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Further notes on Piketty's Capital

by Cyrille Sun Apr 20th, 2014 at 12:28:43 PM EST

I published a first set of notes on the book a little while ago. I still have not finished it, but am now much further. It's still an excellent read that I would recommend to anyone.

Some of the slightly odd trends are maintained, but also the further developments answer several of the questions that came out of the first chapters.


Chapter 5 - The Capital/Revenue ratio in the long run

Some quite revealing observations there -and it is of a great benefit to have timed data, rather than just a snapshot of the current situation, as we can compare dynamics between countries.

Piketty discusses Germany, and states in passing that the German trade surplus is due to “the alea of German competitiveness” and that we should thus expect it to go down over the near future. This will come as a complete contradiction to the analyses that we tend to read on European Tribune (in particular Migeru’s very detailed description of the imbalances). I must say that I find those analyses (and mine) more convincing that this mere statement that it’s about competitiveness –unless of course that term is used to convey something else than I understand. Certainly, it is not competitiveness due to productivity gains. If by competitiveness we mean the effect of actively depressing domestic demand in a fixed exchange-rates system, then I guess we can reconcile the two views. However, I very much doubt that this is what the word will bring in mind to most readers. In particular, it is clear that it is very much a consequence of political choices, and this is not, I felt, what seemed to come out of Piketty’s brief explanation. Things may change in the rest of the book (although I know that some reviewers have mentioned it as a general tendency), but I keep getting the impression that structural causes are overplayed while the consequences of political choices are not highlighted as much as their impact would suggest.

In any case, much of what he presents is quite revealing, and does give indications of the relations between the capital to revenue ratio and policy choices:

-Private capital shot up in the UK by a level that savings could not explain, apparently mostly because privatisations happened at very low prices (same with Russia in the 90s). This would be, to a lesser extent, a factor in France and Italy as well. Hard to believe that it was not by design. This, remember, is central to Naomi Klein's Shock Doctrine. Something to keep in mind for forming suggestions to address the diagnosis (something that will be covered later in the book -although I already know from reading reviews what the main ones will be).

-Italy has had a much higher private capital to revenue ratio than comparable countries since the early 90s, mostly because the State (Berlusconi?) chose to borrow from the rich rather than tax them.

-And an extremely interesting line of study (from graph 5.6): Piketty mentions that the price of assets (he seems to mean company assets, and thus exclude financial and real estate ones, which clearly moved a lot) went up, explaining about a third of the rise in capital to revenue ratio. He states that the ratio of market value to book value went up in all 8 main developed countries since its value "in 1970-80".

Actually, though this is true and a very important observation, I find the description somewhat strange. In all countries, the ratio was higher in 1980 than 1970. In all countries but France and Canada, 1980 or 1981 is a low point (Canada starts slowly rising in 1976, and takes off in 1990. France keeps going down until 1984, returns to 1970 value in 1986 with a sharp upward trend, drops again from 1988 to 1995 and takes off again in 1995 -following political changes), after which it takes off.
Note: for France, 1984 is just after the government froze public salaries and dropped the policy of regular raises of the real minimum salary.

Now, the narrative of a major change in trend right at the time of the Thatcher-Reagan revolution is very different from a return to long-term valuation (note: he does not actually says it returns to long-term valuation, although that seems to be the impression left, and his data series starts in 1970) following a vague starting point in the "1970-80" period. I know Piketty has little sympathy for the Thatcher-Reagan model, so what's going on? Is he afraid that he would lose much readership if he made it too explicit?


Chapter 6 - The Capital/Work share in the XXIst Century

This is a very important chapter.

I had mentioned that thus far, there had been no mention of the Capital/Labour breakdown (or variations in the return on Capital). Well, not only does Piketty bring it up, he also states why he concentrated on the capital value to revenue ratio: the historical (by which he means up to the end of the XIXth century) data is more reliable for the value of capital than for the income it generated.

Well, I can accept that reason, though it clarifies that it is not because it is a more meaningful analysis (as I had been under the impression that he was saying and had difficulties understanding), rather than it makes it more likely to draw a long-term historical perspective -an extremely useful task, of course.

He introduces a difference between average and pure return of Capital, to take into account the time and work spent managing it. I am slightly surprised by the scale of the difference if that is the only thing differentiating them, and indeed Piketty suggests that the cost of managing may be overestimated (and certainly has strong economies of scales).

