Economics, Social Justice

Thomas Piketty’s Problematic Political Philosophy Part III: Inequality and the Common Utility

I will address Piketty’s arguments that patrimonial capital generates unjust inequalities and that a global wealth tax can suitably reduce those inequalities in two parts. In this post, I’ll simply analyze Piketty’s defense of these arguments. In the next post, I’ll assess them.

In this post, I focus on Piketty’s arguments that patrimonial capitalism generates unjust inequalities and that a global wealth tax can suitably reduce those inequalities. Here are arguments 2E and 2P (evaluative and prescriptive arguments, the latter slightly modified):

2E. Unjust Inequalities: r > g and patrimonial capitalism generate inequalities of wealth that cannot be justified on egalitarian and/or meritocratic grounds, as these inequalities do not aid the “common utility.”

2P. Rectifying Unjust Inequalities: A global progressive capital tax will reduce unjust wealth inequalities in an efficient fashion, in comparison to socialist, protectionist and other alternatives.

It turns out that Piketty has much more to say about 2E and 2P than 1E and 1P but it’s harder to make sense of it all. Piketty displays remarkably little familiarity with principles of distributive justice, largely relying on an unclear phrase from the Declaration of the Rights and Man and of the Citizen, which claims that inequalities are justified only when they promote the “common utility.” A standard translation of the claim is that “Men are born and remain free and equal in rights. Social distinctions may be founded only upon the general good.” Piketty admits that this first article of the Declaration was originally understood in classical liberal terms, as guaranteeing formal legal equality and abolishing aristocratic privilege, but he tries to do more with it anyway (“The drafters of the Declaration were thinking mainly of the abolition of the orders and privileges of the Ancien Regime” though “one can interpret the phrase more broadly.” (480)

As with the last post click here for my compilation of the relevant passages. You can find them on pages 19, 22, 31, 240, 241, 264, 334, 335, 364, 417, 443, 479, 480 (core page), 481, 483, 495, 505, 518, 522, 527, 538, 572-3, along with key footnotes 20-22 on pages 630-631.

I. What is Wrong with Inequality?

The first step in any argument for decreasing the inequality of wealth is to figure out why wealth inequalities are morally problematic. Piketty clearly thinks that inequalities of wealth are relevant for determining how just a society is. And he is clear that “Inequality is not bad in itself: the key question is to decide whether it is justified, whether there are reasons for it.” (19) And again: “I have no interest in denouncing inequality or capitalism per se—especially since social inequalities are not in themselves a problem as long as they are justified.”

Now, in this sense, no philosopher that I know of thinks inequality is bad in itself. Even luck-egalitarians think there’s no injustice in inequalities due solely to the free choices of individuals. But Piketty clearly throws his lot in with egalitarians by holding that inequalities of wealth must be justified. On many other views, including libertarianism, the mere fact of wealth inequality triggers no justificatory requirement.

As mentioned, Piketty appeals to the Declaration of the Rights of Man and of the Citizen, which he believes is reasonable: “Although this definition of social justice is imprecise but seductive, it is rooted in history. Let us accept it for now.” (31) It seems obvious to Piketty that something like this principle is true. In fact, he claims that,

At a purely theoretical level, there is in fact a certain (partly artificial) consensus concerning the abstract principles of social justice. The disagreements become clearer when one tries to give a little substance to these social rights and inequalities and to anchor them in specific historical and economic contexts. In practice, the conflicts have mainly to do with the means of effecting real improvement in the living conditions of the least advantaged, the precise extent of the rights that can be granted to all …, and exactly what factors are within and beyond the control of individuals (where does luck end and where do effort and merit begin?). (480)

From this, I take it Piketty thinks that the line from the Declaration is largely agreed upon at least as an abstract principle. And even when we attempt to apply the principle, the main disagreement is about what actually works in, say, improving the least advantaged, the extent of rights that can be granted to all, etc. (Note that this is one of the only passages where Piketty seems interested in benefiting the least advantaged for their own sake.)

And here’s how Piketty interprets the principle, as the Declaration,

… reverses the burden of proof: equality is the norm, and inequality is acceptable only if based on “common utility.” (480)

So, the problem with inequality seems to be that inequalities of wealth and income are unjust if no justification can be given for them, justification understood in terms of the common utility. This is a standard view among egalitarians (depending on what one means by common utility), and a view that Piketty seems to think we broadly agree on, at least in the abstract.

II. How are Inequalities Justified? Common Utility

Piketty seems to think that there are two ways that inequalities of wealth and income can be justified: merit and the promotion of the “common utility.” Piketty focuses most on the common utility, so I’ll dispense with the merit discussion (but see pp. 241, 334-5, 417 and 443).

