I bought the much talked-about book Capital in the 21st Century by economist Thomas Piketty but have not yet cracked open its 700-odd pages. His basic thesis apparently is that when r>g, where r is the rate of return on capital and g is the rate of growth of economies, that leads to greater wealth and income inequality. His book looks at the data over a long period and suggests ways to reduce the inequality. Of course, his prescriptions will not be popular among the elites in the US who see the inequality as reflecting the fact that they are so much more valuable to society than the 99%.
He has given a 15-minute TED talk followed by five minutes of questions where he outlines the argument and the data that supports it.
who see the inequality as reflecting the fact that they are so much more valuable to society than the 99%.
That’s bullshit. Most of them know they’re just lucky plonks who inherited wealth. There are a few who managed to start businesses and get rich, and see themselves as “self-made men” (the same way Mitt Romney does) but I doubt they are even fooling themselves on that score. Anyone with half a brain knows that you can’t get ahead without a vibrant economy to get ahead in, and that is never created by oneself. They’re just fooling themselves and can’t face up to how luck most of them have been.
Is that what’s being passed as rocket science by economists? If capital returns are greater than the growth of the underlying economy _of_ _course_ wealth disparity is going to increase. Like, duh? Because “capital returns growing faster than the economy” means that capital is, uh, outgrowing the economy.
Exactly -- many of them believe that hype; or at least, they sure as shit give the appearence of believing that hype, and spend much rhetoric and campaign contributions on opposition to economic reform on that basis. Speculating on their private thoughts doesn’t seem useful, given their actions.
I read it once quickly with a borrowed copy.
It’s very well written and easy to read. Even if it is about economics and you don’t know much economics.
The analysis is convincing and backed up by enormous data sets. His ideas about what to do about growing inequality don’t seem too workable or realistic. Then again, no one else has any good ideas either.
Growing economic inequality in the USA has been happening since the 1970’s. This isn’t a party problem, it occurs when both the GOP and Democrats are in power. And neither has any idea how to solve it. It’s known that when economic inequality gets high, countries become unstable. In my lifetime, the USA has become…politically unstable especially in the 21st century.
We could always wait for the traditional fixes to happen. Hear that noise in the distance? The tumbrels are warming up their engines. This is the 21st century, They use Toyota engines these days instead of horses to drive them.
Oh dear, Marcus R. I do wish folk would actually read the bloody book before ejaculating stuff like “Is that what’s being passed as rocket science by economists?” all over the place …
While TP set out to investigate the “r > g?” question, that idea isn’t new. The intuition back to Veblen. The trouble is that “r less-than-or-equal-to g” seems to be the case for at least the middle half of the twentieth century. What TP does is to show that “r > g” holds over the longer haul (by examining longer term data) and give a plausible, analytic explanation for why. No one’s done that before. And no one’s gone into the details about why “r > g?” did not happen between about 1935 and 1985. And there’s an important corollary; in contrast to your naive conviction that “you can’t get ahead without a vibrant economy to get ahead in”, TP makes the point that the beneficiaries of “r > g” do (relatively) better in an economy that’s stagnating (low or falling or even negative g, inelastic and zero-lower-bounded r).
TP’s also very interesting on the subject of growing inequality in the US since 1980, which he claims does NOT seem to be primarily a function of “r > g”. Rather, TP attributes US inequality to the rise of “super-managers” … individuals who pocket a great deal of the capital that flows through their hands *cough* Mitt *cough*. Of course, having acquired such wealth, the “r > g” effect means that inequality at least persists and relative wealth grows (his description of how Harvard manages its endowment is fascinating).
Everyone should read it. It’s a terrific, solidly fact-based book. Some of it’s a bit dense; I found myself skipping long sections explaining in detail things like how inheritance taxes worked in Third Republic France. But I suspect TP was obliged to go into that degree of detail because he knew his book was going to come in for some serious scrutiny *cough* hatchet-jobs * cough*.
*sigh* Format mangling … I will learn to use “Preview”, I will learn to use “Preview” ….
Should say …
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The trouble is that “r less-than-or-equal-to g” seems to be the case for at least the middle half of the twentieth century. What TP does is to show that “r > g” holds over the longer haul (by examining longer term data) and give a plausible, analytic explanation for why.
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Paul,
I took the liberty or correcting your original comment as indicated by your second one to spare readers the extra effort. Hope you don’t mind.
I probably will read it. But your comment is in effect, “no, it’s really good!” followed by another bunch of obvious stuff. It makes me expect a bounteous feast of obviousness. If you want to get your dander up, I was commenting on Prof. Singham’s summary of the book, not the book itself -- which, obviously, I haven’t read. But if a 700-page book’s main point is so easily summarized and it’s pretty obvious, I guess we must all stand in awe of Prof. Singham’s amazing skill at distilling 700 pages down to such a kernel of simple clarity.
Before you get your dander up more, the context of the book is that a lot of people are saying it’s eye-opening stuff. But it keeps sounding to me like it’s more like shining a light in the eyes of people who’ve been trying to screw their eyelids tight shut. There’s nothing wrong with that. And it’s good. It doesn’t sound like it ought to be a revelation, though.
(by “vibrant” economy I didn’t necessarily mean a good one -- just one that’s not stuck in a liquidity trap or stagnation. If money is moving, yes, those with the power to control its movements will place themselves in a position to make money whether the economy is getting better or worse. hey, that brilliant revelation is summarized sometimes as “the rich get richer, and the poor get poorer” or is “r > g” cooler because it sounds technical and shit?)