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Henry George School of Social Science
SMART TALK with Andrew Mazzone
Interview with Dr. Yanis Varoufakis
Transcript 10/16/2014
Interviewer:
Hello I’m Andrew Mazzone President of the Henry George School of
00:00:19
Social Science. Welcome to Smart Talk, on this program we discuss and
debate controversial topics with leading economics and social scientist
from around the world.
Today’s guest joining us by Skype is Yanis Varoufakis. Dr. Varoufakis is a
political economist and an active participant on current debates on the
global and European crisis from 2004 – 2006. Dr. Varoufakis served as
economist advisor to George Papandreou. He is the author of the book
Global Minotaur. Dr. Varoufakis is also a recognized speaker as it appears
as a guest analyst in the BBC, CNN and Bloomberg TV, among others.
Interviewer:
Well, Yanis, thanks for coming back and joining us on SmartTalk. I
00:01:11
invited you back because I just recently read your critique on Piketty, and
it’s going against the mainstream critiques, although there have been a
number of critiques. But I felt it was solid, sound, made sense, and it’s a
little counterintuitive to the current critiques that are being given. I mean
it’s true that his book is a sensation, it caught the zeitgeist of the times.
00:01:45
He's confirmed, uh, something we all know, and we're shocked to find
out that they're inequality in this world, and he's done a tremendous, uh,
uh, job of document it, and so we give him that. There's no, no, no, no
complaints here. But you bring up a number of points that I think are,
are crucial and serious. You're concerned about the long-term
implications of his book, and the presentation of it.
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Henry George School of Social Science
SMART TALK with Andrew Mazzone
Interview with Dr. Yanis Varoufakis
Transcript 10/16/2014
00:02:07
And I think if I could saw, sum up, number one, he's essentially using a,
a broken neoclassical model to try to explain his results, number one,
and number two, he's, he's, he's saying essentially that capitalism has
some ineh, exceh, inexorable, uh, outcomes, but he doesn’t explain why.
And in effect, he says the only good times are some, somehow
accidental and exogenous. And essentially, if that's, that's true, what can
we do to control our own fate?
00:02:38
Now, his, his solution is taxing wealth. And at the beginning this is a
problem, especially for a Georgist, because his conflation of, uh, wealth
and capital for us is very serious and obviously is very serious for you.
Your comments?
Varafoukis:
Yes, that's quite right. Uh, Piketty tells a story which is important, it
00:02:55
needs to be told, and which as you put it, uh, everybody knows. That
doesn’t mean that it shouldn’t be told again and again. Uh, the, that...
hideous inequality has been on the rise. Uh, especially after 2008, has,
uh, become, uh, uh, you know, a shared fact by all of us. It was, uh, the
Occupy movement, after all, in the center of New York, that, uh, made it
clear to everyone that this kind of inequality was intolerable.
00:03:43
And what was interesting was that, you know, the rest of American
society, and, and, and, and in the West more generally, saw the Occupy
movement with a great degree of sympathy. So Piketty's taking the
Occupy movement's message and making it mainstream. What is, more
particularly what Piketty is doing is that he's not just making it
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Henry George School of Social Science
SMART TALK with Andrew Mazzone
Interview with Dr. Yanis Varoufakis
Transcript 10/16/2014
mainstream, but he's bringing it into, uh, the established mainstream of
the economics profession.
00:04:14
If you think about the, the, the, the time of the Occupy movement, there
was this complete disconnect between what most Americans thought
and what the economists practiced. So if you were a student of
economics at Harvard, uh, or, you know, some community college,
doesn’t matter where you were, and you had your finger on the pulse of,
uh, daily events, you would get this feeling that there is something
profoundly wrong with our economy and society, that inequality is
becoming an unbearable.
00:04:49
That even the powers that be — you know, Obama won on a ticket that
was promoting a diminution, restraining this, uh, abysmal inequality. And
yet you would go into your lecture theater, you'd go into [unintelligible]
room with a professor, you'd read a textbook of economics, and it would
be [none of it there]. Inequality was a non-issue. It just didn’t feature at
all. It was —
Interviewer:
Well, it can't happen in a neoclassical model, it can't happen.
