Thomas Piketty: Inequality in Capital Distribution and Growth Rate of Economy/Labor vs. Growth Rate of the Return on Capital

  • Posted by a hidden member.
    Log in to view his profile

    May 04, 2014 4:59 PM GMT
    Thomas Piketty’s new book, Capital in the 21st Century, painstakingly details the dynamics of wealth and income inequality throughout the last two centuries, and offers a somewhat grim picture of the future of economic inequality. Along the way, Piketty also offers his theory of the cause of exploding executive pay and how we can successfully combat this destructive trend. (Matt Bruenig The Week 2014-03-20)

    In Capital in the Twenty-first Century, Piketty sums up his research, tracing the history and pattern of economic inequality across a number of countries from the eighteenth century to the present, analyzing its causes, and evaluating some policy fixes. Spanning nearly 700 densely packed pages, it’s a big book in more than one sense of the word. Clearly written, ambitious in scope, rooted in economics but drawing on insights from related fields like history and sociology, Piketty’s Capital resembles nothing so much as an old-fashioned work of political economy by the likes of Adam Smith, David Ricardo, Karl Marx, or John Maynard Keynes. But what is particularly exciting about this book is that, due to advances in technology, Piketty is able to draw on data that not only spans a substantially longer historical time frame, but is also necessarily more complete and consistent than the records earlier theorists were forced to rely on. As a result, his analysis is significantly more comprehensive than those of his predecessors--and easily as persuasive…Capital is a consistently engrossing read, encompassing topics including the stunning comeback that inherited wealth has made in today’s advanced economies, the dubiousness of the economic theory that a worker’s wage is equal to his or her marginal productivity, the moral insidiousness of meritocratic justifications of inequality, and more.

    But the book’s major strength lies in Piketty’s ability to see the big picture. His original and rigorously well-documented insights into the deep structures of capitalism show us how the dynamics of capital accumulation have played out historically over the past three centuries, and how they’re likely to develop in the century to come…

    America’s twenty-first-century inequality crisis is, if anything, even more daunting and complex than the one we experienced a century ago. But as Piketty reminds us, the solutions to this problem are political, and they lie within our grasp. Should Americans choose to deploy those solutions, not only would we be doing the right thing, we’d be living up to our deepest traditions and most cherished ideals.” (Kathleen Geier Washington Monthly 2014-03-01)
  • Posted by a hidden member.
    Log in to view his profile

    May 04, 2014 5:04 PM GMT
    Reader Review by Aguadito

    If I could give more than 5 stars I would. As a former Libertarian who realized the path quickly leads to oligarchy with such an ideology, Piketty's book is a wonderful reminder of just how wrong I was back then.

    The empirical work he has done in assembling the income and wealth concentration for countries is simply invaluable. We have some data like gini and labor vs. capital income, but to meticulously collect and analyze specific percentiles of income and wealth in many nations is truly groundbreaking. No longer can people who deny the inequality we have in the United States. No longer can people deny that we are in a new gilded age. The regulatory capture in our wild west capitalism has led to outright corruption being "legalized", and the politicians merely keep deregulating, cutting taxes, cutting spending on public programs.

    Piketty not only provides the important data, and the historical context and analysis, but makes some very clear policy prescriptions. Tax inheritances, get some sane corporate governance standards to stop the insane overpaying of executives, and strengthen public institutions that provide opportunity to the masses.

    Remember, the r in r>g is AFTER TAX. We can reverse this if we change the incentives that allow the American oligarchs to use accounting shenanigans, tax havens, and lobbyists to rig rules in their favor.

    I recommend this book to anyone who has irrational anti-government tendencies or liberals who still defend Obama and other corporatist Democrats. It is time for this generation to get radical and reform this disgraceful system.
  • Posted by a hidden member.
    Log in to view his profile

    May 04, 2014 5:15 PM GMT
    StephenOABC saidReader Review by Aguadito

    The empirical work he has done in assembling the income and wealth concentration for countries is simply invaluable. We have some data like gini and labor vs. capital income, but to meticulously collect and analyze specific percentiles of income and wealth in many nations is truly groundbreaking.

    No longer can people who deny the inequality we have in the United States.

    No longer can people deny that we are in a new gilded age.

    The regulatory capture in our wild west capitalism has led to outright corruption being "legalized", and the politicians merely keep deregulating, cutting taxes, cutting spending on public programs.


