When economists aggregate all the various types of capital into a single quantity — corporate paper, equipment, patents, real estate, et cetera — they make it impossible to know whether the right tax incentives will channel this abstraction into labor income, productivity, or growth. Most often, liberated capital flows into asset bidding, more debt, corporate stock buybacks, dividends, and idle cash to be hoarded. You might call it wealth, but you’d need the right education to believe it.

Historically, the tendency in American economics has been to conflate investment talk with trading talk, which opens the door to the argument that cutting tax rates for large savers will increase the funds available for starting businesses and creating jobs, rather than for taking bets and protecting status. Since high rates of return should mean available investment opportunities, the confusion leads people to oppose any limits on profits. This makes it difficult to determine what type of social activity our financial institutions are sustaining — increasing the income of ordinary workers or safeguarding hoarded wealth. The devastating effects of this confusion are now self-evident, and they cast a shadow over the Clinton and Obama Administrations.