French economist Thomas Piketty is raising a ruckus

Not on purpose, not at all. But his new book, Capital in the Twenty-First Century (I haven’t read it, but I’ve read a lot about it online in the past few days), apparently concludes that there is no economic force that drives capitalist societies towards shared prosperity, and that ever-greater stratification is the normal thing to be expected absent governmental intervention. That alone is enough to get him called a Marxist, which he emphatically and dismissively is not, by American RW pundits. See recent editorials/reviews by Thomas Douthat and James Pethokoukis.

Questions for debate:

  1. Is Piketty right?
  2. Does what he writes make him effectively some sort of Marxist willy-nilly?
  3. If so, does it matter?

The Guardian article on this from 10 days ago, with 480 comments below:

Ross Douthat, and its a nice right-wing view at the book, IMO.

I thought the Guardian article was very interesting. I’m curious now to hear what others think about this book.

Without government to regulate the market, why would anybody think that people will equalize on their own? How much of their income do these right wingers give to charities, or the poor? How much time do they spend trying to dodge taxes, or make excuses for tax dodger, and demonize those who aren’t like them? I would think the logic is self-evident

Nevertheless, it runs contrary to received economic wisdom of the past 60 years. See below.

Jeff Faux reviews Piketty’s book in The Nation.

Timothy Shenk incorporates it in his discussion of “Millennial Marxists.”

I’m not sure that government reduces inequality except at the margins. And mostly by making rich people poorer, not by making poor people richer. So that wealth from the rich is mostly transferred to the government itself, which creates a new class, and a pretty entitled one to boot, of bureaucrats.

Now maybe there’s this theoretical good government that can wisely make economic policy in a non-self-interested way to benefit the masses, but since this government is going to be run by people, it will never actually exist.

The underlying idea of the book is that if the rate of return to capital exceeds economic growth, then inequality will tend to increase. Piketty calculates the average returns to capital as being around 4-5% historically, compared to the 2-3% annual growth we’ve seen in developed economies for the last 30 years or so. Aside from the post WWII period until about the 1970s, which looks increasingly like an anomalous period in economic history, this dynamic has largely been in effect. In other words, it’s easier to increase wealth when you already have wealth than it is when you have to work for a living. Compare the preferential tax treatment of capital gains to the tax treatment of income, as one of many examples.

I find it funny that economists consider Piketty’s conclusions so groundbreaking when any working stiff could have told them this. But then most economists have their heads up their asses.

Government makes poor people richer by building things everybody gets to use, which also sometimes serves as a jobs program.

:rolleyes: That shit again?! Look, no one goes into civil service for the money; and most money government at any level collects in taxes goes right out the door again immediately, stimulating the economy.

Yeah, ours, from the 1930s through the 1970s.

See also the Vimes’ Boots Problem.

Government intervention stifles competition. Regulatory burdens act as barriers of entry across the board. The elite know this. The elite control government as demonstrated by that empirical study cited in the Elections forum. If Piketty doesn’t account for this in his analysis, it’s worthless, even if his conclusion that capitalism leads to inequality is sound.

In a statist society, there will be income inequality, with those that manipulate government for their own ends rising to the top.

In a free-market society, there will be income inequality, with those that best satisfy the desires of consumers rising to the top.

That’s simply not true. Particularly in the Nordic countries but also in many other places, government transfers have been proven to reduce inequality for decades now. Funny enough, Sweden’s small-government reforms of the 1990s and early 2000s have been followed by record-breaking increases in inequality. Coincidence? I don’t think so.

The whole ‘governments are run by people therefore dysfunctional’ argument is just wrong. Aren’t private businesses run by people too? Why do we trust them?

Then what form of society will produce something near to income equality?

We don’t. But we deal with them because they have what we need; we don’t have to trust them in order to work for them or buy from them. Caveat emptor.

Well, apparently, whether he accounts for it or not is hard to know without reading the book. According to Jeff Faux (see link in post #6):

OTOH, Pethokoukis’ review (linked in the OP) says:


Wow, nice assertion. Care to back it up? Because if you want to claim this is universally or even largely true, then you’re going to need a cite. I think only a very few here take this claim as a given.

Yes, it sure would be easier to start a pharmaceutical company if you didn’t have to go through that painfully expensive process of clinical trials for your treatments. And it sure would be easier to start a restaurant if you didn’t need any sort of certification to show that you actually know how to cook without poisoning people.

I know of the study you’re talking about, but here’s what I’m wondering… is that really what the elite are going for? Citation, please?

Am I supposed to laugh now? Because that’s not very funny…

Sounds sexy! :slight_smile:

So his ground breaking thesis is that it’s easier to make money when you already have money, and those with money use it to drive out competition, protect their privilege, and maintain the status quo? Well, I guess it’s nice to get in down with charts and everything.

Tyler Cowen is not a fan, although that’s presumably not a surprise.