  • Posted by a hidden member.
    Log in to view his profile

    May 04, 2014 5:21 PM GMT
    Reader Review by Adam:

    Thomas Piketty's "Capital in the Twenty-First Century" is a brilliant analysis of the long term distribution of income and wealth. The book draws on reams of data from the United States and numerous other countries. Most of the data comes from income tax records and estate tax/inheritance records. The sheer quantity of data that underlies Piketty's conclusions is unprecedented, and as a result his work deserves a great deal of credibility.

    While the book is quite long, the major conclusion can be summarized very briefly: Piketty has found that, over the long run, the return on capital is higher than the growth rate of the overall economy. In other words, accumulated and inherited wealth becomes a larger fraction of the economic pie over time. This happens more or less automatically, and there is no reason to believe this trend will change or reverse course. Although Piketty does not focus on it, there is also an argument that modern technologies like robotics and AI could accelerate the process even more. (For more on this, I'd suggest also reading The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future).

    Piketty argues that the reduction in inequality in developed countries after World War II was a "one-off" that was driven entirely by political choices and policies. It did not happen automatically. Those policies have now been largely reversed, especially in the United States. As a result the drive toward increased inequality is likely to be relentless.

    Piketty's solution is a global wealth tax. While this seems politically unfeasible, he argues that it is the only thing likely to work. In particular he is is dismissive of the idea that more education and training for the masses can solve the problem. Conservatives in the US will almost certainly dismiss Piketty as a socialist, but his book makes it clear that this is not the case. His conclusions are backed by more hard data than any other economist has so far amassed, and they deserve to be taken very seriously.
  • Posted by a hidden member.
    Log in to view his profile

    May 04, 2014 5:29 PM GMT
    Reader Review by Shayn Macullum

    First of all, contrary to the rants of those who wish to denounce any criticism of capitalism, Thomas Piketty is not a Marxist of any kind; a fact that ought to be obvious to anyone who has any background in Marx or who has read the author's own introduction.

    Piketty has no intrinsic issue with capitalism per se, nor even with inequality. In fact, personally, as someone who is more fundamentally opposed to both capitalism and inequality on principle, I regard Piketty's qualified acceptance of capitalism and inequality as constituting a theoretical weakness, in that his proposed remedies seem not only too modest but, lacking a system of democratic global governance, actually politically unfeasible.

    In terms of analysis however, Piketty's moderate social-liberalism actually imbues the work with an invaluable sense of objectivity that a similar work by a committed socialist would not be perceived to have. Quite simply, Piketty has no axe to grind and this work is the result of rigorous, thorough, methodologically-sound research based on a quite staggering wealth of data.


    This is, therefore, a very important work, certainly destined to be as referenced and quoted in the social sciences as John Rawls' "A Theory of Justice". The sheer scope of the work, its clear, methodical presentation and clearly explained methodology make this work very user-friendly and an absolute treasure as a reference work for social scientists.


    Capital in the 21st Century is an excellent book and deserves as wide an audience as possible.

    I have given it 4 stars because I am unsatisfied with Piketty's rather weak policy recommendations for the reasons I state above.

    Nonetheless, as a source of data and as a guide to interpreting capitalism in the 21st Century, this work is quite simply phenomenal. Arguably, this may well be the most important work on capitalism since Karl Polanyi's "The Great Transformation" (1944).

    My advice; don't hesitate- buy it, read it, discuss it. Anyone without a pig-headed, flat-earther's insistence on believing in capitalist fairy-tales is bound to find serious food for thought here.
  • tazzari

    Posts: 2929

    May 04, 2014 7:41 PM GMT
    Thanks so much for posting this - I've been passing the reference on to friends.

    AT LAST! - a (so-far) non-vituperative, actual discussion on the board! That in itself is a major achievement.
  • coolarmydude

    Posts: 9190

    May 04, 2014 8:36 PM GMT
    As much as I have defended Obama, I have also criticized him for trickle-down economics, especially when he said that he thought that bailing out Wall Street would automatically correct the housing market issues.

    If it's not directly addressed, it's trickle down, Mr. President. icon_rolleyes.gif
  • Posted by a hidden member.
    Log in to view his profile

    May 05, 2014 2:33 AM GMT
    Thank you, Tazzari.

    # # #

    We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

    Is the general public faring well under increasing inequality? All citizens are created equal with respect to capital? We are losing our meaning of nation.


