Thomas Piketty’s new book Capital in the Twenty-First Century is all the rage right now. You know the gist: Piketty thinks capitalism has an inherent tendency to ever-increasing inequality. Indeed, he thinks capitalism leads to terrifying, destabilizing (his terms) inequality.

Maybe he is right about this, maybe he is not. I have not yet finished the book and, in any case, am not qualified to say. However, I have been struck by the reception of this book. It borders on adulation. Many public intellectuals seem to think they have finally found the scientific proof for what they knew all along: how capitalism is unfair, unjust, and ultimately ridden with “contradictions.”

This kind of reception should make us uncomfortable. We are hardwired to see the evidence in light of our ideological commitments, and intertwining the empirical with the moral makes it very difficult, if not practically impossible, for ideologically motivated people to reason correctly. (For some among many studies showing this effect, see here and here.) In the book, Piketty explicitly flirts with the Marxist left, couches his arguments in ethical terms, and proposes policies that clearly align him on one side of the ideological spectrum. And the reviews have by and large been just a little too relieved, too gleeful, a little too enthusiastic.

This is not good news for those among us who seek the truth. Yesterday, Tyler Cowen approvingly linked to a critical review of Piketty’s book by Clive Crook. Crook too notes the “erotic intensity” with which the book has been received. And he makes some good points about the importance of focusing on making sure economic growth benefits all, rather than inequality. That, I agree, should really be the major issue of our time. And the reception of Piketty’s book largely distracts form it.

One “R.A.”, blogging at the economist, disagrees. Responding to the Crook review, s/he writes:

Why do we care about inequality? We care about it because we are human, and we can’t help but be concerned about matters of fairness, however much economists might wish that were not the case. But what Mr Crook seems not to understand is that we also care about it because we care about living standards. Mr Piketty’s book does an able job showing that high levels and concentrations of capital have not been a necessary or sufficient condition for rapid growth in the past, though they have often sowed the seeds for political backlash that is detrimental to long-run growth. His argument is that the living standards of many people around the rich world are now unnecessarily low, because of the nonchalance with which elites have approached distributional issues over the past generation, and that continued heedlessness of this sort will ultimately undermine the growth-boosting institutions of capitalism. His argument is that economic growth that concentrates benefits on a small group of people will probably not be tolerated as fair, even if living standards among the masses are not completely stagnant.

It is an argument that is powerful and well-supported by the data—and extremely relevant today, whether or not one thinks inequality qualifies as the defining issue of the era. That, it seems to me, is why the book has been received as it has.

True: the importance of inequality is ultimately an ethical issue. And that issue is independent of the truth about whether inequality is growing or not. Piketty’s book might well have uncovered the truth about this matter. (Although Cowen in his own review of the book offers some important questions.) But even if inequality is growing, that does not settle the ethical question.

“R.A.” misses this point. Part of Crook’s message is precisely that inequality per se need not bother us as much as it does the Piketty-acolytes. (And the mere fact that many people do care about the issue does not show that we should care.) What matters is that living standards keep rising, and keep rising for all. That has been the crucial engine of humanity’s greatest achievements in poverty reduction, increases of life expectancy, literacy, culture high and low, and so on.

It may be true, of course, that real economic growth need not come with great increases of inequality. And it is clearly true that great increases of inequality do not imply real economic growth. But all that leaves open whether policies designed to reduce inequality, and transfer resources from rich to poor, carry significant risks of slowing down real growth.

If they do – and all the ones I have heard clearly do (read the section “Taxman” in Cowen’s review) – that remains, despite Piketty, an important concern. And one with profound moral implications. It is, or rather should be, central to our thinking about fairness. We cannot simply focus on inequality, therefore. Whether or not markets are fair depends in part on whether they help rise living standards. And if they do so unequally, well, maybe that is par for the course.

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  • Rachelle

    I never understood this obsession with the value of economic equality per se (i.e. egalitarianism). Parfit’s classic objection to it pump our intuitions enough to show that equality, by itself, is insufficient.

    Society 1: A has $1, B has $1. 0% inequality.

    Society 2: A has $1,000,000 and B has $2,000,000. 200% inequality.

    Which society are A and B better off? Clearly society 2. Therefore, inequality/equality is BY ITSELF insufficient. When will people question their value judgment assumptions? And what is the basis of it anyway? Prove something or shut the fuck up.

    • Jonathon Martin

      But most people do not worry about inequality per se. They worry about inequality that they consider to have negative consequences (such as an unlevel playing field) or to be unfair or inefficient. They may use the shorthand “inequality” but what they are usually upset about is more complex.

      • michael

        I’m not sure about that. When I pose the society 1 versus society 2 question or some variation of it that Rachelle laid out in the post above I often get angry responses from leftists. I’ve never heard “Well if everybody had more opportunity and wealth under a system with more income inequality as such I’d be fine with that.”

