French economist Thomas Pikkety’s recent book Capital in the Twenty-First Century has been the subject of large scale debate.
His book studies the global dynamics of income and wealth distribution since 18c in 20+ countries, including particular case studies of the UK, USA and France. Alongside other economists, Pikkety studies historical data collected over the past 15 years, together with Atkinson, Saez, Postel-Vinay, Rosenthal, Alvaredo, Zucman, and over thirty others.
Some of the main ideas presented in this book are that inequality is in fact a feature of capitalism, that can only be reversed through state intervention. He suggests that the history of income and wealth inequality is always political, chaotic and unpredictable; it involves national identities and sharp reversals and therefore that nobody can predict the reversals of the future. He argues that the trend towards greater inequality was reduced through major historical events such as world wars, which forced governments to intervene with the redistribution of wealth. He speaks of a shift back to ‘patrimonial capitalism’ of inherited wealth and predicts low economic growth in the near future, despite technological advancement, and proposes a new wealth tax rate in order to combat this.
This book has been both praised and criticised by the academic community.
For example, nobel –prize winning economist Paul Krugman called the book a “magnificent, sweeping meditation on inequality” and “the most important economics book of the year — and maybe of the decade.”
Steven Pearlstein called it a “triumph of economic history over the theoretical, mathematical modeling that has come to dominate the economics profession in recent years.”
However, a large chunk of criticism comes from Pikkety placing inequality at the center of analysis without any reflection on why it matters or explaining its implications. Martin Wolf, suggest he merely assumes that inequality matters, but never explains why, only demonstrates that it exists and how it worsens. Clive Crook also underlines how, “Aside from its other flaws, ‘Capital in the 21st Century’ invites readers to believe not just that inequality is important but that nothing else matters. This book wants you to worry about low growth in the coming decades not because that would mean a slower rise in living standards, but because it might … worsen inequality.”
There has also been heavy criticisms of Pikkety’s methodology. Lawrence Summers claims her underestimated diminishing returns on capital, which would change the upper limits of inequality following his model. James K. Galbraith criticizes Piketty for using “an empirical measure that is unrelated to productive physical capital and whose dollar value depends, in part, on the return on capital. Where does the rate of return come from? Piketty never says,” and German economist Stefan Homburg (de) criticizes Piketty for equating “wealth” with “capital”.
A lot of focus has been put on not only lexical differences, but a focus on qualitative and quantitative methods. Inequality itself can hold both qualitative and quantitative connotations, as it does not solely rely on numerical wealth. With this being such a central factor, it needs to be strictly defined.
There are also claims that the acquisition of quantitative data from a variety of sources, and from the array of researchers required to obtain necessary figures across the studied period, were also mixed in a questionable manner, which would impact on results exiting the economic model.
A further list of reviews and criticisms can be found here
So whilst Pikkety’s book was groundbreaking, it does not come without controversy
Make up your own mind – you can find this book at the library, with the code 2-2434 PIK