00:05:11
Varafoukis:
It’s impossible to have inequality in a neoclassical model, 'cause in a
00:05:13
neoclassical model we're all utilitarians, we all have utilities, and my
utility cannot be compared to yours. So it’s impossible to say that you
have more utility than me, because the first assumption that economics
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Henry George School of Social Science
SMART TALK with Andrew Mazzone
Interview with Dr. Yanis Varoufakis
Transcript 10/16/2014
students have learned to make is that your utility cannot be compared to
mine.
00:05:30
So inequality has been banned as a concept from economics. So what
Piketty's doing, which is very interesting and, and potentially useful, one
might have thought, is he brings, uh, given his Harvard background, and
the fact that, you know, his best mates are in MIT, are in Harvard,
[unintelligible] economists. He brings the concept of inequality in. He
makes a case that inequality should not be acceptable, that its dynamic
is toxic and it’s poisoning capitalism and democracy.
00:06:04
So that, that, you know, that is all well and good. And also, he frames it in
such a way that the economics profession, at last, at least the liberally
minded professors of economics with kudos in the profession — people
like Joe Stiglitz, Paul Krugman — uh, can embrace it, and can say,
"See? Our profession can have something useful to say about
inequality."
00:06:28
So inequality has become admitted, was admitted to the academy, to the
economics academy for the very first time through Piketty's book, and
therefore one might be excused to believe, to trust that this will now
mean that inequality is going to be tackled by the professional
economist, by —
Interviewer:
Let me just interchange there. First of all, his book was essentially
00:06:48
descriptive, and his theoretical explanation for it, I mean especially if you
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Henry George School of Social Science
SMART TALK with Andrew Mazzone
Interview with Dr. Yanis Varoufakis
Transcript 10/16/2014
go back to the capital controversies, just can't hold water. So how
can, how can you make —
Varafoukis:
Of course. And that's part of my critique too, as you know. But, but
00:07:03
nevertheless he does have a theoretical part. So he's got the
[unintelligible] and he's got the theoretical part, which is completely
consistent with the neoclassical textbook. This is what he, what makes
him the darling of the economics profession. You see, he gives the
economics profession, the neoclassical economics profession, the
mainstream, he give, he gives them, uh, an opportunity, uh, to, to
become humanized, to show that, you know, that what they do in the end
bears upon the great problem of inequality.
00:07:37
My great fear is that the, as reflecting in an important sense what you
just said, that the particular theoretical construct that he uses to do it, in
the end, is one of the greatest enemies —
Varafoukis:
[anyone who] is interested, pragmatically, in egalitarianism.
00:08:00
Eventually, they're gonna pull a surpri... this is a model that, that is not
ex, uh, explanatory. And like you said yourself, he didn’t need to do that.
He could've gone just to observe the propensity of saving of wealthy
people, and basically created essentially, uh, a logical explanation.
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Henry George School of Social Science
SMART TALK with Andrew Mazzone
Interview with Dr. Yanis Varoufakis
Transcript 10/16/2014
Varafoukis:
He, look, logical explanations are [all] important because let's say that,
00:08:18
that, that you and I observe a, a particular empirical [unintelligible]. Well,
someone can turn around and say, "Yes, but this is, you know, there is
nothing endemic about this pattern in capitalism. That, you know, it, it, it
was a confluence of, uh, factors that led to that. Things could've been
different. Capitalism could well work, could function differently."
00:08:45
So it’s important to have a logical explanation, a theoretical, analytical
explanation as to why the inequality we're observing is not the result of
just bad people making decisions. It’s not just a question of, you know,
the bankers having been allowed to get away with murder, which they
have. Uh, but that there is something endemic in our capitalism which
gives rise to that.
00:09:07
There's nothing wrong with doing that. The problem I have is that his
theoretical construct comprises three so-called economic laws, as he
pre, presents them, of which the first one, as I say, the first law of
Piketty's is a tautology, so it’s not a law. It’s like saying five equals five.
Varafoukis:
That's not a theory.