        • Theresa Klein

          “opportunity” is a stand-in for fairness.
          What many people are concerned about is that poor people do not have a level playing field starting out, due to poor public schools, the inability to afford a college education, and such. Also not having the social connections that the rich have to be able to get jobs and succeed in a business environment.
          There are *some* people who think inequality is intrinsicly unfair. But then there are others who are just worried about how having rich parents gives you an advantage.

          • michael

            For sure, most people aren’t philosophers (thank God) and their thinking about what equality is and why it does and doesn’t matter is often fuzzy so it’s difficult to know exactly what they value and for what reason.

          • Jacob Waldrop

            There is a famous astrophysicist named Neil Degrasse Tyson. You may know him as the man that changed the way we see planets. He also caused Pluto to be declassified. He is a genius who at the age of 9 knew he wanted to be an astrophysicist. At every turn he was told that he should instead try athletics or some other form of occupation. There was no way a poor black child would ever be able to take on a profession that was clearly dominated by white men. Had he not gotten help from a man by the name of Carl Sagan, that dream would have never come true. He is now one of the leading astrophysicists in the world.

            In his show he talks about a small orphan boy who at the age of 11 was busy working day and night making mirrors. The orphanage collapsed, and a prince rescued him. Instead of being denied an education, he was given the full access of all the scientific knowledge of the day. Using this, he discovered that there were tiny black lines in the color spectrum. He discovered that those lines showed the jump in electron rings of atoms, and using that you can tell the molecular makeup of an object by the colors if puts out. This is how we can tell what other planets or stars are made up of.

            With both cases, we nearly lost out on huge breakthroughs of how we understand science and knowledge. This all happened because they were given a helping hand to overcome inequality. Imagine how much more advanced we would be, the amount of insight, the shear knowledge we have denied ourselves because some great thinker who would be uncovering even greater mysteries of the universe is stuck working in a sweat shop somewhere so that you can get a $10 pair of pants.

          • michael

            Those are great stories (truly). But what you are arguing for is opportunity, not greater material equality.

          • good_in_theory

            Opportunity typically requires greater material equality.

          • meliorist

            Opportunity doesn’t require material equality. Suppose there’s an exam for entry to an elite profession. One candidate has a hearty but cheap breakfast. The other candidate has a gourmet breakfast prepared by chefs and served by a butler. One candidate rides to the exam hall in a cheap, but perfectly serviceable small car. The other candidate rides in a limousine with outriders. These differences don’t materially affect the opportunity each has of passing the exam. If one passes and the other fails, great advantages might accrue to the one who passes, creating a new inequality between the former candidates, but this, far from being inimical to opportunity, is the incentive of it.

          • Theresa Klein

            Sir, put the gun down and slowly back away from the Cosmos remake.

        • BensonBear

          You have never listened to Rawls?

          And perhaps these responders would agree that more wealth and opportunity for *everyone* at the cost of more inequality is an improvement, although not enough of an improvement, so that they are not “fine” with it (as an end point)

          • michael

            “at the cost of more equality.” I simply reject the claim there is a cost because I see no basis for according equality per se any value whatsoever.

          • BensonBear

            Is this a reply to me? I was questioning your claim that “[you've] never heard “Well if everybody had more opportunity and wealth
            under a system with more income inequality as such I’d be fine with
            that.””. I wasn’t making assertions myself about the cost of inequality (intrinsic or otherwise).

            I believe that is more or less what Rawls says (subject to the proviso of reading :”fine with that” as meaning “I approve of that as a good move, if not a final resting point”), someone I assume folks here would call a “leftist”. At least folks here would object to Rawls as an anti-libertarian redistributionist or some such — someone on the other side. And Rawls is pretty popular, so it seems strange you have never heard anything like that.

          • michael

            It’s impossible to read BHL without knowing who Rawls is. It would like be reading a hockey blog and not knowing who Gretzky is :) So yes very familiar with Rawl’s argument.
            What I’m unclear on is the weight you’re according to inequality per se. Do you think it matters?

          • BensonBear

            As I said, I am not according any weight to equality personally here, per se or otherwise. I am saying that I find it strange that you never heard any “leftists” say that they would allow for more inequality (we can assume they are against it, ceteris paribus, for some reason or other — one could give reasons too but it is not the issue here) provided that the situation of the worst was made better as a result. It seems bizarre that you have never heard that.

          • michael

            Okay I see. I was referring to leftists I talk to on blogs, not Ralwsian philosophers who I’m not even sure I’d label leftist.

    • TheBrett

      It depends on how much stuff costs in Society 1. That’s why absolute levels of income don’t really matter – the cost of things comes from the costs of labor, materials, and equipment, which means that living standards really come from how cheap those things are in comparison to the income level. If a house costs one dollar to buy, then the $10 man is rich.

      Relative levels of income do matter, though. If doctors’ wages go up while mine stay the same, with no increase in productivity, then the cost of my health care goes up and I’m now poorer. If I’m an apartment dweller and someone else outbids me for the rent in a time period longer than in which new apartments can be built that I can afford to live in in the area (we’re assuming away any construction restrictions), then I’m now forced to live farther away from what was once close to me, and am poorer for the transportation costs.