However, if we must go for "pure" return, we should (theoretically -I don't know if we have the data to do so at the moment, though if we do, it would probably be thanks to Piketty's work) add the additional revenue that people get from having high capital. Not only will people be more likely to get a high degree when born in a wealthy family, but they are far more likely to get high-paying roles, if only because many organisations like having someone from a wealthy background on their books, in the hope that they may look kindly on the venture. Never forget that George Bush junior was given a directorship because, and I quote, "his name was Bush".
As a note: in his introduction to Part 3, which looks into inequalities, Piketty hints that the correlation between high revenue from capital and high revenue from labour will need to be looked at. I have not yet reached the point where he does, although he notes in comments that (as I suspected) it has gone from negative in the early XIXth century to positive now. So he does take that into account, and when it flows from capital to labour, it is a form of capital revenue.

Piketty once again summons the great novelists of the XIXth century to describe the then well-known fact that Capital had a return of around 5% (sometimes, more rarely, 4% appears to be used in their descriptions). I agree that it makes it clear that this is what "everyone knew", however, having seen so many glaring mistakes in the economic valuations of ownership, particularly when it comes to the decisions of buying or renting, I am rather careful of equating what everyone knows with an actual economic relationship. Though Piketty may have more of a point with that period, since distorting factors like inflation and taxation were much weaker. The apparent return of government bonds would have been rather close to the actual one, although not entirely devoid of risk, as a war was likely to trigger the inflation whose lack made the calculation easier. Even then, bonds would have then been paper documents that you needed to protect from theft at a cost, and certainly real estate needed maintenance. I doubt that novelists would have been spot on, and probably erred in underestimating costs.

Closer to our times, he has and shows robust series. He takes the time to explain why we would expect (and, to a clear extent, we do see it) that return on capital would go down with higher levels of capital. Still, returns have held up rather well. Piketty seems to suggest that this is due to the diversification of types of capital. No doubt it played a part, but I would expect more emphasis on deliberate choices to help it. Companies receiving subsidies would be a start. But maybe the clearer example is that copyrights and patents laws have become more restrictive even as technological advances would have pointed towards more sharing, anti-trust laws have been watered down, and in general more policing is done to protect owners and corporations than the general public.

Piketty notes the distinction between purely financial (and thus, mostly, not inflation-protected) and other assets -which he both includes in his definition of Capital. And it turns out that the higher rungs of capital owners have a much smaller proportion of purely financial assets these days (whereas many rentiers were getting rents from government bonds in the XIXth century, and non-rentiers had nothing anyway). This will be important when the time to discuss solutions will come, as inflation could hit the wrong targets.

Although at this point (maybe later), Piketty does not attempt to distinguish between the various ways of generating inflation. A proposal, like Steve Keene's, of simply crediting everyone with an equal amount (a negative poll tax?) until reaching full employment (or ideas such as the living allowance) would indeed have an inflationary impact, but it would be of a secondary order to the first order effect of boosting the relative position of the lower rungs, and thus hit the right target after all.

In this chapter, Piketty takes the time to refute some old theories (while being quite understanding with how they may have been formulated when data series were much more limited), such as the idea of a fixed capital/labour share of income.


However I fear that he may give slightly too much importance to the β=s/g relation, where β is the capital/revenue ratio, s the savings rate and g the rate of growth. It is, indeed, the only stable state for any set of s and g.

I have learnt to be very mindful of using accounting identities in causal analyses. Apart from obvious objections of noisy series (growth rates and savings rates are not constant, so how could they be the basis of an infinite limit?), which Piketty does highlight, I see further problems:

-This law, first written by Harrod and Domar, related to capital as a production factor, not as a market value, and it's not quite the same interpretation in either case.

-Piketty talks rather a lot of what happens to β when g changes, "for a fixed savings rate". Well, not only is it unlikely that there would be total independence between economic circumstances and the decision to save, s in Piketty's work must be understood as net of all depreciation (ie not the person's decision to save, but what's left of savings after you have paid to keep up capital). In that case, the more capital you have, the more depreciation, and thus you'd need more and more savings to keep up. So s should go down when g is reduced.