00:09:27
The second law is based on an assumption which can never hold in
reality. And the third is [trivial]. So the logical contras, construct that he's
presenting us is not a way to, to convince, uh, high-minded people that
inequality is, uh, an essential component of the capitalist machinery. No.
It is a way of bathing himself in analytical glory, and ingratiating himself
with the economics mainstream, but doing it in a way, as you put it, that
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Henry George School of Social Science
SMART TALK with Andrew Mazzone
Interview with Dr. Yanis Varoufakis
Transcript 10/16/2014
leaves him complete, leaves him and anyone who adopts his, uh,
mantra, wide open to devastating critique.
Interviewer:
Yeah, it’s poor neoclassical economics at best. I mean how, how he can
00:10:14
make his edifice stand on that, or even, uh, it’s, it’s not even a fig leaf, if
you think about it. I mean, it’s really... he might as well have dispensed
with that. Why didn’t he?
Varafoukis:
Well, because he wanted to write a book that would very simply, without
00:10:29
having any serious theory [audio cuts out] depicts capitalism as a
machine generating inequality, then to have empirical evidence that this
is what has been happening. And then to have, to, effectively to have the
monopoly of the truth about inequality, and to say, "Okay, I've given you a
theoretical explanation as to why this is happening. I've proven that it
has, it has been happening. So I'm the Isaac Newton of inequality, and
all you now have to do is, uh, follow me to the, to, you know, down the
path that leads us to a simple conclusion as to what needs to be
happening, to be happening."
Remember, social theorists are power-crazed people, right?
Interviewer:
Well, look what he's, he's rec, recommending at the end of this whole
00:11:24
thing, yes, he recommends a wealth tax. Does he mean a, a, on wealth,
does he mean it on capital, does he mean it on both? Does he mean to
split it? Does he...? I mean how does he implement it? Where does he
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Henry George School of Social Science
SMART TALK with Andrew Mazzone
Interview with Dr. Yanis Varoufakis
Transcript 10/16/2014
implement it? I mean the, the conclusion is, is, is so anticlimactic, and
the theory is so weak that he'd a been better off just pointing out the
statistics and leaving at that.
And you're, and basically what you're saying is —
Varafoukis:
But it wouldn't have sold the book, then. The book, you and I would not
00:11:55
be discussing the book, then. So it’s also a marketing strategy, right?
Interviewer:
Well, I think, I think he could've... I don't think... First of all, according to
Amazon, the average reader's only reading up to page 12 of the book,
okay?
Varafoukis:
Doesn’t matter, they buy it.
Interviewer:
They buy it, okay. Number two, no one's reading his theory. They're all
00:12:14
getting the fact that there's inequality for 200 years, and this fella dug the
records out of the monasteries, the tax, the tax, uh, agencies of various
countries, and he's, he's obviously intellectually honest in that sense.
And so the figures stand for thems, themselves. But what generative
mechanism has he demonstrated?
Varafoukis:
But, but, but hang on a sec. You have to see things from a slightly
00:12:44
theological perspective here. Now, remember, uh, most believers —
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Henry George School of Social Science
SMART TALK with Andrew Mazzone
Interview with Dr. Yanis Varoufakis
Transcript 10/16/2014
Christians, Muslims, Jews, whatever — uh, they don't understand the
minutiae of, uh, the theologist of their religion, right?
Varafoukis:
This is, only the, the theological scholars spend a whole lifetime
00:13:06
concerning themselves with that. You know, even, even, even the, the,
the least accomplished believer, then they kneel down and pray, they like
to know that there are these theologians who have the theory. They
don't understand the theory themselves, the believers, but they, they,
they, they, it’s important to them that they, they assume that some
theologian has worked out the theology.
00:13:35
They don't want to read it, it’s too complicated, it’s too byzantine. [laughs]
Right? Similarly, believers in Piketty's, uh, you know, followers of Piketty,
the people who actually buy the book have heard that, you know, several
chapters in there have the theoretical component, which is equivalent to
deep theology. They don't want to read it, because first they don't
understand, and then secondly they're not bothered with it.
