Capital In The Twenty-First Century Research Articles

Review and Critique of Piketty’S Capital in the Twenty-First Century

This essay is a comprehensive and critical review of Thomas Piketty’s Capital in the Twenty-First Century. It follows the flow of Piketty’s argument carefully and literally and notes his many assertions that are unsupported or contradicted by economic logic and empirical evidence, particularly in the United States. The essay particularly questions the high real interest rate needed to support Piketty’s model of growth and distribution, in stark contrast with the low and even negative real interest rates the United States has been experiencing for several years. The essay also summarizes the recent critiques of Piketty’s arguments by other leading economists.

People, Not Ratios: Why the Debate Over Income Inequality Asks the Wrong Questions

The debate over income inequality became especially heated following the English-language publication of French economist Thomas Piketty’s bestselling book, Capital in the Twenty-First Century. The controversy has generated more heat than light. This paper seeks to clarify common points of confusion in the inequality debate and expose the fundamentals behind the ideological tussle. For all sides of the inequality debate, the overarching goal should be to reduce global poverty.

Assessing Inequality Using Percentile Shares

At least since Thomas Piketty's best-selling "Capital in the Twenty-First Century" (2014, Cambridge, MA: The Belknap Press), percentile shares have become a popular approach for analyzing distributional inequalities. In their work on the development of top incomes, Piketty and collaborators typically report top-percentage shares, using varying percentages as thresholds (top 10%, top 1%, top 0.1%, etc.). However, analysis of percentile shares at other positions in the distribution may also be of interest. In this paper I present a new Stata command called -pshare- that estimates percentile shares from individual-level data and displays the results using histograms or stacked bar charts. A shorter version of this paper has been published in The Stata Journal 16(2): 264-300 (see: http://www.stata-journal.com/article.html?article=st0432).

Rehearsal with the Elite from the Front Row

Abstract The performance Capital by Ivica Buljan, which was conceived while reading Capital in the Twenty-First Century by Thomas Piketty, is a presentation of the work process by a group of young actresses and actors who try to reflect the contemporary paradigm of capital. From a directorial perspective, this is not a wilful aestheticisation of the chosen texts, which we read as a sign of the sincerity of the artists’ collective effort. Although the explanatory approach and the burden of the dramatic form hinder effective expression of personal stances on the chosen topic, the created material can serve as a solid ground for an eventual upgrade of this study production, which could bring about a more pronounced engagement or performance of the discourse – out of itself.

Assessing Inequality Using Percentile Shares

At least since Thomas Piketty's best-selling Capital in the Twenty-First Century (2014, Cambridge, MA: The Belknap Press), percentile shares have become a popular approach for analyzing distributional inequalities. In their work on the development of top incomes, Piketty and collaborators typically report top-percentage shares, using varying percentages as thresholds (top 10%, top 1%, top 0.1%, etc.). However, analysis of percentile shares at other positions in the distribution may also be of interest. In this article, I present a new command, pshare, that estimates percentile shares from individual-level data and displays the results using histograms or stacked bar charts.

The Literature on Piketty

ABSTRACTThe extensive critical literature on Thomas Piketty’s Capital in the Twenty-First Century is surveyed under nine headings. The first deals with the conservative argument that inequality in the distribution of wealth does not matter, since a rising tide lifts all boats. Second, it is claimed that Piketty’s prediction of continuously increasing inequality and the return of ‘patrimonial capitalism’ is unjustified. Third, the quality of the empirical evidence that he cites is questioned, on a number of quite different grounds. Fourth, some critics object that Piketty’s explanation of long-run trends in the distribution of wealth is too general and too theoretical. Fifth is the argument that he has used the correct (neoclassical) theory incorrectly, exaggerating the elasticity of substitution of capital for labour. Against this, post-Keynesian critics claim, sixthly, that Piketty is using the wrong theory, and should have drawn on the Kaldor–Pasinetti model of distribution and growth, and not the discredited neoclassical analysis. Seventh, Piketty has been criticised for ignoring the distribution of wealth in developing countries. Eighth, there is a wide range of objections to his most striking policy proposal, for a progressive global wealth tax. Finally, several critics from outside economics complain that Piketty has neglected a number of non-economic dimensions of inequality. I conclude by welcoming both the book and the critical literature, and calling for the distribution of wealth to be placed back on the political agenda.

