A Good Question Re the Piketty Book

April 26th, 2014 at 10:26 am

As is her wont, Alex Witt asked me a good question this AM on MSNBC (paraphrasing, you can watch here): why is this 600+ page book by a hitherto little-known French economist, laden with data and charts, taking the world by storm?

As I said, a number of reasons but perhaps one of the most important is the intersection of the book’s scholarship, its timing, and its author.

As the US recovery proceeds into late middle age, the benefits of growth are heavily skewed toward the top.  Wall St. is once again way ahead of Main St.  In many other advanced European economies, recession-like conditions persist, in no small part resulting from first reckless finance and then from contraindicated austere fiscal policy.

So even if you’re not reading Krugman and others regularly, there’s a sense among many people of many different political stripes that something is structurally wrong with both the economy and the practice of economics.   Between financial bubbles and busts, the macro-management seems inept and even once the economy starts growing again, the benefits accrue narrowly to the top.

In part, it’s a sense that “the fix is in” when it comes to the distribution of growth.  In this regard, Piketty’s r>g (see here for a very cogent explanation) can be viewed as the economic mechanics of the fix.  Moreover, especially given the uniquely pervasive money-in-politics problem in the US, it’s a self-reinforcing fix.

Against that backdrop, we get a long, carefully researched tome with literally centuries of data across numerous countries showing a pretty inexorable trend of income and wealth concentration and providing a cogent analysis of the mechanics behind those dynamics.  At the same time, though Piketty clearly knows his economics, he is quick to dismiss a knee-jerk elevation of assumption-based economic analysis that has led so many policy makers astray in recent years.  Moreover, he is not a known partisan who can quickly be compartmentalized and thus distractingly plugged into the existing debate that tends to generate more heat than light.

So, summing up, I think at least part of the reason for the book’s big splash is the intersection of a) timing and a latent demand for an explanation of what’s really going on, b) the weight of its scholarship and credibility of its evidence, and c) the unique attributes of the author.

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14 comments in reply to "A Good Question Re the Piketty Book"

  1. Perplexed says:

    -“As is her wont, Alex Witt asked me a good question this AM on MSNBC (paraphrasing): why is this 600+ page book by a hitherto little-known French economist laden with data and charts taking the world by storm?”

    But isn’t this a question you should have been asking Alex instead? After all who’s “job” is it to keep the public informed about important events that are occurring? Anyone who had any interest at all in the striking increases in wealth and income inequality would have been familiar with Piketty’s work for more than a decade. Ed Wolff has been calling attention to this for more than four decades now (http://www.levyinstitute.org/research/?prog=3). This has been going from bad to worse to extreme (wealth GINI .87 is EXTREME already, not some future “possibility” or “probability”) for more than 40 years now. The real question is why did it take such an overwhelming effort by Piketty and others to get “news” media and other main stream economists to stop denying the data and take it seriously. What else are we just ignoring now that “news” is just another form of entertainment structured to deliver a “product” that optimizes ad revenue per minute?

    So how “shocked” will the “news” entertainment industry be when they suddenly “discover” that our “representative” form of democracy has been been displaced by by something quite different from, and totally unintended by, the Framers of our Constitution? What “tests” or “standards” have to be met in order for a government to “qualify” to be called a “democracy”? Does it really have any meaning other than a “government that holds some elections from time to time” whether or not those elections have any implications or not for who really holds power? http://www.princeton.edu/~mgilens/Gilens%20homepage%20materials/Gilens%20and%20Page/Gilens%20and%20Page%202014-Testing%20Theories%203-7-14.pdf

    Its not get any earlier http://www.ted.com/talks/lawrence_lessig_we_the_people_and_the_republic_we_must_reclaim.html.

  2. Tom in MN says:

    And so will this book be looked back on as the tipping point in the inequality debate? It would be great if it was.

    • PeonInChief says:

      It would be a wonderful thing, but remember that only a few short years ago we couldn’t imagine that Wall Street wouldn’t suffer the consequences it so deserved for crashing the economy and wrecking people’s lives. Alas, that was not to be, and I suspect that after a period of enthusiasm, Piketty’s book will end up on the same shelf as the books detailing the evils of Jamie Dimon et al.

  3. Robert Buttons says:

    It is just not true that we’ve had centuries of inexorably clustered wealth at the top. Piketty’s book (figure 9.8) shows rapidly DECLINING inequity from 1930-1971. What happened in 1971? The end of Bretton Woods and the end of the gold standard. Clark and Cummins (What is the True Rate of Social Mobility? Surnames and Social Mobility, England, 1800-2012) should rapidly decreasing inequality from 1800-1913. What happened in 1913? Creation of central banking.

    Piketty brings up a good point : inequality is increasing. But we need to deal with the root cause of the problem. Krugman, Piketty, et al just want to treat the symptoms with redistribution.

    • ReaderOfTeaLeaves says:

      But Piketty earlier points out that the diminished inequality 1913-71 followed the social cataclysm of WWI- and the further redistribution post-WWII was also a result of new economic policies. In addition, that chart illustrates the impacts of economic and social policies well beyond 1971 — inequality in the US surges after 1970, accelerating after the period in which the GOP/Reagan cut taxes for the wealthy were implemented. Europe’s inequality is lower than the US post-1971; the differences are due to government policies.

