CREATIVE DESTRUCTION: Don Boudreaux: Uber vs. Piketty.

Problems galore fill Piketty’s book – including his failure to recognize that market-driven innovation and competition are incessantly creating new capital while reducing or even destroying the value of older capital, all in ways that move new flesh-and-blood people into the central ranks of the ‘capitalists’ while moving others onto the periphery of those ranks. (Twelve years ago Mark Zuckerberg, the son of a dentist, was no one’s idea of a capitalist. He’s now worth close to $40 billion.)

While working together earlier this week on a business trip to California, my Mercatus Center colleague Ashley Schiller and I were chatting about Uber and the assaults that governments are now launching on this amazing innovation. Ashley had a brilliant insight, which I share here with her kind permission: Uber (and other ‘sharing economy’ innovations, such as Airbnb) allow ordinary people to turn their consumption goods into capital goods.

Uber enables someone who would otherwise drive his or her car only for personal use to drive his or her car for paying customers – that is, to drive his or her car in an income-earning (and, hence, wealth-enhancing) manner. Uber enables a consumption good to easily become a capital good for however long the car owner chooses to operate as an Uber driver. For whatever number of hours car owners use their personal cars as Uber (or Lyft) cars, part of value of those cars becomes part of the value of an economy’s capital stock even if formal statistics do not yet register it as such.

Uber and other sharing-economy innovations create more productive capital and create more capitalists.

Ah. That explains why lefties hate them so much. It all makes sense now.