Piketty Review Roundup: “Capital in the 21st Century”

UPDATE: Piketty responds to his critics.

Capital in the 21^st Century by Thomas Piketty has drawn more attention than any economics book in recent memory. The attraction is obvious. Piketty tells us capital as a proportion of the national income has been typically high throughout the last few centuries and current levels of extreme wealth are not a surprise. He also tell us today’s inequality of income and wealth does not reflect hard work or ability but is deeply unfair.

Piketty arrives with lots of good feeling. His credibility derives from his seminal work with his colleagues Emmanuel Saez and Anthony Atkinson on the stunning rise of incomes at the very top of the spectrum—the top 1 percent, and even more so, the top 0.1 percent.

Piketty’s new work is a challenge to orthodox economists, who believe capital should be a stable–not rising–proportion of income and labor markets reward work fairly. Progressives generally welcome his implicit criticism with open arms.

But Piketty is also inconsistent. While he says labor markets fail, as Adam Smith may have predicted, he also says there are no failures in capital markets. Here, the invisible hand does work.

Returns on capital are naturally high, he argues, based on his empirical studies. But this return is not artificially inflated by monopolists or political power. It is, he says, the natural workings of an efficient market. He implicitly claims, with humility, to have found a new relationship in capitalism that requires government intervention–in particular, higher taxes–to control.

Is his new found “law” true?

To make it easier for readers to wrestle with these questions, we have created a repository of the most significant commentary on the Piketty thesis, below. We will continue to update this collection until the conversation is exhausted (which may take many years). We expect many arguments, new investigations into the data, and challenges to economic theory. In particular, Piketty argues only higher taxes are the answer to capital accumulation. Many progressive economists take exception to this. Keep track of the debate here and feel free to discuss in the comments section.

Updated list of reviews:

Lance Taylor, Schwartz Center for Economic Policy Analysis, The New School

Guillaume Allegre and Xavier Timbeau, OFCE

Benjamin Kunkel, London Review of Books

Thomas Piketty (response to Financial Times), Huffington Post

Suresh Naidu, Jacobin

Debraj Ray, Chhota Pegs

Branko Milanovic, Globalinequality

Martin Burcharth, Information

John Cassidy, The New Yorker

Mike Konczal, Next New Deal

Paul Krugman, The New York Times