00:14:00
But it, it is important to them that that theoretical component is there. So
to understand and discuss the power of Piketty, you've got to appreciate
the role that this theoretical part plays in giving discursive authority and
value to the whole enterprise. Now, you and I can delve into this
theoretical component and find holes everywhere.
Interviewer:
Well, Krugman said, he said this was a great book that was written. I
00:14:24
mean, Krugman, of all theorists, should know better about theory.
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Henry George School of Social Science
SMART TALK with Andrew Mazzone
Interview with Dr. Yanis Varoufakis
Transcript 10/16/2014
Varafoukis:
Now, Paul Krugman is, uh, a colleague and, uh, an academic economist
00:14:34
of, uh, substance and of a, and someone who has made a huge
contribution, especially during the years of the Bush Administration,
when he used his New York Times column singlehandedly to confront a
great deal of, uh, falsities and toxic economic views and policies.
00:14:59
So this is my preface, saying effectively that I have a great deal of
admiration for, for Paul Krugman, his contribution to public debate so far.
Except I do not value tremendously his theoretical, his own theoretical
perspective. If you look at the way he understands the world, Paul
Krugman that is, and he, he, he, he makes a point of repeating that, so
this is not an allegation, this is simply repeating what Paul Krugman
himself says very often.
00:15:30
He has a ver, a, a, a perspective from which he sees the world that I
think it is a single sector economy model.
Varafoukis:
Think about it. Everything he talks about is couched in terms of the ISLM
model that —
Interviewer:
Right.
Varafoukis:
— undergraduates learn in macroeconomics 101.
00:15:50
Now, I'm not going to go into this in any particular way, except say,
except to say that it is a single commodity universe. It is as if the
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Henry George School of Social Science
SMART TALK with Andrew Mazzone
Interview with Dr. Yanis Varoufakis
Transcript 10/16/2014
macroeconomy produces only one good, and that one good is produced
by one capital [good]. So, uh, in fact, it’s, it’s actually, it’s the same
commodity and capital good. So it’s like a corn model, like, you know,
Ricar —
Interviewer:
Ricardo's model, sure.
00:16:15
Varafoukis:
Uh, theory in which you are asked to imagine of a very simple world in
00:16:16
which there's only one commodity — it’s corn — and corn can be eaten,
so it’s, it’s a consumption good, or it can be invested. You save it to use
the seeds in order to plow the land next year.
Varafoukis:
That's a capital good. And in that kind of world, which finds its way into
00:16:35
Paul Krugman's analysis, since he's stuck with this ISLM model, which is
a one-commodity world model, in that world, uh, returns to capital are a
little bit difficult, you know, difficult to envisage.
Varafoukis:
So, you know, if you have only corn, you know what the returns to corn
are.
Varafoukis:
If you save, if you save a, a fistful of, of corn seeds, you know how much
00:17:04
corn you'll get out of it.
Interviewer:
Yes.
Varafoukis:
You plow, when you, you know, you cultivate the land with it. So —
00:17:09
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Henry George School of Social Science
SMART TALK with Andrew Mazzone
Interview with Dr. Yanis Varoufakis
Transcript 10/16/2014
Interviewer:
Don't need money.
Varafoukis:
There's no money in this. There's no money, money in any of these
00:17:12
economic models. Economic models are not capable of handling money.
Money is too complicated a concept. Uh, uh, to, to put it simply, if you
introduce money into any of these models, those models explode.
So they become indeterminate. In other words, anything goes. Any, any
price, any quantity is possible in these models. So it’s like, you know,
having a meteorological model that can predict that tomorrow you may
have, uh, hail, shine, rain, or, uh, you know, uh, drizzle. It’s, it’s a useless
model. [unintelligible] predict that anything is possible, it’s not predicting
anything.
Varafoukis:
So money cannot be handled by this model. So the fact that Paul
00:17:49
Krugman liked Piketty's analysis is not a great surprise to me. Because
in the end, their neoclassical background, uh, is, is, is a common one, is
a shared one. Now, the difference between Krugman and, and Piketty is
that Krugman is a sincere man, and a thoroughly progressive political
economist.
So he uses his ISL, ISLM, simplistic model in order to, to say and do
good things.