      • j r

        Sure, real income matters. But almost everything we buy is now cheaper in real terms than it has ever been before, because of capitalism. And those things which are more expensive in real terms (healthcare, housing, education) are more expensive mostly because of terribly inefficient government-regulated markets.

      • Theresa Klein

        Yes there definitely has to be some accounting for productivity. But the inequality produced by capitalism is what incentivizes the productivity. What incentive do you have to produce more, or get more efficient, or innovate, if the product of your labor is going to be taken and redistributed?

        And isn’t it generally true that the greater the profits (and therefore the resulting inequality), the greater the incentive to produce?

        How is it possible to reduce inequality without reducing the incentives that drive increases in productivity?

        • TheBrett

          The question is how much inequality do you need to get innovations, entrepreneurship, and productivity gains. Do people need to be able to become billionaires? Millionaires? Is it more important that the gains come quick than come large?

          That’s why liberals point to the Postwar Period. If you’re thinking in terms of innovation and business, those were some severe years for individual rewards for work – just becoming rich was difficult when the higher levels of taxation ate most of your gains. But it doesn’t seem to have hobbled innovation or entrepreneurship, possibly because you still could become rich even if it was more difficult, and you could definitely become more prosperous for work.

          • Theresa Klein

            How much do you need? Well exactly as much as consumers are demanding. Let’s remind ourselves that the “inequality” in question is a manifestation of other people’s desires. Inequality is what happens when someone responds to a price signal and satisfies a demand better than other people. If you want to reduce the inequality, you are, by definition, interfering in the price signal.

          • BensonBear

            How is it that “the consumers”, as some aggregate entity, have figured out collectively just how much they should be willing to spend on the better product so as to provide the correct incentive to produce it?

            For one thing, each individual consumer’s action (for that is all there is) will be based on how much he personally benefits from the purchase far more than it will be based on the uncertain and unknown resulting inqueality that he will only make the tiniest contribution to. For another thing, while you might argue the inequality is “deserved” in some metaphysical sense since it resulted wilt-chamberlain-style from free exchanges, this is not your original point, i.e., that this inequality is *necessary* in order to call forth the production. You do not address “TheBrett’s” crucial point that it probably is *not*.

          • CT

            The post WWII example of high taxes coupled with growth is easily explained by examining the charts for private investment. I believe Robert Higgs’ explanation of ‘regime change’ explains why private investment exploded after 15 years of inactivity.

          • BensonBear

            I had to read this a while to see that it really is an attempt to answer my point. My point (and I think Brett’s) is not about one specific episode. That is just an example. My point is in reply to the ideological, general, nearly a priori principle offered by Teresa, and then her non-sequitur in response to Brett. So again, first, her point was that “inequality produced by capitalism is what incentivizes the productivity.
            What incentive do you have to produce more, or get more efficient, or
            innovate, if the product of your labor is going to be taken and
            redistributed”. There is no reference to any specific examples here. It is stated in absolute, general terms. The reply is, yes, incentives are necessary, and yes, those incentives will result in some inequality, but is it necessary that there be *as much* inequality as there actually is. Could we not get buy with somewhat less inequality, and still provide adequate incentives. Note also by the way that it is not necessarily the inequality itself per se that incentivizes, that is, the inequality between the winners and the losers, but the difference between what one could have versus what one does, or may, have, as a result of being incentivized. So the inequality is a byproduct, an unfortunate one, and not the thing that incentivizes, itself (one would hope, anyway). Also note that it is a strawman to say that if we don’t have this incentive, it is because “the product of your labour is going to be taken”. That either means *all* the product is taken, or *a portion* is taken. In the first reading it is a strawman, and in the second reading, a truism: we all agree some of the product will be taken, except for a few market anarchists. The question, is, how much much must be left alone in order to provide an adequate incentive for productivity. (This way of framing it ignores the idea that redistribution to less well off may also increase productivity by the way).

            The second point involves Teresa’s answer to Brett. When he makes the same point as I make above, she then suggests that the amount of inequality is just right now because we have chosen it by agreeing to make the purchase. But that is highly arguable. As I said, we make our individual purposes independently without really considering the long term effect of many purchases made by many. In effect, it is a kind of prisoner’s dilemma situation. The idea that “we” collectively chose the level of inequality willingly does not seem to be correct.

          • JoshInca

            That’s why liberals point to the Postwar Period. If you’re thinking in terms of innovation and business, those were some severe years for individual rewards for work – just becoming rich was difficult when the higher levels of taxation ate most of your gains.

            They were also an epoch of stultifying conformity that a majority of people ultimately rejected. Jim Crow – Rigid roles for women and mindless hierarchy for white males (death of a salesman, rebel without a cause, hell’s angels etc.) ; that was only tolerated for a short time because of the preceding horror of the great depression and WWII.

