's sovereignty that they lack.