Varafoukis:
The Bush... yeah. So when he talked about the Euro Zone, when he
00:18:25
talks about, you know, Wall Street, when he talks about the trickledown
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Henry George School of Social Science
SMART TALK with Andrew Mazzone
Interview with Dr. Yanis Varoufakis
Transcript 10/16/2014
effect, in spite of his simplistic modeling, he says some excellent things,
and very useful interventions that he makes in the political arena. My
concern about Professor Piketty is that he's much shiftier, and far less
interested in changing the world in important ways than Paul Krugman is.
What they do have shared in common is an oversimplified view of
capitalism. In effect, a view which is inconsistent with [unintelligible]
existing capitalism.
Interviewer:
Yes. And of course, what policy prescriptions can you really take from
00:19:06
Piketty's analysis? In real life. What policy...? You can't take any. If you
think about it.
Varafoukis:
Well, this is an excellent question, and let me answer it this way: His
00:19:19
theoretical model is constructed so as to assume away the most [audio
cuts out] that he's bargaining with. So, you know, when, when you accept
a job or you are being interviewed for a job or you're doing a job, uh, you
have certain bargaining power which will determine the terms and
conditions of your employment [unintelligible].
Once you start working with an employer and you're producing value for
the employer, then it’s a question, it’s like a, a, a tug of war between you
and the employer —
Interviewer:
Not in, not in Piketty's formulation. There is no bargaining power.
00:19:57
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Henry George School of Social Science
SMART TALK with Andrew Mazzone
Interview with Dr. Yanis Varoufakis
Transcript 10/16/2014
Varafoukis:
There's no bargaining, there's no bargaining. None, none whatsoever.
00:20:00
It’s, uh, like, like, I call it the Matrix economy.
Interviewer:
Hm.
Varafoukis:
If you remember the —
Interviewer:
Yes.
Varafoukis:
— the movie "The Matrix,” where the machines produced everything.
Interviewer:
Hm.
Varafoukis:
Okay, there's no bargaining between the machines. They're all cogs in a
00:20:15
bigger machine. So the, that, and that is not capitalism. Capitalism's a
realm of continual bargaining and power games. Power games between
buyers and sellers.
Varafoukis:
Between suppliers and companies. Between governments. Between
00:20:27
departments of governments. Between men and women at, at a house,
who's, who's going to take the garbage out. You know, our society's
based on bargaining. Now, markets play a role in mediating this
bargaining, and sometimes doing away with it when you accept the
prices given.
But you can't understand capitalism if you assume that all prices are
God-given and everybody simply sits back and takes them.
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Henry George School of Social Science
SMART TALK with Andrew Mazzone
Interview with Dr. Yanis Varoufakis
Transcript 10/16/2014
Interviewer:
Hm.
Varafoukis:
Uh, and this is what Piketty's, uh, model does. It assumes that prices are
00:20:56
given, that there, there, there is some kind of divine mechanism that
determines them, and everybody else accepts them. And these price,
they simply follow his mathematical schema, all right? So it is like saying
I'm going to create a model of the world where capitalism doesn’t exist,
and I'm going to use this in order to given prescriptions as to what people
should do within capitalism, which is absurd, okay?
Interviewer:
Okay. But now, what he says here — let me, let me just interject right
00:21:23
there. So if we go to a policy prescription, which he does, he
immediately jumps to, "I'll tax wealth," basically not disaggregating it, and
assuming that wealth is, is part of a production f, function that's
determinate, which it can't be. And so it hangs out there, and it’s even
unexplainable why wealth, if he looked at it, is so much bigger than
capital these days, especially after 2008. All of a sudden there's no,
capital is not being built, but wealth is being built at least on paper to a
tremendous degree.
00:21:59
So his prescription is, "We're going to tax this wealth," which essentially
is becoming monetary, and, uh, almost not anchored to reality. And we
essentially are in a situation where everything is indeterminate now. And
so everyone's congratulating themselves about having to, made this big
discovery. This discovery leads us to absolutely nowhere.