        • meliorist

          I have a quibble. History tells us the that before capitalism, there was feudalism, which was extremely unequal, but the system incentivized either grovelling obedience or violence, depending on one’s position, whereas capitalism incentivizes productive. Therefore, inequality is not really created by capitalism (it already existed), and it isn’t the inequality per se that makes people productive, but freedom to accumulate the wealth by means of productive work. The freedom would have this effect even in an entirely equal society. (Though, of course, an equal but free society would not remain equal for long.)

    • Paul

      I’m not sure it is worth replying to someone who tells others to “prove” something (whatever that means) or shut the fuck up, but here it goes.

      I don’t think that equality is intrinsically valuable, but I doubt that those who do think that equality is intrinsically valuable think that it is the ONLY thing that is intrinsically valuable. Clearly Society 2 is better *overall*, but it is not obvious that Society 1 is not better *in some respect*. One might think, therefore, that equality is pro tanto intrinsically valuable.

      • MARK_D_FRIEDMAN

        Great. Then without saying something obviously circular like, society #1 is more equal, please articulate in what “respect” it is better.

        • Paul

          Well, the claim is that equality is intrinsically valuable. If this is true, then equality is an evaluatively basic property: it admits of no further analysis in terms of other good-making properties. So I’m not sure what kind of explanation you are looking for.

          • MARK_D_FRIEDMAN

            Right, but the example given above seems to provide a clear counter-example to the claim that having equality of condition is intrinsically valuable. I agree that there are other things that are intrinsically valuable, but why do you think that they provide support for equality of condition? Isn’t that what we are debating?

          • Paul

            My point was that the example is *not* a clear counterexample to the claim that equality is (pro tanto) intrinsically valuable (as Rachelle seemed to claim that it was). It is a counterexample to the claim that equality is the only thing that is intrinsically valuable, but we already knew that.

            I don’t actually think that equality is pro tanto intrinsically valuable. But it doesn’t strike me as crazy that people think that it is, and the example above certainly doesn’t show that the view is wrong.

          • MARK_D_FRIEDMAN

            Thanks. Let me try again. If equality is intrinsically valuable (although not the only intrinsically valuable thing), it should be possible to identify a case where its presence alone changes our evaluation of the situation, correct? Can you do so?

          • Paul

            The problem with the case is that there is a *dramatic* increase in well-being from Society 1 to Society 2. So, the fact that our intuitions tell us that Society 2 is better is not surprising. This does not show that that Society 1 is not better in some respect, however. In other words, our evaluation of Society 1 as being worse than Society 2 might be tracking the dramatic difference in well-being which overwhelms in this case the value of equality.

            So, suppose that Society 1 had three people A, B, and C. A and B each have 20 units of well-being, whereas C has 60 units of well-being. In Society 2, each has 30 units of well-being. To many people, Society 2 is clearly better.

            But even if this judgment is correct, this does not show *equality* is intrinsically valuable, since there may be some other (distributional) factor that explains the judgment. In fact, the leveling down objection is supposed to show that it is this other factor that explains this and similar judgments.

            But the leveling down objection remains unconvincing to many egalitarians because by leveling down, there is a decrease in something valuable–namely, well-being. So, they can explain the intuition that, in general, leveling down is a change for the worse (overall) on this basis.

            But egalitarians may be able to point to a case in which they think that that equality improves society overall, even when well-being is diminished (so, leveling down). Suppose that in Society 1, A and B each have 30 units of well-being and C has 32 units. In Society 2, A, B, and C each have 30 units. Is Society 1 *obviously* better than Society 2? I think that Society 1 is better, but I don’t think that it is obvious.

            Or, let’s say that in Society 1, 100 people each have 30 units of well-being and 3 people have 100 units. In Society 2, all 103 people have 30. Again, is Society 2 obviously worse than Society 2?

            Is the “not obviously worse” a powerful argument for egalitarianism? No, but egalitarians may point to their *theoretical* intuition that equality is valuable, and then attempt to explain away case-based intuitions (like leveling down intuitions).

          • MARK_D_FRIEDMAN

            I (sincerely) thank you for the further explanation. But, despite your heroic efforts, I don’t believe you can save egalitarianism from incoherence (bearing in mind that you do not hold this view). In the 30/30/32 v. 30/30/30 example, the only reasons that I can see for preferring the latter (or thinking that it is not inferior) relate to human psychology, i.e. the absence of envy, greater social harmony, etc. But these things are distinct from equality, so even if you think they have intrinsic value, it doesn’t show that equality does. Setting aside these other, extraneous values, egalitarians are left with the problem of explaining how a +2 in units makes things no better. This just seems absurd on its face.

            So, I return to my original challenge. Show me a case where the presence of equality per se alters our judgment of the case. In the absence of such an example, I think the alleged intrinsic value of equality falls into the “not even false” category. It is supposed to exist, but there is no evidence for it, and no way to even argue against it.

    • Les Kyle Nearhood

      I agree with you, but it is really easy to understand. it is an ugly human emotion called envy. Even wealthy academics and journalists are not immune to it, although they “transfer” some of their envious feelings to the rich toward their favorite dependent groups; “the poor”, “Minorities”, etc.

