I’ve finally received my copy of Capital in the Twenty-First Century, Thomas Piketty’s magnum opus that has already risen to the status of a cult book for the political left. It is a good rule never to comment on a book you haven’t read cover to cover. I’m not going to stick with this rule, this time, for two reasons. First of all, I am not up to comment competently on the book, neither now nor when I’ll put it down: I simply lack both the statistical training and the economic knowledge that is needed to tackle the many arguments made by Piketty. I hope somebody writes a good review of the book. Paul Krugman wrote a long and enthusiastic one, but my ideal candidate would be Deirdre McCloskey. Second, I find Piketty’s book a most intriguing read (I’m reading the English translation, and I find it extremely well written: clear and evocative at a time), and every page prompts comments, reflections, and occasional outrage.
However, there are a couple of comments I’d like to share.
First, the author maintains that inequality is the central issue of the political debate. He writes:
(…) the distribution of wealth is too important an issue to be left to economists, sociologists, historians and philosophers. It is of interest to everyone, and that is a good thing. The concrete, physical reality of inequality is visible to the naked eye and naturally inspires sharp but contradictory political judgments. Peasant and noble, worker and factory owner, waiter and banker: each has his or her own unique vantage point and sees important aspects of how other people live and what relations of power and domination exist between social groups, and these observation shape each person’s judgment of what is and is not just.
Piketty maintains that “social science research on the distribution of wealth was for a long time based on a relatively limited set of firmly established facts together with a wide variety of purely theoretical speculations”, and he wants to fill in with some better grounded information. Fair enough, but is it really true that the distribution of wealth is the central problem we confront, as we enter the public debate? I mean, couldn’t it just be that some of us do not care about inequalities? I know somebody may reply that indeed, there are people that do not care about inequalities: the rich. But why should the drive towards a more equal distribution of wealth be the central question for all those interested in politics? Surely inequalities are often visible to “the naked eye”: but so are, for example, asymmetries in the distribution of not wealth, but power. We live in societies that are centered around stable power asymmetries: and yet we tend to make fun of those that would like to equalize the power of men over men, as most people think that anarchists rightly belong to the periphery of the learned debate.(*)
Piketty’s book is being praised for its scientific worth, but also because he argues that
Since the 1970s, income inequality has increased significantly in the rich countries, especially the United States, where the concentration of income on the first decade of the twenty-first century regained – indeed, slightly exceeded – the level attained in the second decade of the previous century.
Well, I am surely totally mistaken, but isn’t this a wonderful argument for not caring that much about inequalities per se (vis-à-vis, for example, inequalities as the result of perverse incentives, exploitation, legal privilege or political intrigues)? Piketty reminds his readers of the poverty and destitution experienced by the masses in the 19th century, painting a Dickensian picture of those times. Whatever we may think of bankers’ bonuses, is today’s situation, in the Western world, really comparable?
(*) Piketty asks “how would one arrange the division between capital and labor” in “an ideal society” (emphasis added). He maintains that “political economy ought to study scientifically, or, at any rate rationally, systematically, and methodically, the ideal role of the state in the economic and social organization of a country” (emphasis added). He seems to believe this to be a rather uncontroversial statement. Is it really?
READER COMMENTS
Becky Hargrove
Apr 14 2014 at 8:59am
For me, Piketty’s book is best read and commented on in small chunks! Indeed, it might take me a month to finish the book. Even though I disagree with him in the central aspect of inequality, the ways in which he frames discussion of wealth and growth potential (or in his case what he believes to be a lack of growth for demographic reasons) makes it easy to bring these elements back into ongoing discussion. And that’s something I definitely look forward to.
Julien Couvreur
Apr 14 2014 at 11:26am
Does Piketty explain his focus in income inequality as opposed to other forms of inequality (say wealth inequality)? My understanding is that wealth inequality by and large still follows a Pareto distribution, and that is broadly the case in most countries.
Don Boudreaux
Apr 14 2014 at 11:53am
Julien Couvreur: I’ve so far read only 60 of the 600 or so pages of Piketty’s book, but can report that he does indeed devote much attention to wealth inequality. Indeed, if I can judge from what I’ve read so far where Piketty is going, wealth inequality will play an even larger role in his narrative than does income inequality.
Charles A
Apr 14 2014 at 4:23pm
A Marxist review of Piketty’s book is at
http://mltoday.com/professor-piketty-fights-orthodoxy-and-attacks-inequality
LD Bottorff
Apr 14 2014 at 6:21pm
I admit that I will be biased from the start. I am a capitalist; I believe in the morality of letting the owners of capital control their capital within the constraints of a free market. He is a socialist. Perhaps I should read the book and try to understand why everything I believe about the ethical status of making money is wrong (to paraphrase Andrew Hussey). Or, perhaps I’ll wait for Don Boudreaux’s comments on the book.
Roger McKinney
Apr 14 2014 at 8:24pm
Is per capita gdp today higher than in 1900? Of course it is. Even the poor are much, much better off. So if everyone is better off, why worry about inequality?
If someone is stealing from the poor, then we should get upset. The only theft I can find is the redistribution effects of inflation. Inflation is a tax on the working poor and rent for the wealthy because of Cantillon effects: the rich get the new money first and can by stuff, especially assets, before prices rise. The working poor get it last.
The working poor rarely see their wages rise as fast as price inflation but if they do there is a lag of at least a year.
According to the ABCT, Fed inflationary policies cause booms and busts. The working poor get hurt during the boom because wages don’t keep up with prices, then they lose their jobs in the bust.
High taxes and regulations with union wages destroy factory jobs, the working poor’s best chance at a better life.
Big corporations and the wealthy earn rents by bribing Congressmen through campaign contributions to appoint their cronies to regulatory agencies where they right regs to benefit and protect the rich and power corporations.
The US has become much more socialist at the same time that inequality has risen so dramatically.
I’m sure Piketty addresses all of these in his book!
Pajser
Apr 14 2014 at 10:02pm
Piketty‘s main thesis is
“The fundamental inequality, which I will write as r > g (where r stands for the average annual rate of return on capital, including profits, dividends, interest, rents, and other income from capital, expressed as a percentage of its total value, and g stands for the rate of growth of the economy, that is, the annual increase in income or output), will play a crucial role in this book. In a sense, it sums up the overall logic of my conclusions.” (p. 25).
Simple truth and nice formulation. But he still want capitalism and he doesn’t even discuss socialism seriously.
Urstoff
Apr 14 2014 at 11:53pm
Is he still only talking about physical capital in his book, or does he include human capital, which is the dominant form of capital these days?
ChrisA
Apr 15 2014 at 8:42am
I am in almost despair when I see this “monetary inequality” is bad meme coming up again. Have people learned nothing from the disasters of the 20C? Every attempt to address the “problem” of monetary inequality ended up in disaster, with millions of people killed and many billions in poverty. We did this experiment already many many times, we don’t need to do it again.
Craig Jones
Apr 17 2014 at 3:14am
You ask: “But why should the drive towards a more equal distribution of wealth be the central question for all those interested in politics?”
Because politics is the mechanism for the allocation of values, including power — especially power.
Power and wealth are often, if not always, joined at the hip. To have more of one is, almost always, to have more of the other.
To have more power is to have the power to deny power to others, which tends toward a tyranny which is antithetical to democracy.
Don’t tell me I’m wrong. Show me an historical example of where great wealth and power DO NOT result in anti-democratic tyranny.
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