-Which way does it go? Piketty seems to feel that β shooting up is a consequence of g going down (and indeed, as ideas of secular stagnation hint at, it's very likely that g is going down). But it has a major contracting effect on g: if you don't have enough customers, you don't have demand and, after a while, you produce less. Yes, that's what's been happening for a while, or at least so I'd argue.

Using the identity too liberally would give the illusion of mostly structural factors at play and underplay the impact of policy choices. That is the recurrent feeling from reading that Piketty is showing what's absolutely undisputable but very mindful of pointing out to political causes, even as he reminds us that they are a crucial component. I would guess that he is trying to make sure that he cannot be dismissed. After all, his book does not have to be an end point, and he does give you plenty of material do derive your own thoughts and conclusions.


Anyway, this part two provided a great description of the evolutions of Capital, something that is surprisingly rarely studied for societies living in a system called "Capitalism". The reasons for this silence may well lie in the next part, about inequalities.


Part Three - The Structure of Inequalities

I will not have very much to add or comment on that part, where Piketty is clearly in his element. Actually, since much of my understanding has been derived from his work, it is unsurprising that I would not change much from the descriptive parts.

But I must mention that it is very clearly written, and that, while little may be news to those who have read every Piketty (and Saez) paper that they could find over the past few years, it is illuminating.

In his Chapter 8 - the Two Worlds, Piketty makes the important point (one that pundits like Friedman and Brooks love to ignore) that the top decile really is a mix of very different realities, and even the top centile still is the top 1/1000 and the rest. Actually, the point is so strong that I feel he could have concentrated on the top 1/1000 even more (certainly for English-speaking countries), but I glanced at the rest of the book and see him doing so.

Piketty contrasts France (the longest data series, and a somewhat trending egalitarian country, if not to the 80s Scandinavian level) with USA (which, although the others are a few years behind, you could use for English-speaking countries in general), which is in an entirely new experiment with inequalities for a developed country.

Much has been made by reviewers of the point that the new experience in inequality in the US is a labour revenue phenomenon. However, it appears to be a combination: the first centile of wages received just over 10% of wages in the US in 2010; the first centile of revenues (thus including capital) received 20% of all revenues. For France, the corresponding numbers are around 7% and 9%. It's hard to refute Piketty's description of a general rise in inequality.

There is little to add to his excellent work -and the stagnation of capital revenues (except for housing rental) in France that he showed in chapter 5 were a hint of the gap between the two countries. Piketty also evokes the fact that tax havens have greatly expanded, so that the reality of capital inequalities is probably highly understated by the data (true for both countries, but believing recent articles probably much more so of USA).

Still, one thing I have not seen mentioned but which seems important is the difference in pension systems. As far as I understand it, a pension through capitalisation system would pretty much force everyone to hold capital (even if in the form of Social Security assets in USA), whereas one by repartition such as in France would not. This should have a strong effect of reducing capital inequalities for countries with a capitalised system. That France should nevertheless have significantly lower inequalities thus speaks volumes.

I'll stop this set of notes at the end of chapter 8


Cross-posted on my blog Anachronicles

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Interesting thoughts.

Not much to add at the moment.

by Metatone (metatone [a|t] gmail (dot) com) on Tue Apr 22nd, 2014 at 11:00:21 AM EST
Is there an interest in notes for the remainder of the book?
Next parts will cover taxation, and suggested policies. I believe they are important, now I'm not my own reader.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Tue Apr 22nd, 2014 at 11:48:55 AM EST
[ Parent ]
Yes, most definitely. It may be a while before I get around to reading the book.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Apr 22nd, 2014 at 03:41:11 PM EST
[ Parent ]
Ditto

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Tue Apr 22nd, 2014 at 04:02:49 PM EST
[ Parent ]
Definite interest.

I even have some thoughts on these notes, but so far this week is just too busy to get my brain around them...

by Metatone (metatone [a|t] gmail (dot) com) on Tue Apr 22nd, 2014 at 05:22:35 PM EST
[ Parent ]
in particular Migeru's very detailed description of the imbalances

Can you provide a link to it?

By the way, you are reading the book in French or English?

Point n'est besoin d'espérer pour entreprendre, ni de réussir pour persévérer. - Charles le Téméraire

by marco on Tue Apr 22nd, 2014 at 09:03:46 PM EST
I am reading in French.