  • Critic

    First, Piketty does not “flirt with Marxism”. He rejects Marx and states that private property and some inequality are necessary. It should give you pause that you felt the need to tie him to Marx unfairly.

    Second, I see Piketty as having three strands. First and most importantly, he argues that capitalism concentrates wealth at the top. Second, he argues things went very badly when this happened before and there are good reasons to think they would go badly again. Third, he proposes solutions that he acknowledges are unworkable.

    Your argument, and the argument of Crook seem to be with number two, which you consider a distraction. But you don’t argue for it, you just assert it. Piketty argues for his point of view. R.A. is right to criticise this. A man has written 900 pages and you think you can dismiss his work as irrelevant because what? You assert the falsity of something he argues for without any engagement or argumentation yourself.

    If you want to be taken seriously I think I’d like to see you argue that massive inequality has no impact on the efficiency of the system; that it will not lead to instability as it did in the past; or that even if the system is less efficient and less unstable, this doesn’t matter for some ethical reason. Currently it’s not clear that you’re doing that, and you are very much running the risk of doing exactly what you claim others to be doing.

    • Jason Kuznicki

      Flirting with and rejecting are not incompatible. Indeed, they go together much more frequently than flirting with and then marrying.

      • Jonathon Martin

        Cute. Disingenuous given the context. But cute.

        • Jason Kuznicki

          The analogy to one’s intellectual affinities works perfectly. There is nothing disingenuous about it.

          • Jonathon Martin

            Well no, flirting in a bar does not have the same connotation as flirting with Marxism. And let’s be honest here, the author tried to tie Piketty to Marxism because he knows that people in these parts could then more easily dismiss his 900 pages of argumentation without engaging with it. That would be cheap even if Piketty had once had some sympathy for Marxism, which he hasn’t.

          • Jason Kuznicki

            No, they do not connote the same things. But the words do suggest an analogy, and that’s why it’s become a common figure of speech. In both cases, you can flirt with something/someone and yet not go on to embrace or espouse it. I have a hard time believing that I actually need to spell this out to anyone.

          • Jonathon Martin

            Save your patronising asides for those occasions where you actually understand the argument being made. I criticised the author for linking Piketty to Marx. He responded that he only said Piketty “flirted with” Marxism. You defended him. There is no evidence to suggest Piketty “flirted with” Marxism any more than anarchism or libertarianism. Thus, unless you wish to now redefine “flirted with” to mean “had no obvious interest whatsoever in”, my point stands.

          • Jason Kuznicki

            I am defending the use of the figure of speech, and its meaning. I don’t need to have read the book to do so. If the author of the post wants to reply on the merits, that’s his choice. I’ll just note one more thing here – the first use of the term was in the original post. That wasn’t a hedge, and it wasn’t responding to you.

          • Jonathon Martin

            This was the original context: “First, Piketty does not “flirt with Marxism”. He rejects Marx and states that private property and some inequality are necessary. It should give you pause that you felt the need to tie him to Marx unfairly.”
            To which you responded: “Flirting with and rejecting are not incompatible. Indeed, they go together much more frequently than flirting with and then marrying.”

            You are now saying that despite being agnostic on the general issue and what was clearly the point of the post, you felt moved to make a semantic clarification abstracted from the context of the whole discussion? You were not defending the author? Well if you really want to argue that I do not disagree (and never would have). I thought the point of your clarification was to join the debate as to whether Piketty had been said to have flirted with Marxism. If we are simply picking nits I might point out that while it is possible to flirt with and later reject a position, it is also possible to reject a position without ever having flirted with it. That, indeed, is more common.

            Oh, and I wrote the original post. Discus was playing up. I’m not sure why that matters though.

      • michael

        Any guy who has spent a good amount of time flirting in a bar only to be left sitting on his stool alone 20 bucks poorer can tell you flirting and rejecting go together quite well :)

        • MARK_D_FRIEDMAN

          Ok, but when you hit pay dirt, be sure to come back and recount those episodes too :)

          • michael

            Will do :)

    • Basvandervossen

      If you label a book with this message “Capital in the Twenty-First Century”, you are flirting.

      In any case, for someone who accuses me of being unfair to Piketty, you sure know how to be unfair to me. I frankly don’t care if you take me seriously or not, but here goes for the record:

      (1) I have said nothing to detract from the achievement that is Piketty’s book. As far as I can tell, it is a great and important contribution. And believe me, I appreciate what an achievement it is to write something like that. Piketty deserves to be lauded for that.

      (2) My point, instead, was about the book’s reception. (The title kind of gives it away, no?) It has been rife with bad moral judgments about the importance of material inequality. The “R.A” post is a clear example of this, and it deserves calling out.

      • Jonathon Martin

        His book is about capital in the 21st century. That’s the topic. Can you not investigate the distribution of capital without flirting with Marxism?

        • JoshInca

          His book is about capital in the 21st century.

          Nope, not even a little bit.

      • Sean II

        “The achievement that is Pikett’s book…as far as I can tell, it is a great and important contribution…”

        Dude, c’mon. If you’ve read the book, and if it is indeed a “great and important contribution”, then why say “as far as I can tell”?