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Henry George School of Social Science
SMART TALK with Andrew Mazzone
Interview with Dr. Yanis Varoufakis
Transcript 10/16/2014
Varafoukis:
This is entirely so. But look, you just put your finger on, uh, the reason as
00:22:24
to why Piketty has enjoyed such great discursive success. Because
everything you've said makes no sense in the context of his own
analysis.
Varafoukis:
What we have is an amazing piece of discursive power — propaganda,
00:22:59
in a sense — because to begin with, the theoretical part of the work
conflates wealth with capital. There's no difference between capital and
wealth. Why? Because he wants to be able to measure it. Now, as we
all know, we can't measure capital.
Interviewer:
Can't measure it.
Varafoukis:
It’s like love. It’s very important, it exists. Like beauty, right? I mean
anyone who denies the concept of beauty, uh, is a very sad person.
Nevertheless, anyone who tries to measure it is, uh, is, is going to
destroy beauty and love, uh, and certainly never know it. So this is the
problem with capital.
00:23:39
Uh, we can't measure capital. I mean we could if we lived in a single
commodity world where we only had corn. Then we could measure it.
It’s whatever corn we don't consume today, in order to plow into the
fields tomorrow. But when we have anything from computers to steam
engines or to, uh, you know, oil, uh, as, uh, capital goods, uh, then it is
impossible to, to, to bring them together into one measure, one metric of
capital.
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Henry George School of Social Science
SMART TALK with Andrew Mazzone
Interview with Dr. Yanis Varoufakis
Transcript 10/16/2014
00:24:06
So what he says is, "Okay, we have a problem measuring capital. We
won't measure capital. We will measure wealth.
00:24:11
His model precludes policy decisions of let's say governmental
interference. So again, like you said, we have a concept that feels good,
sounds good, but we have no operative way of dealing with it.
So everyone's going to look at this, we're all feeling good about it. And
we, Janet Yellin, the Fed governor, she’s discovered there's a lot of
inequality going on. It’s, everyone's making this official. And there we
have it. But nobody is doing anything about it.
Varafoukis:
Well, in a sense, in a sense, that's quite right, in a sense. The moment
00:24:50
you conflate capital and wealth in order to make your model work, to
make the mathematics work, you become irrelevant from a policy point of
view. And you become irrelevant because you cannot distinguish
anymore between a robotic assembly line, uh, a portfolio of bonds or
shares, or indeed your grandmother's silverware in the cupboard, okay?
So whether there's productive cap, a productive asset or not makes no
difference.
So if, if you don't like the distribution of wealth, if you've already used in
your classical model, which has banned bargaining from the picture, it
has taken it out, so there's no bargaining between capital and labor,
between different, uh, uh, departments of state, between buyers and
sellers, then what is left? You're only left with the distribution of wealth.
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Henry George School of Social Science
SMART TALK with Andrew Mazzone
Interview with Dr. Yanis Varoufakis
Transcript 10/16/2014
00:25:45
And if you don't like this distribution of wealth, because it’s too unequal,
which it is, then because you've lost all other —
Interviewer:
Policy levers, really.
Varafoukis:
— oh, no other levers, the only, the only conclusion you can come up
with is the redistributed wealth, which is, you know, and how do you
redistribute wealth? Through tax, taxing wealth. Now, I don't have a
problem with taxing wealth, but it depends on what wealth. Do we really
want to tax our grandmother's silverware? What if your grandmother has
absolutely no income?
Interviewer:
No income, exactly.
Varafoukis:
You force her to sell the silverware to give you 20% of it? Uh, what, what
00:26:18
do you do with an investor who has actually invested in productive
capacity that is call, creating jobs? Do you, do you, do you actually tax
the machinery? And that's a, a tax on investment. [laughs] Uh, I'm all in
favor of taxing, uh, you know, the mansions of the bankers, uh, wherever
they, they have —
Interviewer:
Or their portfolio of derivatives, which, uh —
Varafoukis:
Indeed. But if you have no, if you've banned from yourself, yourself,
from making a distinction between a portfolio of assets and a robotic
plant, or your grandmother's silverware, you're, you're left in no man's
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Henry George School of Social Science
SMART TALK with Andrew Mazzone
Interview with Dr. Yanis Varoufakis
Transcript 10/16/2014
land policy-wise. But that doesn’t concern Mr. Piketty because Mr.