Thomas Piketty and the Justice of Education

Thomas Piketty's Capital in the Twenty-First Century is best known for its documentation of increasing social inequality, but it also has a notable normative aspect. Although Piketty is far less clear on the normative level than on the empirical, his view of justice can be summarised as meritocratic luck egalitarianism. This leads him to condemn as unjust the fact that inheritance is once again becoming more important than education for determining social position. In this paper, I discuss whether Piketty's normative conception can justify this condemnation. My main thesis will be that Piketty ends up in a dilemma that he cannot resolve with the normative resources he has at his disposal. The horns of this dilemma are defined by whether or not we accept what Susan Hurley calls ‘the regression requirement’, and in both cases the normative distinction between inheritance and education as ways to achieve social positions disappears. Toward the end, I shall suggest an alternative justification for the moral superiority of education over inheritance, which makes use of one of Piketty's key empirical arguments.

Symposium on Piketty's Capital: An Introduction

Capital in the Twenty-First Century was first published in France in 2013 with the title Le Capital au XXIe Siecle. The French edition runs to over 900 pages. The English version (reduced to less t...

Capitalists, Workers and Thomas Piketty's Capital in the 21st Century

ABSTRACTThis paper interprets Piketty's influential work through the lens of structuralist macroeconomic theory, which is a synthesis of the classical, Marxian and Keynesian traditions. It shows that Piketty's key inequality, (the rate of profit is greater than the rate of growth) measures the influence of capitalist consumption on capital accumulation in the context of a growth model with capitalists and workers in the tradition of Nicholas Kaldor and Luigi Pasinetti. The paper shows how in the structuralist model the connections Piketty makes between growth and inequality become more transparent and less confusing than they are in the neoclassical theory he resorts to using. The paper also examines his data with emphasis on two central paradoxes of neoliberalism: with all the upward redistribution of income, there is surprisingly little concentration of the wealth distribution; and with a higher profit rate, there has been no corresponding increase in growth. The hypothesis suggested by structuralist growth theory is that neoliberal capitalism has transformed Marx's ‘accumulate, accumulate' into ‘consume, consume.' The political-economic implications of this hypothesis are significant.

Book review: Capital in the Twenty-First Century

Book review: Capital in the Twenty-First Century

The Meaning of Capital in the Twenty-First Century

America is on a path towards a level of both wealth and income inequality unparalleled in recorded history. Thomas Piketty’s Capital in the Twenty-First Century summarizes and conveys the work of Piketty and many co-authors, over many decades, looking at the structure of income and wealth inequality across many nations and centuries. This review essay builds on Piketty’s ambitions as well as his data, in order to put forth a better solution: one that accepts and even embraces the facts of unequal ownership of capital, but changes the social meaning of those facts to avoid the social harms that follow from unfettered private party capitalism. A progressive spending tax does not simply take capital away from the wealthy. It allows the rich to keep and manage their wealth, as they have shown the ability and temperament to do so. But it curtails their ability to spend their capital on themselves and their luxurious wants. The social distinction of holding wealth can continue; the progressive spending tax makes this state of affairs work to the common utility.