The master standard is whether inequalities benefit the “common utility.” That is clear from the above and all the references to the Declaration. He is also clear that present and future inequalities of wealth and income are of any “common utility” the “nice expression” with which Piketty begins and ends the book (572-3).

The problem for the common utility standard is that it’s not clear what Piketty’s after. To get clearer on what Piketty means, let’s examine two core passages. Piketty:

It remains to define the term “common utility.” The drafters of the Declaration were thinking mainly of the abolition of the orders and privileges of the Ancien Regime, which were seen at the time as the very epitome of arbitrary, useless inequality, hence as not contributing to the “common utility.” One can interpret the phrase more broadly, however. One reasonable interpretation is that social inequalities are acceptable only if they are in the interest of all and in particular of the most disadvantaged social groups. (480)

Piketty expressly acknowledges that the phrase he uses throughout the book is fully compatible with, and even is primarily rooted in, a classical liberal conception of inequality. This is odd. I guess he just likes the way the expression sounds to modern ears. But his broader idea, I think, is to expand the phrase to cover more types of inequality that the drafters of the Declaration had in mind, including wealth and income inequalities. The orders of privileges of the Ancien Regime were merely the worse, because they were “the very epitome of arbitrary, useless inequality.” So all social inequalities have to be in the “interest of all” and “in particular of the most disadvantaged social groups.”

I think we’re dealing with something like but not identical with Rawls’s Difference Principle. For Piketty, economic inequalities are only justified if they promote the interest of all and especially the most disadvantaged. But more on that in a moment. Here’s the footnote that Piketty uses to follow up:

The notion of “common utility” has been the subject of endless debate, and to examine this would go far beyond the framework of this book. What is certain is that the drafters of the 1789 Declaration did not share the utilitarian spirit that has animated any number of economists since John Stuart Mill: a mathematical sum of individual utilities (together with the assumption that the utility function is ‘concave,’ meaning that its rate of increase decreases with increasing income, so that redistribution of income from the rich to the poor increases total utility). This mathematical representation of the desirability of redistribution bears little apparent relation to the way most people think about the question. The idea of rights seems more pertinent. (630).

Piketty uses the idea of the common utility as a master principle in the book and yet feels no need to give us any help as to what his standard is. He’s clearly drawing on the Declaration, however, and wants to contrast his view with the “mathematical sum of individual utilities.” That’s not what most people care about. What more people care about is “the idea of rights” that seems “more pertinent” (more pertinent to making sense of the idea of the common utility). So this is another reason to think Piketty has something Rawlsian in mind.

Importantly, Piketty freely admits that the idea of equal rights is disputed:

This is the central tension of any rights-based approach: how far do equal rights extend? Do they simply guarantee the right to enter into free contract—the equality of the market, which at the time of the French Revolution actually seemed quite revolutionary? And if one includes equal rights to an education, to health care, and to a pension, as the twentieth-century social state proposed, should one also include rights to culture, housing, and travel? (480)

Nonetheless, despite reasonable disagreement, Piketty seems to think something like the Difference Principle is the way to go. He claims, “The ‘difference principle’ introduced by the US philosopher John Rawls in his A Theory of Justice is similar in intent.” (480) Though he then makes the false claim that “And the ‘capabilities approach favored by the Indian economist Amartya Sen is not very different in its basic logic.” Incorrect, though it’s a subject for another time.

Notably, Piketty also likes Rawls’s understanding of the least advantaged and of primary goods and seems to take on some of Rawls’s worries about arbitrary inequalities:

It seems reasonable to define ‘the most disadvantaged’ as those individuals who have to cope with the most unfavorable factors beyond their control. To the extent that inequality of conditions is due, at least in part, to factors beyond the control of individuals, such as the existence of unequal family endowments (in terms of inheritances, cultural capital, etc.) or good fortune (special talents, luck, etc.), it is just for government to seek to reduce these inequalities as much as possible. The boundary between equalization of opportunities and conditions is often rather porous (education, health, and income are both opportunities and conditions). The Rawlsian notion of fundamental goods is a way of moving beyond this artificial opposition. (630-1).

Clearly Piketty has the luck-egalitarian and Rawlsian (not the same) intuition that the most disadvantaged are those who suffer through not fault of their own. So the government is just in reducing these inequalities as much as possible. Piketty then appeals to Rawls’s idea of primary goods (though he mistakenly calls the “fundamental goods” and does not cite Rawls properly), which are goods that anyone will need to pursue a rational form of life.

So what we end up with is something in the vague vicinity of the Difference Principle, though Piketty uses the confusing term “common utility” which he explicitly disavows should be understood in utilitarian terms or in the terms in which the phrase was first used. He would have done better just to appeal to the difference principle.