Piketty is not interested in changing the world and making it a better play,
place.
00:27:10
He's interested in becoming the guru of inequality, and for creating a link
between the mainstream of economics profession with the social
sentiment that there's something wrong with inequality, as long as that
link does not result in policies that actually do something about
inequality. This is why I was saying that he's a great enemy in the end of
pragmatic egalitarianism.
Interviewer:
Well, he has, he has formed a group of 30 likeminded economists who
00:27:35
are going to get together and wring, handwring about this problem, and
hopefully, uh, impact institutions in some way to induce change. But his
model doesn’t prescribe that, but that's apparently his stated objective —
to, uh, form these committees. I mean, 'cause essentially, his, other than
taxing, his prescription doesn’t allow for intervention in government
policies, or at least he hasn’t specified what they would be, uh, what he'd
be attacking based of his policy or, or his own model.
Varafoukis:
Look, I, I wish them well, and I hope they change the world in, in a
positive way. I don't know anything about this group, but I do know about
enough of Piketty group — you may have noticed that in France, where
Professor Piketty lives and works and lives, he has formed a group of
some like 14, 15 economists. It’s called the Piketty Group.
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Henry George School of Social Science
SMART TALK with Andrew Mazzone
Interview with Dr. Yanis Varoufakis
Transcript 10/16/2014
00:28:38
And the Piketty Group is not the French Piketty group. Uh, is, is not
geared towards doing something about inequality. Their remit is to do
something about the collapsing European Union, and in particular the
Euro Zone and the euro currency. So they have published a manifesto,
which is called "The Piketty Group Manifesto" on what to do with Europe.
I'm mentioning this because, let's face it. You know, you, you, one gains
insights from looking at these parallel [political] projects.
If you look at this manifesto, actually it’s just like he spoke, beautifully,
and you think, you know, it’s full of good sentiments about Europeans at
least, uh, doing something about Europe, and uniting as opposed to
allowing the Euro crisis to fragment the European Union and
[unintelligible] leads to its collapse
Interviewer:
But it doesn’t devolve from his book, that kind of approach is not even
00:29:30
signaled. Uh, so he's really shifted tenses here. There's nothing from
his, his book that would enable him or force him to become an
institutional intervener, uh, regardless of whether it’s, uh, austere or not.
I mean, where does he come from?
Varafoukis:
Look, I suppose there is, there is something that you could, his, his
answer to this would be that his books leads to the safe conclusion that
unless there is a de, redistribution of wealth, then democracy is in peril.
Interviewer:
But, ah he’s not proposing that
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Henry George School of Social Science
SMART TALK with Andrew Mazzone
Interview with Dr. Yanis Varoufakis
Transcript 10/16/2014
00:30:06
Uh, you know what he reminds me of? This is, this is not a new story.
He reminds me of a very interesting debate in the early '70s, which of
course everybody remembers very well, and I'm sure you do, between,
at the level of political philosophy, between, uh, John Rawls —
Varafoukis:
— bertarian Robert Nozick.
Varafoukis:
I think that I would, I would say this: Thomas, Thomas Piketty is a
second-rate version of John Rawls.
Varafoukis:
John Rawls was a philosopher, so he was a bit smarter and more
00:30:34
cultivated. Uh, but in the end, what, if you recall, "The Theory of Justice",
which was —
Varafoukis:
— a great book John Rawls published in 1971, uh, made a very simple
point: That if we all had the opportunity of passing judgment on, on our
society behind a veil of ignorance, without knowing what role we would
play in that society, without knowing whether we'd be black, white, man,
men, woman, rich, poor, uh, disabled or able-bodied, what kind of society
would we choose? Would it be the society we live in?
00:31:05
And he answers, his answer is of course not, because, you know, if you
are rich, and you think, "Okay, my chances of remaining rich in this
society are very tiny because the rich people are very few compared to
the poor people," so if the, some machine were to randomize and put me
in some social role or body, uh, at random, then, uh, I, I would want to go
back to the society that, in which I am [can, cannery rich].