        If you haven’t read it, and the only thing you really know is that a bunch of people are slobbering over it, then why join the slobbering at all?

        I swear…if you only knew how obvious this kind of pandering looks to anyone but the guy doing it, you wouldn’t bother.

        • Basvandervossen

          I inserted the qualification because I am not a trained economist. And I like to remind myself of the limits of my judgement. You should try it sometimes.

          • Sean II

            Oh…so you’re just being intellectually modest? How virtuous of you.

            Because, you know, from down here it kinda seemed like you were decorating your comment with a weakly worded tactical concession designed to make your criticisms seem less partisan, less rabid. You know, the old conversational ploy: “Of course ______ was a great and vital thinker, despite being totally wrong about everything that counts.”

            How crazy of me to think such a thing, just because …that’s exactly how it looked, and I’ve done the same thing myself, and because its practically a leitmotif here at BHL.

            But maybe you can stop being modest long enough to answer a question: why do you think Picketty’s book is a great and important achievement?

          • lol

            Dude, he even said he wasn’t qualified to judge the economic merits of the book in the original post:

            “Maybe he is right about this, maybe he is not. I have not yet finished the book and, in any case, am not qualified to say.”

          • Sean II

            If he isn’t qualified to judge the merits of the book, then why does he feel comfortable telling people its a great achievement, important contribution, etc?

            Cause…you know, those sure sound like judgements of the book’s merits.

          • Basvandervossen

            I am not an engineer or architect, but I can see when a building is great. But why do I even bother.

          • Sean II

            I’m sorry, are you claiming that you can tell a book about economics is great a) without reading it, and b) in the same way one admires an enormous tangible thing like, say, Tapei 101?

            Because if that’s what you’re saying, why DO you bother? Why keep going down such a dead-end path?

            Bas, all you have to say is this: “Yeah, Sean, I guess you have a point. I don’t really know if Piketty’s book is great or important. I just know lots of people seem to think it is, and I guess I was trying to be polite and stipulate that for them. I thought maybe if I did, I’d seem more reasonable and have better luck starting discussions across party lines. But having been called on it, yeah…you’re right, I was technically talking out of my ass there for a minute. No big deal.”

            But somehow I get the feeling you’d rather lose a pinky finger than admit that. Man, people can be so damn disappointing.

  • TheBrett

    What matters is that living standards keep rising, and keep rising for all. That has been the crucial engine of humanity’s greatest achievements in poverty reduction, increases of life expectancy, literacy, culture high and low, and so on.

    Justice matters as well, and that’s what I’m skeptical will survive in an increasingly unequal society even if living standards climb upwards. We’ve had several high-profile cases recently where wealthy criminals got themselves out of court sentences because the judges sympathized with them more than the victims. That’s not something we’re going to see the end of.

    But all that leaves open whether policies designed to reduce inequality, and transfer resources from rich to poor, carry significant risks of slowing down real growth.

    Some do, but many don’t in such a way that seriously slows down real growth. That’s why liberals have pointed out the Postwar Period – that was when the upper tax brackets were openly confiscatory and designed to simply blunt compensation above certain levels, but it didn’t seriously impact growth. It just meant that the top level managers and owners had less of an incentive to accumulate personal fortunes and more of one to leave money in the firms themselves.

    • Les Kyle Nearhood

      Have not virtually all human societies featured income inequality? Yet the things which have caused actual revolution and upheaval tend to be more concrete like war, abuse, and starvation.

  • Curious

    Interesting Bas.

    One of her recurring arguments is that capitalism is bad because it breeds inequality and therefore people won’t like it. She things like “…will probably not be tolerated as fair, even if living standards among the masses are not completely stagnant.”

    It’s a weird, circular, invalid argument. Capitalism is bad because people in the future will think it’s bad.

    On the fairness issue, she beg’s the question in a very textbook way, and generalizes the same moral intuitions to all of humanity. Has anyone noticed how bad the left has become with begging the question? It’s as though this fallacy isn’t taught, isn’t in the logic textbooks… (e.g. responding to someone who opposes gay marriage, a la Eich, by saying he wants to deny the rights of millions of people… Whether there is a right to have the government say that you’re married is the very issue…)

    Back on fairness, we already have a bunch of social science on this. Look up Haidt’s updates to his moral foundations. Fairness was a foundation before. Now it’s split in two because of more findings. There is the equity notion of fairness, which resonate with leftists; and the proportionaity notion of fairness which resonates with conservatives and libertarians, more of meritocratic framework.

    That’s just descriptive moral-political psychology, but it debunks her claim to universality. As far as substantive philosophy, she says this:

    “…because of the nonchalance with which elites have approached distributional issues over the past generation, and that continued heedlessness of this sort will ultimately undermine the growth-boosting institutions of capitalism. His argument is that economic growth that concentrates benefits on a small group of people…”

    She was like this throughout, this tone of resentment, and ascribing shabby personality characteristics and motives to ever-beloved “elites”. That signals that her piece isn’t a serious piece — this is Salon-quality agitblog ideological smugness. A key problem with her argument will be the way she treats benefits as conferred in some directed way from on high, not linking work, productivity, risk-tasking, investment, or invention, all the things people can do prosper — to the way the wealth is sorted out in the end. It’s going to be some version of “it was mostly luck or exploitation, they got rich from a bunch of minimum wage workers, etc.

