(2014-04-08) Piketty Capital In The 21st Century

Thomas Piketty's Capital In The 21st Century ISBN:067443000X posits that Capitalism inevitably leads to exploding Wealth Inequality (Increasing Returns), and that this has been would have been more apparent in the last century had it not been for World War I, the Great Depression, and World War II.

MatthewYglesias summarizes. Piketty also finds that the increase in wealth:income ratio is not unique to the inequality-friendly Anglo-Saxon economies of the United States and Canada. In fact, the accumulation of wealth is most clearly seen in places like France and especially Italy where economic growth has been very slow. Piketty also finds that the rate of return on capital is about 5 percent on average across different countries. That's part of why he argues that the dynamic towards wealth inequality is built into capitalism rather than any one country's economic policies.

Will Hutton gives his take. Inevitably the stock of capital will rise disproportionately faster within the overall pattern of output. Wealth inequality rises exponentially. The process is made worse by inheritance and, in the US and UK, by the rise of extravagantly paid "super managers" (Executive Compensation)... The lesson of the past is that societies try to protect themselves: they close their borders or have revolutions – or end up going to war. Piketty fears a repeat.

Albert Mingardi wonders if we should care about Wealth Inequality. 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? (Progress)

Scott Winship notes the challenges of accurately measuring wealth and income. New York City’s 54 percent top share has not dissuaded people from around the U.S. and the world from putting down roots there. What does Piketty know that they don’t?... If rising inequality is compatible with higher incomes further down, then while income grows more concentrated at the top, everyone else could still end up richer, as they have in recent decades. That would be a very different problem—if a problem at all—than if incomes fall within the bottom 90 percent, which Piketty seems to regard as inevitable.

May23: Rob Wile summarizes Chris Gile's claim that Piketty doctored his data. Giles writes: "This appears to be the result of swapping between data sources, not following the source notes, misinterpreting the more recent data and exaggerating increases in wealth inequality."... Giles shows another example: Piketty appears to have added random numbers to certain formula to bend the data toward his hypothesis. "A 2 is added because the number wasn't high enough — it didn't seem to fit what he wanted to show in his charts, so he just added 2 to it," Giles says. "There was quite a lot of this sort of thing in his spreadsheets." Wow.