But, alas, I cannot provide a link to Migeru's diaries right now, though I could search through his production at some point. He showed that a 6% trade surplus appeared to be a stable policy target, not at all something that was likely to disappear in the near future.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Wed Apr 23rd, 2014 at 02:06:13 AM EST
[ Parent ]
In fact the German current account surplus increased to 7% even after the European Commission put the "macroeconomic imbalances" threshold at 6% so as not to bother Germany.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Apr 23rd, 2014 at 04:30:54 AM EST
[ Parent ]
The Court Astrologer: The Eurozone's giant sucking sound (2013/11/04)

See also my twitpic for more Eurostat sector balance charts.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Wed Apr 23rd, 2014 at 04:10:09 AM EST
[ Parent ]


Point n'est besoin d'espérer pour entreprendre, ni de réussir pour persévérer. - Charles le Téméraire
by marco on Wed Apr 23rd, 2014 at 12:30:54 AM EST
"Temporarily out of stock". (I just ordered the French version).
by gk (gk (gk quattro due due sette @gmail.com)) on Wed Apr 23rd, 2014 at 03:08:53 AM EST
[ Parent ]
That is somewhat amazing, and a very positive development.

I cannot say enough how much effort he put into making it readable by all (all graphs have an "how to read this graph" in small prints underneath). But it IS 950 pages long and about economics, which means constant numeric descriptions.

I have a friend who works in a bank as a quant who thought the book would be too difficult for him (not because of the maths, but because of economic understanding). Of course, he's wrong, and I told him. But if he could think so, then it's an incredible outcome that the book could be top of the sales.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Wed Apr 23rd, 2014 at 03:42:24 AM EST
[ Parent ]
I have a friend who works in a bank as a quant who thought the book would be too difficult for him (not because of the maths, but because of economic understanding)
Wow, a quant who's aware of the extent to which the quant finance industry cultivates economic illiteracy in its members.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Apr 23rd, 2014 at 04:11:55 AM EST
[ Parent ]
And a comment that informs the rest of us about that!

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Apr 23rd, 2014 at 09:29:15 AM EST
[ Parent ]
What, it's not common knowledge that finance people have no idea what they're talking about?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Apr 23rd, 2014 at 09:31:18 AM EST
[ Parent ]
People may wonder about that, but few might have any idea that financial institutions prefer economic illiteracy amongst their quantitative analysts. I can see how that might keep quants, who are probably on average smarter than their financial side managers, from being quite so much a threat to their own sense of being a Master of the Universe, but it sure makes all of the decisions based on information from quants more dangerous to use.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Apr 23rd, 2014 at 11:02:36 PM EST
[ Parent ]
http://www.msnbc.com/all-in/watch/not-born-rich-out-of-luck-229868611955

Here's an interview with Piketty, apologies if already posted.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Wed Apr 23rd, 2014 at 03:01:04 AM EST
There is an interview of Piketty in le Monde today, and what he says seems to confirm my suspicion.

Loosely translated, answering a question about the fact that we don't hear too many stringent criticisms of his book (whereas several have praised it), even though there must be many opponents of his theories, with easy access to the media:

"We don't hear them much because my book is not a book of theory or speculation. By the end, I draw conclusions with which one may disagree, but the large majority of the book is made of descriptions of the historical of inequalities of assets holdings. I think it is not something easily brushed away. [...] people may draw different conclusions, but the diagnosis is hard to dispute."

By the way, it's interesting that potential critics are understood to necessarily come from the right. However, much as I appreciate his tremendous historical work, I feel that if anything he errs towards the right. In the description, as he himself says, because official data would tend to understate the extent of inequalities (tax havens have become a bigger factor with the increased mobility of capital). And in highlighting policy causes, probably deliberately so that his work cannot be brushed aside.

Which makes Galbraith remark (clearly intended as a negative) that this, despite wanting to be, is not the definitive work on Capital fall flat. First, being a definitive work is a silly target (why would you not want people to add?). But second, because Piketty deliberately made sure it would not be. He wanted it to be readable by all and dismissable by none.