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Henry George School of Social Science
SMART TALK with Andrew Mazzone
Interview with Dr. Yanis Varoufakis
Transcript 10/16/2014
So it was a mechanism that John Rawls, uh, recommended to us for
passing judgment on the justice of our society. And, and, and there was
a poli, policy implication there in the end, because he, his theoretical
model led to the conclusion that we should want to maximize the, the
welfare of the, of, of, of, of the least well off person.
Varafoukis:
That's the mini-max rule of John Rawls. So he, he came up with a pretty
radical agenda for using the tax system in order to keep redistributing
from the haves to the have-nots, until the have-nots reach a certain level,
such that if you redistribute further, then their own level is going to suffer
because the efficiency of the capitalist system is going —
Varafoukis:
— to be diminished.
00:32:17
And then, remember that what Robert Nozick did — he destroyed John
Rawls in his 1974 book "Anarchist State and Utopia" by asking a simple
question, a simple question. He said, "Okay, Mr. Rawls, let's agree with
you. We should do what you're saying and that, you know, we are now in
a situation where we have optimal justice, and the best possible
distribution of income according to your own scheme, right? Now, what
happens of one, one of us develops wonderful skills at basketball, let's
say?"
00:32:49
That's the example he used, right? "And suddenly everybody wants to
pay him money to watch him play basketball. We have a, a, a, a, a
choice between two courses of action here. One is to ban people from
paying the basketballer, because allowing them to do it would skew the
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Henry George School of Social Science
SMART TALK with Andrew Mazzone
Interview with Dr. Yanis Varoufakis
Transcript 10/16/2014
distribution, suddenly it wouldn't be optimal anymore. Or secondly, to
allow them to do it, in which case we, we agree that that distribution was
not optimal."
Varafoukis:
He destroyed — the simple [unintelligible] point he made... By the way,
00:33:16
it’s a point that Marx had made, essentially, before, right? Was that what
matters is not so much the outcome, it’s the process. If the process is
just, then we're okay. Then if you have inequality at the end, who cares?
But if the process is unjust, okay, so where I disagree with Nozick and
the libertarians is that they assume that the market process, if, if it’s,
there's no interference from government, is by necessity good and
proper. I disagree with that.
00:33:50
Okay? But he was right that what matters is process. Now, Rawls had a
static view, which could be destroyed by the libertarians. And what has
happened since the 1970s — and I hope you agree with this — is that
this kind of social democratic, in America, liberal, small L liberal view of
the world, of John Rawls, has been destroyed by the libertarians, who
are saying, "Who are you to impose upon us a particular distribution
which you think, of income or wealth, which you think is optimal or just?
Let, you know, the process determine that."
00:34:24
And, and my great fear is that Piketty is setting himself up as a new John
Rawls, less sophisticated, who is going to be completely destroyed by a
libertarian who comes and says, "This is all rubbish. Your distribution of
wealth, firstly, doesn’t reflect the real distribution of wealth because
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Henry George School of Social Science
SMART TALK with Andrew Mazzone
Interview with Dr. Yanis Varoufakis
Transcript 10/16/2014
you're conflating wealth and capital and all that. And secondly," exactly
like Nozick asked the question, "Talk about the processes. What have
you got to say about the process?" Piketty has nothing to say about —
Interviewer:
Nothing to say about it, and in effect he'll destroy, by getting hammered
00:34:58
that way, he'll destroy any progressive action from being taken.
Varafoukis:
So anybody who, who subscribes to Piketty, for the purposes of
egalitarianism is, in the end, creating an opening for a libertarian to come
in and destroy egalitarianism.
Interviewer
Well, I think, Yanis, that's a good point to end this interview.
Varafoukis:
Thank you so much.
00:35:20
Interviewer
And that’s it for this edition of Smart Talk. On upcoming shows we will be
00:35:23
talking with economist and social scientist as Eamonn Fleington. Mr.
Fleginton is an Irish journalist and author. His books deal with global
economics and globalism. He is a former editor for the financial times in
Forbes.
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