Book Review: Capital in the Twenty-First Century, by Thomas Piketty

Thomas Piketty Capital in the Twenty-First Century. Cambridge, MA: Belknap Press, Harvard, 2014. 685 pp.Journalists and journalist-academics once read from Adam Smith's Theory of Moral Sentiments to Karl Marx for the point E. F. Schumacher fingered: to approach economics as if people mattered. That idea seemed to fade in the United States in the late 1970s and 1980s, as homeless entered the vernacular, the middle class eroded, and Americans celebrated Lifestyles of the Rich and Famous more than we are all in this together. After Californians passed Proposition 13 and similar measures, public schools, the foundation of American citizenship, began to fray, and conservatives consigned Marx to the dustbin of history. Higher education equated the science, technology, engineering, and mathematics (STEM) disciplines with success, as economics and the social sciences became scientistic: less about people, more about models abstracted from them.That is partly why an intellectual tsunami swept academe when economist Thomas Piketty, professor at the Paris School of Economics and centennial professor at the London School of Economics, published Capital in the Twenty-First Century in French, in 2013, and in English, in 2014. Piketty's argument-that capital inevitably grows faster than the general economy (r > g), concentrates wealth in fewer hands, and worsens income inequality-did more than validate the 99% movement. From the macroeconomic level, his work confronted the West with the impact of its 40-year swing to individualism at the expense of community. It also enriched social science methodology by Piketty's connecting comprehensive statistical aggregations over more than two centuries' time to poignant qualitative work from those eras: from Jane Austen to Honore de Balzac, and from the economics of slavery to Michael Jackson. In the process, the work resurfaced the arguments of Marx-this time less doctrinaire, and with testable, web-accessible data.Piketty's charge produced a counteroffensive, first, from financial circles in London and New York, to little effect, and then, from conservative think tanks attacking his assumptions. Massachusetts Institute of Technology (MIT) economics doctoral student Matthew Rognlie seemed to dent the argument by suggesting Piketty had understated the case against capital's growth, which Rognlie said has been negligible in recent decades and concentrated mainly in the housing sector.1 Rognlie's critique took hold, but the debate's outcome remains unsettled, and the impact on Piketty's work seems more an issue of degree, rather than kind.Among the downsides of growing income inequality, Piketty says, is not only that it produces reactions like the 99% movement; it also dampens the economy overall, evident in America's slow recovery from the Great Recession. In other words, when two thirds of American economic activity depends on consumer spending, squeezing the incomes of lower- and middle-class people does not just reduce their standards of living: It lowers all boats.Piketty charts in exhaustive detail how that has happened worldwide since the 1980s, when incomes of billionaires soared into the stratosphere while billions of others live in want. …

Economic Inequality Matters: Reflections on Piketty’s Capital in the 21st Century

In <em>Capital in the 21st Century</em>, Piketty takes a central liberal claim about economic inequality seriously and asks: does capitalism reward merit? If true, we would expect salaries, presumably rooted in the reward of merit in the workplace, to be more important to personal wealth than inherited money and property, which is just luck. He concludes that capitalism does not reward merit more than inherited wealth. Piketty suggests that this is at once a political and moral problem. As such, it cannot be resolved through economics alone, especially in the profession’s current incarnation, characterized by mathematical fetishization. Instead, all of the social sciences and humanities will necessarily be mobilized to develop a full description and analysis of economic inequalities, which must then be made a central question for broad, public debate. This is an important epistemological and political argument, although Capital in the 21st Century has critical weaknesses, including an undertheorized empiricism, a tendency to treat economic inequality as a matter of money and not as a social relationship, and a failure to grasp how class, gender, race and age come together in social relationships of exploitation (and not merely statistical relationship of inequality).