This book (and the World Top Income Database. In many ways, the book is a summary of the base and an example of what can be done with it) is so important because it forces open a whole area of investigation. It does not seek to close anything.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Wed Apr 23rd, 2014 at 03:17:42 AM EST
Does Piketty say anything about the Cambridge Capital Controversy? How can this redefine capital after 200 years of confusion without resolving that debate?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Apr 23rd, 2014 at 04:32:57 AM EST
Yes, there is a section of chapter 6 called "Beyond the two Cambridge"

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Wed Apr 23rd, 2014 at 04:36:04 AM EST
[ Parent ]
Conservatives Are Scared Straight by a Frenchman
The central thesis of Picketty's book is that capital ALWAYS gets a better return than labor - typically around 5-8% per year. It's been this way for the past 1000 years or more.

[...The] wealthy elite are always getting wealthier, doubling their wealth every 5 years or so, while the working class is always going to just be getting by.

It's the way capitalism is structured. Capital makes money. Labor earns money - and a lot less money. Maybe that's why it's called "capitalism" and not "laborism."

[...] The way the capitalist system is now, the wealthy elite [...], the Mitt Romney's of the world, are going to get richer and richer, regardless of whether the economy in strong or weak.

Meanwhile, the working class is only seeing an increase in their income - which rarely even turns into an increase in wealth - when the economy is doing well.

Working people are screwed when the economy is doing poorly, while capitalists - people who earn money with money - pretty much always do just fine.

[...] Right now, the top tax rate on capital gains - money made with money - is 20%, while the top tax rate on labor income is 39%.

Even Reagan thought this was crazy, at least on one particularly lucid day.

In a speech to students at Northside High School in Atlanta, Georgia in June of 1985, Reagan point out the absurdity of working-class Americans having to pay more in taxes than millionaires.

He told the crowd of students that, "We're going to close the unproductive tax loopholes that allow some of the truly wealthy to avoid paying their fair share. In theory, some of those loopholes were understandable, but in practice they sometimes made it possible for millionaires to pay nothing, while a bus driver was paying ten percent of his salary, and that's crazy. [...] Do you think the millionaire ought to pay more in taxes than the bus driver or less?"

by das monde on Thu Apr 24th, 2014 at 06:58:39 AM EST
If Piketty is coming from a Marxist or Marxist informed background, which may be possible given his nationality and academic traditions there, then it is not at all surprising that he consistently favored structural explanations to policy explanations.  

A key point in traditional Marxism is economic determinism, that the underlying dynamics of capital are the ultimate driver of history.  Politics is secondary.  This is, obviously, a point that has been greatly contested within Marxist circles, but it has never been rejected or conclusively disproven in any manner.  Now, that doesn't mean much, as proof and disproof in the realm of grand theories for all of human history is a somewhat intangible matter.  But still.

by Zwackus on Thu Apr 24th, 2014 at 08:18:23 PM EST
Well, he spends a lot of time at the beginning of the book distantiating himself from any theory of inevitability.

Of course, the fact that he observes the same thing everywhere can point towards structural issues. But we have had a worldwide movement towards freedom of capital, which is a policy choice with major consequences for the relative bargaining power of labour and wealth.
Also, the Eastern bloc collapsed at about the same time, unions had been weakened, the memory of the war aftermath was getting lost... All that seem to have helped a general movement of policy rightwards. With the consequences that we see.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Fri Apr 25th, 2014 at 02:13:37 AM EST
[ Parent ]
Did someone say patrimonial capitalism? The White House hosts a meeting of teenage billionaire "philanthropists" by Kathleen Geier | Political Animal | The Washington Monthly

Thomas Piketty, call your office!

Today's New York Times -- in the Fashion and Style section, but of course! -- reports on a White House meeting of "100 young philanthropists and heirs to billionaire family fortunes." Some of the people quoted in the article are as young as 19, and they are from family names you'll recognize: Marriott, Pritzker, Rockefeller, etc.

(via Krugman)

This article is also quoting Digby:

Hullabaloo

It's very nice that many of these young idealistic aristocrats want to do good deeds. But this is really nothing more than good old fashioned noblesse oblige which basically leaves the betterment of man to the whims of rich people. One of the big improvements democracy was supposed to bring was that the people themselves decided how to organize society rather than depending on the kindness of aristocrats. Even great philanthropists of the gilded age like Andrew Carnegie believed in a huge confiscatory tax of great estates in order that the government of the people might make the decisions rather than the heirs of great fortunes.