    They envision the affluent doing something kind of random, just enjoying theirlives and have asystem that distribution They of wealth, that just sort of arose from luck or cheating, They thing this is how the world works. These beliefs are false and can be easily dispatched even we ever stumble upon these bros in the streets of the Champs Elsee (sp?)

    • Jonathon Martin

      “It’s a weird, circular, invalid argument. Capitalism is bad because people in the future will think it’s bad.”

      It depends what you mean by “bad”. No economic or political system can survive if enough people think it unfair. The argument is a practical one, not an ethical or ideological one.

      Interesting too that you invoke Haidt. My takeaway from Haidt is that our ethical intuitions are arbitrary and thus have only practical force, not moral force. That is, it matters what people think is just or unjust not because it is in fact just or unjust (which is just a subjective evolutionary reaction), but because those feelings are strong and affect behaviour. If Haidt is right, the only sensible arguments are those that appeal to empirical facts.

  • Aeon Skoble

    The NYT had similar breathless adulation in a big Sunday article. They seemed to think it was revolutionary for him to argue that inequalities are necessary, but only justifiable inasmuch as they benefit the least well off.

  • Sam

    We are hardwired to see the evidence in light of our ideological
    commitments, and intertwining the empirical with the moral makes it very
    difficult, if not practically impossible, for ideologically motivated
    people to reason correctly.

    This is plausible, but this point surely applies to libertarians too. This is an ideological blog and everyone who writes for it is a libertarian of some kind. But I don’t think that we should just dismiss or even discount the arguments on this blog because they have an ideological affiliation. The same goes for people on the left.

  • Sean II

    Does this mean we can finally dispense with the usual polite bullshit about how the left is “concerned for the poor”? Please?

    Because they’re not concerned for the poor. They’re obsessed with the rich. That’s what the left is now. And they’re not even pretending anymore.

    They’re the new Calvinists who lie awake at night desperately worrying that someone, somewhere is out having a capital gain.

    But, of course, this is just a fallback position. First it was: “the market makes us all poor”. Then it was “the market causes war”. Then it was “the market fails to help the very poor”. Now it’s “the market helps the rich too much”.

    I know it’s crazy talk and all, but has it occurred to anyone that these guys might just hate the market for no reason, or maybe for some yet undisclosed reason which hides behind an endless series of excuses?

    • Satori

      People worry about the rich having more because the more the rich own the less everyone else owns, and that problem is exacerbated in a country where money can influence elections. I don’t want to live in a country where a few members of the hereditary elite dominate society and equality of opportunity does not exist.

      • Sean II

        “People worry about the rich having more because the more the rich own the less everyone else owns”

        First of all, that’s completely false and stunningly ignorant.

        “I don’t want to live in a country where a few members of the hereditary elite dominate society…”

        Second of all, you already do live in that country. Concentrated interests of all kinds, not just the rich, get their way in one election after another.

        Even more importantly, there already is a hereditary elite, made so by the inheritance of something much more valuable than money: brains. Every institution you can think of is dominated by people cleverer than the people they dominate.

        • Satori

          It’s not necessarily true since in some logically possible worlds the Waltons owning more doesn’t mean anyone else owns less, but in the actual world we know that isn’t how things are for a variety of reasons.

          >Second of all, you already do live in that country. Concentrated

          Why assume I’m American? I agree with you though, America needs to be reformed.

          >Every institution you can think of is dominated by people cleverer than the people they dominate.

          This is a much stronger argument I think. The genetic lottery is just as random as inheritance, and some people are born brilliant while some people are born stupid. I think that the right way to address this is to argue that intelligence is a form of merit that allows you to contribute more to society, and allowing some inequality incentivizes those with brains to produce goods and services that others value. I don’t see the same argument working for the Waltons or the Koch brothers.

          In the case of elections, political donations should be sharply limited.

          • Les Kyle Nearhood

            Sean called your view point ignorant because it is. Wealth is created, there is no fixed pie that you slice up. Furthermore, the operation of capital investment is the very instrument which causes this creation. So stealing capital in the form of punitive taxation makes that growth smaller.

          • Sean II

            I didn’t assume you were an American.

            I assumed you live in a democracy…every one of which has the features I described.

    • michael

      “They’re the new Calvinists who lie awake at night desperately worrying that someone, somewhere is out having a capital gain.”
      That was gold.

    • Theresa Klein

      I know it’s crazy talk and all, but has it occurred to anyone that these guys might just hate the market for no reason, or maybe for some yet undisclosed reason which hides behind an endless series of excuses?

      It’s all about money being impure, IMO.

