First Thoughts on Piketty

I bring been reading Thomas Piketty's "Capital inwards the 21st Century." It is genuinely an impressive work, together with I am much enjoying it. I bring of late organized a session at the upcoming AEA coming together (January inwards Boston), where David Weil, Alan Auerbach, together with I volition live on discussing the book, followed yesteryear a answer from Professor Piketty.

Let me offering a few immediate reactions.

The mass has 3 principal elements:

1. A history of inequality together with wealth.
2. A forecast of how things volition evolve over the adjacent century
3. Policy recommendations, such equally a global taxation on wealth.

Point 1 is a pregnant contribution. I similar this business office of the mass a lot.

Point ii is highly conjectural. Economists are actually bad at such things. In particular, the boundary from r>g to the decision of a growing usage of inheritance inwards social club seems likewise large to me. Many uppercase owners swallow much of the supply on their capital, so wealth does non grow at charge per unit of measurement r. This consumption ranges from fancy cars together with luxurious vacations to generous charitable giving. In addition, unless mating is perfectly assortative, or nosotros supply to an era of primogeniture, wealth per identify unit of measurement shrinks equally it is divide amid children.  So, from my perspective, Piketty tries to draw way likewise much from r>g. (Quick Quiz for econonerds: (a) What does r>g order you lot inwards a standard overlapping generations model?  (b) And what is the magnitude of bequests inwards that model?  Answers below.*)

Point 3 is equally much close Piketty’s personal political philosophy equally it is close his economics. As nosotros all know, you lot can’t larn “ought” from “is.” Like President Obama together with others on the left, Piketty wants to spread the wealth around. Another philosophical viewpoint is that it is the government’s labor to enforce rules such equally contracts together with belongings rights together with promote chance rather than to gain a detail distribution of economical outcomes. No amount of economical history volition order you lot that John Rawls (and Thomas Piketty) offers a ameliorate political philosophy than Robert Nozick (and Milton Friedman).

The bottom line: You tin appreciate his economical history without buying into his forecast.  And fifty-fifty if you lot are convinced yesteryear his forecast, you lot don't bring to buy into his normative conclusions.
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* Answers to quiz: (a) That the economic scheme is dynamically efficient (that is, it has non over-accumulated capital).  (b) Zero.
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