      Along with the change off the gold standard, the Oil Crisis hit in the US in the early 1970s, and our economy has never been the same. Attempts to wean off oil have been politically sabotaged at the federal level. We’ve been sending billions to other nations, failing to address underlying energy issues, and adding tax breaks for corporations and ‘capital’ onto the underlying increased energy costs.

      FWIW, I picked my copy up at my local bookseller on Friday evening. I was in the store again Sunday, and the bookstore employee who’d sold me my copy said (fairly wide-eyed) that she’d sold another two copies on Saturday. I noticed that Heidi Moore at the Guardian highlighted the impact of the book today. I’m under the impression that booksellers aren’t used to seeing a $40 tome on economics be a best-seller.

      I’m still in the first section, but two more reasons the book is making an impact: (1) Piketty has a wonderful gift for conveying social and historical context, and (2) he has a very clear interest in explaining things well – he helps the reader understand relationships. This is not a dry tome; it’s a very engaging, often witty, read.

      But I don’t see him advocating socialism; instead, he tries to help the reader understand the demographics that drove urbanization in the early Industrial Revolution, and the society that Marx attempted to understand. Piketty helps the reader understand the cultural conditions that Marx, as well as Dickens and Victor Hugo (Les Misrable), were grappling with.

      Any reasonably literate reader – or any moviegoer who saw Liam Neeson as Jean Valjean – begins to grasp what Marx was trying to grapple with in a society where children’s health was destroyed by work in mines and factories. Piketty’s writing is a far cry from Bentham’s stultifying Utilitarianism, and far more humane than math models that are divorced from social context.

      IOW, Piketty writes with wit, compassion, and an evident desire to make economics more meaningful and responsive to vast social, demographic, and technological disruptions.

      Piketty makes economics matter.
      He recognizes that humans are very social critters, and economics is a social endeavor. As such, trying to understand deeper social structures requires assembling (and then explaining) long term data in order to identify important patterns of human history.
      But he’s not simply quantitative; bringing in novelists and historical tidbits adds context and richness to his explanations.
      He’s an enjoyable, witty read.

      • Robert buttons says:

        Are you implying the oil crisis was completely independent from the end of Bretton Woods?

  4. Peter Millin says:

    As a child of parents that have escaped Marxist dictatorship I am perplexed about you guys promoting Marxism. Its sad and disturbing that less then 30 years after the fall of the Berlin wall, people are flitrting with Marxism again.

    There is nothing good about marxism..just ask my parents.

    • Perplexed says:

      -“As a child of parents that have escaped Marxist dictatorship…”

      The term “Marxist dictatorship” is a paradox. No one escaped something that never existed and I don’t see anyone here promoting either Marxism or dictatorship, either separately or in any combination. There’s no dichotomy: oligarchy (more specifically plutocracy in our case) is not the sole alternative to “dictatorship,” its really more just a form of it from a practical standpoint (at least for those not in the “inner circle”). Piketty’s been pretty careful to present the data in way that inoculates it from these “straw man” attacks. He appears to be as much a student of History as he is of Economics. His anticipation of these attacks is downright prescient! Jared seems to have nailed it pretty well in his summary:

      “So, summing up, I think at least part of the reason for the book’s big splash is the intersection of a) timing and a latent demand for an explanation of what’s really going on, b) the weight of its scholarship and credibility of its evidence, and c) the unique attributes of the author. “

      • Robert Buttons says:

        He certainly does not duck “strawman” attacks. He rails against a pernicious form of govt, namely cronyism for which he applies the false moniker of “capitalism”. Of course the ONLY solution he offers is democratic socialism (viz Marxism lite)

        • Perplexed says:

          -“…democratic socialism (viz Marxism lite).”

          Where is there any connection between democratic socialism & Marxism, lite or otherwise? The only thing the two have in common is that they both reject anarchism (or libertarianism or whatever other re-branding you choose).

    • Also perplexed says:

      As a child of parents that have escaped ‘Marxist’ dictatorship I am perplexed by the complete misunderstanding people have of Marx’s ideas. When my parents with 2 young children managed to escape from the Soviet Union during WW II, they were not escaping from a Marxist society; they escaped from a Stalinist dictatorship. That the two are conflated is one of the intellectual disasters of the 20th century, a conflation that my father, arrested twice by the Soviets, compounded with the belief that the policies of the Democratic Party of the ’60s and ’70s were similar to the policies of the pseudo-marxist Stalinists.

    • JohnR says:

      Peter, with regard to “marxism”, check your definitions; any time you define “marxism” as anything to the left of the pre-Revolutionary French Bourbons, you’re being a bit over-enthusiastic. Furthermore, I suspect you’ve fallen into the common human pit of thinking that slapping a label on something means you understand it. Most things we humans do can be good under certain conditions, and terrible under others. Any “one size fits all” ideological/religious prescription for group organizations is in itself a crazy and stupid idea; times and circumstances change.

  5. Some guy says:

    So, umm..what’s going to happen policy-wise in this country to address this sudden and new-found interest in the lower and middle classes?

    Oh wait. Nothing is going to done about it, because most of us can’t afford the “free” speech, I mean money, to donate to politicians to do anything for us.