But we're going the wrong way again. So if you have a good idea or want to help people or just need a job --- figure out which of the wealthy young scions of the new aristocracy might be amenable to your needs and figure out a way to kiss their asses in exactly the way they like them kissed. That's the major skill we're all going to need in our so-called  "meritocracy".

And let's not forget Jerome's "Why I don't do charity".

by Bernard on Sun Apr 27th, 2014 at 11:20:36 AM EST
The most obvious fix is to rack inheritance taxes through the roof. I understand why rightwing political parties are resistant to this - they are owned by the plutocrats - But I don't get, at all, why this is not universally supported by the rank and file both right and left.

The left should obviously support it on social justice grounds.. But the rightwing arguments for it are if anything stronger.

Inherited wealth, after all is not earned. Noone has a "natural law" right to inherit - because every conceivable inheritance law (Primo, ultimo, agnatic, matrilinial, nephew...) has been practiced widely.

Making the state the heir is thus not a violation of any core principles of etics or law - it is a tax that isn't theft. And the lower it is, the higher all other taxes must be, which is clearly unethical as all hell.

by Thomas on Tue Apr 29th, 2014 at 03:43:16 AM EST
[ Parent ]


A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Mon Apr 28th, 2014 at 09:27:23 AM EST


A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Apr 30th, 2014 at 04:54:49 PM EST
... Even where capital accumulation is concerned, I am not sure that Piketty's theory emphasizes the right aspects. Looking to the future, my guess is that the main story connecting capital accumulation and inequality will not be Piketty's tale of amassing fortunes. It will be the devastating consequences of robots, 3-D printing, artificial intelligence, and the like for those who perform routine tasks. Already there are more American men on disability insurance than doing production work in manufacturing. And the trends are all in the wrong direction, particularly for the less skilled, as the capacity of capital embodying artificial intelligence to replace white-collar as well as blue-collar work will increase rapidly in the years ahead.

Where does this leave policy?

Piketty's argument is that a tendency toward wealth accumulation and concentration is an inevitable byproduct of the workings of the capitalist system. From his perspective, differences between capitalism as practiced in the English-speaking world and in continental Europe are of second order relative to the underlying forces at work. So he is led to far-reaching policy proposals as the principal redress for rising inequality. ...

Thomas Piketty Is Right About the Past and Wrong About the Future
Capital in the 21st Century deserves all of its praise, but it should not serve as gospel on inequality.
The Atlantic



Point n'est besoin d'espérer pour entreprendre, ni de réussir pour persévérer. - Charles le Téméraire
by marco on Fri May 16th, 2014 at 11:42:51 PM EST
I did see that a couple of days ago.

Summers is infuriating. Even when he is partially right (his last paragraph nicely sums up a nice point that I also made in my introduction: this book is highly important as the first word on the issue, not the last. It opens a whole field), he says it with an air of superiority that totally belies an unbelievable combination of sloppiness and bad faith.

When he somewhat refutes Piketty's claims on return on capital by the observation that only 10% of the lists of richest Americans matched up 32 years apart, he reaches Levitt's levels of vacuity. Hello? Over 32 years when people were mostly old in the first list? Ever heard of death? Or of setting up trust funds so your children can take over in due course?

Also, Piketty clearly shows that some 19th century circumnstances have recently come back -and they started coming back in the early 80s, so that the whole period would not have been quite like now. In particular, Piketty keeps saying that his point is before tax.

Of course, he then shows how tax competition between country have now reversed the situation, and capital is taxed less than Labour in many ways. But that was not yet the case in 1980.

Then, saying that the threat is robots and 3D printer in order to dismiss the big problem caused by the advantage of Capital digs towards new depths.
What exactly are robots and 3D printers? Labourers? Or capital?

There are ways in which I think Piketty may be wrong about the future (I am currently writing the next set of notes), and Summers, correctly I think, points out that some of Piketty's claims on the return are about gross rather than net (of deprectiation) return (although he then follows by an apparently erudite discussion that is about a closed economy where Piketty explains that returns can be kept high by the possibility to invest abroad and competition between countries to attract capital), but every correct assertion is lost in the middle of a lot of facile statements that just weren't thought through, and that read as very self-satisfied.

He also seems to include a lot of plausible deniability in his statements, which does not help a clear intellectual argument.

Oh well...

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Sat May 17th, 2014 at 01:35:23 AM EST
[ Parent ]


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