A Post-Keynesian Response to Piketty's ‘Fundamental Contradiction of Capitalism’

ABSTRACTIn Capital in the Twenty-First Century, Thomas Piketty presents a rich set of data that deals with income and wealth distribution, output-wealth dynamics and rates of return. He also proposes some ‘laws of capitalism’. At the core of his argument lies the ‘fundamental inequality of capitalism’, an empirical regularity stating that the rate of return on wealth is greater than the growth rate of the economy. This simple construct allows him to conclude that increasing wealth (and income) inequality is an inevitable outcome of capitalism. While we share some of his conclusions, we will highlight some shortcomings of his approach based on a Cambridge post-Keynesian growth-and-distribution model. The paper makes four points. First, r > g is not necessarily associated with increasing inequality in functional distribution. Second, Piketty succumbs to a fallacy of composition when he claims that a necessary condition for r > g is that capitalists save a large share of their capital income. Third, post-Keynesians can learn from Piketty's insights about personal income distribution and incorporate them into their models. Fourth, we reiterate the post-Keynesian argument that a well-behaved aggregate production function does not exist and cannot explain income distribution.

Capital in the Twenty-First Century

Capital in the Twenty-First Century. Thomas Piketty (translated by Arthur Goldhammer). Harvard University Press: Cambridge, MA, 577 pages, 2014.This book gives an historical account of the developed world's capital from 1700 to 2012 (capital as one of the four factors of production: land, labor, capital, and entrepreneurship). It is a New York Times best seller, an award winner (British Academy Medal; Financial Times and McKinsey Business Book of the Year Award, and National Book Critics Circle Award), and the best sales success ever for Harvard University Press. The author spent a great deal of time going through government records and other sources in both Europe and the United State amassing data for this book, and contends his database is the most complete of its kind to date.Over history two authors come to mind who have taken on this sort of study: (1) Karl Marx in Das Kapital (1867)1 and Simon Kuznets [e.g., National Income and Capital Formation (1937) and Population, Capital, and Growth (1973)].2 Both reached opposing conclusions in forecasting how capital would accumulate and how income and capital would be divided among populations of developed countries. For Marx, capitalism sows the seeds of its own destruction, and so inequality of capital (and the return on capital) is bound to grow to destructive levels. Although Kuznet's raw data covered just a short period of time, he thought that things would work out fine, without income and capital inequality becoming any source of distress. Marx's data was anecdotal and Kuznet's data harbored a myopic view of what drove capital and income accumulation. Piketty says neither Marx nor Kuznets had the proper amount and types of data to properly take on this kind of study.There are four parts to the book. The first three parts are devoted to setting out his findings and discussing them, while the fourth, entitled Regulating Capital in the Twenty-First Century, is normative. The author divides capital into four very broad categories: agricultural land, housing,3 other domestic capital (including what we usually think of as capital, like factories and machinery), and net foreign capital (capital extracted from foreign counties less capital brought in). The measure of a country's capital for comparative purposes is made using its capital /income ratio: the number of years of national income its capital is worth. (For instance Britain's capital was worth about 51?2 times its national income in 2010.) The book focuses on France, Britain, Germany, the United States, and Canada, as developed countries, since data are plentiful for those countries, although Italy, Australia, Sweden (and Scandinavia as a whole), and Japan are also examined. Developing countries examined include India, China, South Africa, Indonesia, Columbia, and Argentina.There are several findings that, though secondary to the author's main findings, are truly eye-opening: (1) over the past 312 years, there was virtually 0 inflation between 1700 and 1912, significant inflation between 19134 and 1990, and very low inflation between 1990 and 2012 (about 2%); (2) agricultural land was a very significant portion of nations' total capital from 1770 to about 1900, falling to a very small portion after 1950; (3) slaves were a large portion of capital in the U.S. (mainly in southern states) from 1700 to 1865;5 (4) the U.S. and France had national minimum wage laws in 19336 and 1953, respectively, while Sweden and Germany have never had one, although the latter countries today have lower labor income inequality; (5) net foreign capital in developed countries fell to insignificant levels after about 1930 (after world decolonization).REAL ESTATEThis book is so chock full of interesting material that including a few of the author's incites on real estate suits me fine. The first thing to keep in mind is that land in the context of the four factors of production (inputs for the production of goods and services) does not include improvements to real estate. …

Интервью с Тома Пикетти: «Можно выгнать историю в дверь, но она немедленно вернётся через окно»

