I’m currently reading Capital in the Twenty-First Century (I’m about halfway through it). It’s written in a very academic style, but is much more interesting than I expected. There is a lot of research synthesized and explained in the book, and r > g is just one important piece.
Once I finish I will go reread reviews I read before beginning the book, but what I find interesting is that most writing about it reflects the author’s prior opinions, i.e. all of the book’s data is of little interest to them. Maybe it’s because I’m not an economist, but there is a lot of stuff that I didn’t know (like the distribution of interest vs. labor across economic classes).
Paul Krugman, however, has taken the ideas in the book seriously, and has been going through some of the data. Maybe we will continue to see more economists referencing Piketty’s work as time goes on and ideas evolve.
I’ve also looked at some of the critiques from the right. They are, unsurprisingly but somewhat depressingly, not good. Most consist of throwing up sand to confuse the issue. There was a critique by Charles Giles, which was thoroughly refuted by Piketty, which nonetheless pops up in very critique of the book. It’s a safe bet that if you see someone citing him, you can safely ignore them.
A prime example is an article by Alan Reynolds, a CATO friend of ours, in his piece “Why Piketty’s Wealth Data [Is] Worthless.” It is a clever, mendacious piece, but can be summed up as “But what about this?” He goes through several changes in US tax data and then… does nothing. There is no analysis here, only (uncited) numbers that lend a veneer of authority to unsupported claims.
Switching from corporate to individual tax returns. When individual tax rates dropped from 70% in 1980 to 28% in 1988, this provoked a massive shift: from retaining private business income inside C-corporations to letting earnings pass through to the owners’ individual tax returns via partnerships, LLCs and Subchapter S corporations. From 1980 to 2007, reports the Congressional Budget Office, “the share of receipts generated by pass-through entities more than doubled over the period—from 14 percent to 38 percent.” Moving capital income from one tax form to another did not mean the wealth of the top 1% increased. It simply moved.
Yes, and? So does this mean equality isn’t increasing? No, it doesn’t. And that’s why there’s no bother to analyze anything. In fact, if this were the case, you would expect to see a drop in labor income for the top 1%. But you don’t. Argument refuted. So hard.
And here is a brilliantly stupid twitter essay by Venture Capitalist Marc Andreessen. I call it, “Too Rich To Know How Dumb I Am”
This is the critique of someone who read a tweet about Piketty and then made up the whole argument in his head. Piketty addresses these points, but you would have to spend at least five minutes thinking you aren’t the smartest person on the face of the planet. Especially the point about secular stagnation. The book is based on the idea that there will be low-growth in the future, so relatively low rates of return on capital will be larger than a very low (by recent standards) rate of growth. This is all in the first fifty pages. Also, the government does invest Social Security. It’s just in t-bonds. And also, he is talking about the average rate of return on capital, which means some people win big and others don’t. And also… how can these people who are both so arrogant and so stupid be so rich? Ugh.
P.S. I will return to my Alt-Right series, hopefully soon.