III. Some Carelessness on Rawls and Distributive Justice

Allow me to briefly whine a bit about Piketty’s sloppiness. On p. 631 in ft. 22, Piketty cites the formulation of the Difference Principle in A Theory of Justice and claims that the formulation “was repeated in Political Liberalism.” Piketty provides no citation to back this up, and in fact, he’s wrong: the formulation of the Difference Principle in PL is different in several key respects. This and the other passages show that Piketty cares so little about clarity on distributive justice principles that he can’t even be bothered to cite his claims.

Second, ft. 23 on p. 631 refers to John Roemer’s work, and claims that the work is mentioned in the online technical appendix. Roemer is not mentioned at all there.

IV. 2P: How the Global Wealth Tax Rectifies Unjust Inequalities Fairly and Efficiently

Now let’s consider how the global wealth tax rectifies unjust inequalities. Much of Piketty’s argument for 2P is that other mechanisms of redistribution aren’t very helpful for correcting inequalities. He’s clear that most redistribution in social democratic states is not aimed at correcting the inegalitarian distribution of wealth (479). He also claims that inflation is not a reliable method of redistributing from capital owners to everyone else (despite appearing prima facie to be so), as it is not directly controlled (103). Importantly, he addresses immigration as a possible redistributive effect (538). Piketty admits that is solves part of the problem, but instead “Redistribution through immigration postpones the problem but does not dispense what the need for a new type of regulation: a social state with progressive taxes on income” (538). (I thought this was a bit of a dodge. It’s true that, after immigration slows down, we’ll have the same problem. But the same is true of a capital tax: if the rate of tax falls, we still have a problem.) Piketty also opposes capital controls and socialism as ways to go due to their inefficiencies.

Here’s what Piketty then argues:

The progressive tax is thus a relatively liberal method for reducing inequality, in the sense that free competition and private property are respected while private incentives are modified in potentially radical ways, but always according to rules thrashed out in democratic debate. The progressive tax thus represents an ideal compromise between social justice and individual freedom (505).

So the thought is that a simple tax causes few distortions and has a direct effect on inequality. And he thinks that “the logic of universal rights that governed the development of the modern fiscal and social state fits rather well … with the idea of a proportional or slightly progressive tax” so he thinks the tax fits with our broader normative commitments (495). Piketty also thinks that a capital tax might have salutary benefits for growth:

Nevertheless, another classic argument in favor of a capital tax should not be neglected. It relies on a logic of incentives. The basic idea is that a tax on capital is an incentive to seek the best possible return on one’s capital stock. … According to this logic, the purpose of the tax on capital is thus to force people who use their wealth inefficiently to sell assets in order to pay their taxes, thus ensuring that those assets wind up in the hands of more dynamic investors (526).

So taking people’s capital will lead them to use what is left over more effectively.

V. Conclusion

We have seen that Piketty is not at all clear about why inequality is problematic and what distributive principle is at work in the book. This supposedly broad-based common utility principle ultimately boils down to something in the vicinity of the difference principle, which is not only sloppy but shifts the content of the principle considerably from how Piketty presents it. We’ll see that Piketty also ignores some important empirical considerations with respect to the costs of the capital tax. I’ll discuss my concerns in the next post.

  • Andrew Lister

    Kevin, I haven’t cracked Piketty yet, but I’m following your posts. This one reminded me of Hume and Hayek.

    Ambiguity about the meaning of “public utility” goes back to Hume. He said that public utility was the “sole origin” of justice and the “sole foundation of its merit,” but by “justice” he meant the the disposition to follow the rules of property and contract, so in effect he was claiming that public utility is the standard for assessing economic institutions. Everyone should benefit from these institutions – but compared to what? If the comparison is to a state of nature in which the strong can just take what they want from the weak, then the strong wouldn’t benefit from rules of property covering the weak, or at least not from rules of property covering the very weak, and so the strong wouldn’t owe the very weak duties of justice, only “humanity.” That was Hume’s controversial position, about his imagined race of rational but much weaker beings.

    Hayek offers another example of ambiguity about utility. In so far as he entertained principles of institutional design (second to liberty), Hayek had a tendency to move between (1) raising the income of the worst off, (2) raising average utility, and (3) raising average income. To appeal to egalitarians Hayek made claim 1, but then later he would only claim 2 or 3. I’m thinking of his Mirage of Social Justice. It sounds like Piketty is going in the opposite direction, rhetorically. Who would object to raising average income, other things equal? But what he really means is giving some strong kind of priority to the worse off, and that’s more controversial.

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