Thomas Piketty, Professor of Economics at the EHESS and at the Paris School of Economics, was interviewed by Olessia Kirtchik, Leading Research Fellow at the Poletayev Institute for Theoretical and Historical Studies in the Humanities at the Higher School of Economics. The interview was conducted during Prof. Piketty’s visit to Moscow in November 2015 when he gave lectures and introduced the Russian translation of his book Capital in the Twenty-First Century (Moscow: Ad Marginem Press, 2015). The Piketty's lecture at Higher School of Economics was arranged by the Laboratory for Studies in Economic Sociology (HSE) and the Franco-Russian Research Center in Moscow with support from the French Embassy and French University College in Moscow. In the interview, Prof. Piketty expressed his skepticism about economists’ tendencies toward using formal models. Early on, he recognized the limits of an economic approach that was applied in ignorance of history. This profoundly affected his future academic career. He admits that his successful research on inequality was possible only in cooperation with other social disciplines. In addition, Prof. Piketty talked about main ideas of his book Capital in the Twenty-First Century and its restrictions. In particular, he pointed out that there has been insufficient attention toward economic growth.In his opinion, in order to explain economic growth, one should take into account historical perspective and analyze government’s policies toward public education and the health system. The French economist also noted his intention to reconcile Karl Marx and Pierre Bourdieu’s conflicting views on a relationship between economic and cultural forms of inequality.

Missing bridges: a pluralist analysis of the debate on Capital in the Twenty-First Century

This article analyses the debate surrounding Thomas Piketty's book Capital in the Twenty-First Century and asks whether it can be characterised as pluralist, understood as a practice of mutual engagement between researchers from different schools of thought. We review the theoretical framework of Piketty and the responses his work received in the economics community, both mainstream and heterodox. We argue that Piketty's theory remains ambiguous. It builds on ideas of mainstream economics but creates a space for broader discussions by referring to non-mainstream concepts, mainly from other disciplines and not heterodox school of thoughts. Neither the book nor the discussion around it can be characterised as pluralist: Piketty, as well as his commentators, hardly build any bridges between different schools of thought, although the topic of inequality seems to be relevant for all of them. Therefore, this analysis serves as an example for habits and problems in the economic debate.

Review of "Capital in the Twenty-First Century"

Review of "Capital in the Twenty-First Century"

Testing Piketty's Hypothesis on the Drivers of Income Inequality: Evidence from Panel VARs with Heterogeneous Dynamics

Thomas Piketty's Capital in the Twenty-First Century puts forth a logically consistent explanation for changes in income and wealth inequality patterns. However, while rich in data, the book provides no formal empirical testing for its theoretical causal chain. In this paper, I build a set of Panel SVAR models to check if inequality and capital share in the national income move up as the r-g gap grows. Using a sample of 19 advanced economies spanning over 30 years, I find no empirical evidence that dynamics move in the way Piketty suggests. Results are robust to several alternative estimates of r-g.

Factor Income Distribution and Endogenous Economic Growth - When Piketty Meets Romer

We scrutinize Thomas Piketty’s (2014) theory concerning the relationship between an economy’s long-run growth rate, its capital-income ratio, and its factor income distribution put forth in his recent book Capital in the Twenty-First Century. We find that a smaller long-run growth rate may be associated with a smaller capital-income ratio. Hence, the key implication of Piketty’s Second Fundamental Law of Capitalism does not hold. In line with Piketty’s theory a smaller long-run growth rate may go together with a greater capital share. However, the mechanics behind this result are the opposite of what Piketty suggests. Our findings obtain in variants of Romer’s (1990) seminal model of endogenous technological change. Here, both the economy’s savings rate and its growth rate are endogenous variables whereas in Piketty’s theory they are both exogenous parameters. Including demographic growth in the spirit of Jones (1995) shows that a smaller growth rate of the economy may imply a lower capital share contradicting a central claim in Piketty’s book.