    # # #

    I am called upon to pay $280 / month given the Affordable Care Act (not affordable for me). Am I contributing $280 / month to my personal treasury of capital?

    A friend in Queens, NY told me, if I remember correctly, 1 and 2 year leases have 6 and 8% increases. During the recession, the owners of capital continued with their increases while the workers' income did not increase by 6% in 1 year or 8% in 2 years.

    The asset appreciation of higher education, the cost of higher education, made higher education UNaffordable for many, others braved into $50,000+ debt for undergraduate and professional degrees.

    4-year college degree, professional degree was one thing the working class member could do for equality between himself and someone his age from a high-capital family.

    I'm hoping a good friend of mine will understand what this book describes. ... I'm thinking a person who makes $50,000 / year in wages also needs to make $25,000 / year, return on capital to even be a player with the capitalist class. For the working class, making $25,000/year return on capital is an against the odds prospect.
  • Posted by a hidden member.
    Log in to view his profile

    May 05, 2014 2:42 AM GMT
    Also, when I left NYC, I'm pretty sure a monthly unlimited pass was $80. Since end of year 2008, the price in 2014 is about $110/month

    Specifically:

    30-Day Unlimited Ride MetroCard
    Cost: $112, reduced fare $56
    Good for unlimited subway and local bus rides until midnight, 30 days from day of first use. This card is protected against loss or theft when purchased at a vending machine with a credit or debit/ATM card.

    http://web.mta.info/metrocard/mcgtreng.htm

    110-80 = 30
    30/80 = 37.5% increase in five years?

    Did minimum wage or corporate raises or Social Security cost of living increases go up that much over the same period of time?

    But the Affordable Care Act asks the Baby Boom Generation (approx. min. age 52+) to fork over $280 / month for a Bronze Plan HMO (not even PPO, locked out of catastrophic plans which are for under 30 year olds)?




  • tj85016

    Posts: 4123

    May 05, 2014 2:57 AM GMT
    coolarmydude saidAs much as I have defended Obama, I have also criticized him for trickle-down economics, especially when he said that he thought that bailing out Wall Street would automatically correct the housing market issues.

    If it's not directly addressed, it's trickle down, Mr. President. icon_rolleyes.gif


    There has NEVER been a bigger shill for Wall Street and the financial industries (insurance, mortgage brokers, etc) than Obama

    It's the primary reason I can't stand the two-faced, lying hypocrite
  • Posted by a hidden member.
    Log in to view his profile

    May 07, 2014 1:57 AM GMT
    Some of the topics in the book:


    Ch. 5: The Capital/Income Ratio over the Long Run

    Ch. 6 The Capital-Labor Split in the 20th Century

    7. Inequality and Concentration: Preliminary Bearings

    9. Inequality of Labor Income

    10. Inequality of Capital Ownership

    11. Merit and Inheritance in the Long Run

    12. Global Inequality of Wealth in the 21st Century

    16 The Question of the public debt
  • Posted by a hidden member.
    Log in to view his profile

    May 07, 2014 11:42 AM GMT
    Now, let's put these reverse mortgages in context: that contributes to capital inequality and inherited capital inequality, doesn't it?
  • Posted by a hidden member.
    Log in to view his profile

    May 08, 2014 3:30 AM GMT
    The book, based on solid data, debunks the common notion, or "The American Dream", according to which anyone can move up in society, if he only tries hard enough. It shows that we are approaching conditions which were typical for Europe before the First World War, where only an inherited or married into fortune allowed you to be a member of society. Ability and hard trying would never get you there.

    - Hans
  • Posted by a hidden member.
    Log in to view his profile

    May 10, 2014 1:06 PM GMT
    I could not find the book at the mall Barnes & Noble.

    About five miles away at another B&N, the four copies were all on hold, but I asked the cashier can I just flip the pages to see if there were by country charts and graphs in the book. It seemed there were less than five. I flipped through this big book twice.

    When I first entered the store I came across this:

    what-went-wrong-cover.jpg
  • Posted by a hidden member.
    Log in to view his profile

    Jun 14, 2014 3:50 AM GMT
    Capitalism will NOT self-correct.

    Thomas Piketty and Charlie Rose in conversation.
  • Posted by a hidden member.
    Log in to view his profile

    Jun 23, 2014 12:58 AM GMT