      Read Jonathan Haidt.
      Money and markets were unclean places full of disease vectors. Trade puts you in contact with foreigners, who, again, carry disease. Thus, we evolved a social norm that money and markets were impure and degrading. It’s all over our culture. Two adults can do pretty much anything they want to and it’s fine, right up until a dollar changes hands, and then it’s disgusting.
      It’s the left-wing version of being grossed out by homosexuality.

      • Sean II

        “It’s the left-wing version of being grossed out by homosexuality.”

        So, by your analogy, that would mean…rich leftists are akin to those self-hating right wing homophobes who the media catches now and again, working out their angst in a roadside glory hole?

        • Theresa Klein

          More or less, yes.

        • Michael Philip

          indeed. they deny their economic nature

  • Jason Kuznicki

    In no summary of this work have I seen his theory of causality. How does it happen that r > g?

    Without understanding the causality, I am going to have a hard time evaluating specific policy proposals to correct it.

    • Satori

      Piketty’s data shows that r remains about 5% across vast periods of time, so if economic growth falls below 5% those with capital will naturally acquire more and more of society’s wealth and create massive fortunes. Given that growth in developed economies is rarely above 5% Piketty thinks that the only way to address this problem is through heavy taxation and redistribution.

      • Jason Kuznicki

        I’ve seen that part. Why is the return on capital so constant? Does the identified mechanism extend plausibly into the future? Why will accumulated capital not eventually bid up the price of labor?

        • Satori

          That’s the sort of question you’ll have to read the book over. Piketty make’s a number of complex empirical claims that I do not feel that I am qualified to summarize. I will say, though, that the amount of data in his book is nothing short of amazing.

        • MARK_D_FRIEDMAN

          Consistent with your first question, Nozick (and I am sure many others) asks why organized labor doesn’t use its large pension fund balances to buy existing businesses or start new ones. They could then pay capital only what it is actually worth, thereby gaining a competitive advantage. Funny, but I haven’t seen labor take advantage of this golden opportunity.

  • http://www.stationarywaves.com/ Ryan Long

    I haven’t read Piketty’s book, but the fervor of the adulation he’s receiving makes me think two things:

    1 – Most of the reviewers probably do not fully understand Piketty’s ideas.

    2 – I probably won’t like the book anyway.

    The only thing I really trust on the topic of Piketty’s book, short of actually picking it up and reading it myself, is this: http://www.economicthought.net/blog/?p=5984

    Seems impartial to me, anyway.

    • adrianratnapala

      The thing about all this fervour and adulation is that in the corner of the interweb where I hang out, I see none of it. That’s because I read mostly right-leaning blogs etc, and they are all grimly skeptical about Piketty. So, how do we know we aren’t the ones being blinded by ideology?

      • http://www.stationarywaves.com/ Ryan Long

        I can’t speak for anyone else, but I read about 75 blogs on a regular basis (yes, really), and I can only think of two bloggers on my list that I agree with completely.

        But that wasn’t really my point. My point #1 was a concise way of saying that there aren’t many modern ideas in economic theory that are truly Earth-shattering, so to see such a lively response from reviewers suggests to me that they’re giving Piketty more credit than his ideas actually merit. Not that they aren’t interesting, but just that they’re a small contribution to the dialogue. Nothing Earth-shattering.

        My point #2 was more about my general opinion that the more popular an idea is, the less it tends to appeal to me.

  • Theresa Klein

    Many public intellectuals seem to think they have finally found the scientific proof for what they knew all along: how capitalism is unfair, unjust, and ultimately ridden with “contradictions.”

    I knew all that time spend reading Marx and Hegel wasn’t wasted. And here is the proof!

  • MARK_D_FRIEDMAN

    For those interested in an economist’s critique of a small slice of Piketty’s book, i.e. on the minimum wage, see: http://www.realclearmarkets.com/articles/2014/04/22/the_systematic_errors_in_thomas_pikettys_new_book_101016.html

    • Les Kyle Nearhood

      I might read it one day, but the more reviews I see of it, the more I get the impression that the guy does not have all oars in the water regarding even basic economics.

      • MARK_D_FRIEDMAN

        If the critique accurately represents his views on the min wage, you would probably be wasting your time.

  • Voluntaryist

    I don’t understand why people are so upset with the “wealthy” of our society. If a person who lives within their means or much less then their means, they would be able to afford the future house, nice car later in life. I’m from a lower middle class family and we didn’t have a problem with wealthy people. The problem we had was our neighbors being envies of the wealthy of society. We didn’t really care about what other people had or hadn’t.

    • Les Kyle Nearhood

      The most envious people, in my opinion often come from fairly well to do circumstances. People like you and I who worked our way into the middle class had no time for such whining.

  • jphip

    FWIW, R.A. is a well known pioneer econoblogger, Ryan Avent at Free Exchange in The Economist. His multi-part review of the book is one of the clearest and carefully points out his criticisms. I thought referring to him as “one ‘R.A.'” dripped with unnecessary condescension. His analysis was certainly more thoughtful and nuanced than this drive-by post.

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