Not ev­ery­one buys the t-shirt

Paschal Dono­hoe finds a col­lec­tion on Thomas Piketty lack­ing an­gles.

The Irish Times - Weekend Review - - ARTS & BOOKS - Paschal Dono­hoe

Af­ter Piketty: The Agenda for Eco­nom­ics and In­equal­ity Edited by Heather Boushey, J Brad­ford De­long and Mar­shall Stein­baum Har­vard Univer­sity Press, £25

Very few equa­tions, es­pe­cially from the so-called dis­mal sci­ence, have ap­peared on T-shirts. There was a rare in­stance, not long ago, when the for­mula “r>g” ap­peared on cloth­ing on Amer­i­can univer­sity cam­puses.

The equa­tion orig­i­nated in the ex­traor­di­nary Cap­i­tal in the Twenty-First Cen­tury, by the French aca­demic Thomas Piketty. No mod­ern eco­nomic work has achieved such promi­nence.

Within a year of the ap­pear­ance of its English trans­la­tion, in the spring of 2014, the book had sold 2.1 mil­lion copies around the world. By the end of 2015 it was avail­able in more than 30 lan­guages. This is all the more re­mark­able as it com­prises more than 700 pages of of­ten tech­ni­cal eco­nomic his­tory and anal­y­sis. The book has even ac­quired an ab­bre­vi­ated ti­tle: C21.

Cap­i­tal in the Twenty-First Cen­tury is based on a decade of re­search into the lev­els and al­lo­ca­tion of cap­i­tal and in­come in the US and Europe over cen­turies. Piketty con­cludes that in­come from cap­i­tal or wealth ex­ceeded in­come from work across 200 years dur­ing the 18th and 19th cen­turies.

The con­se­quences of two World Wars and the es­tab­lish­ment of wel­fare states with pro­gres­sive tax­a­tion sig­nif­i­cantly mod­er­ated this in­equal­ity. But the au­thor con­tends that the po­tency of such in­ter­ven­tions has faded, and that the po­lit­i­cal and eco­nomic pri­macy of cap­i­tal is now re­asserted.

Piketty’s work yields the the­sis that if the rate of profit, or r, is ahead of the rate of growth, or g, then the in­come of the most ad­van­taged in so­ci­ety will ac­cel­er­ate faster than av­er­age in­come from work.

If r>g, to go back to our T-shirt equa­tion, then so­ci­eties are faced with the prospect of em­bed­ded, struc­tural in­equal­ity. The role of in­her­i­tance is cru­cial to this the­ory: the in­come due to those who in­herit cap­i­tal will ex­ceed earn­ings avail­able through work.


Paul Krug­man, the Amer­i­can econ­o­mist, writes that Cap­i­tal in the Twenty-First Cen­tury “will change both the way we think about so­ci­ety and the way we do eco­nom­ics”. He makes the claim in Af­ter Piketty: The Agenda for Eco­nom­ics and In­equal­ity, a col­lec­tion of es­says, on the ar­gu­ment and con­se­quences of C21, that is nearly as large as the work that in­spired it.

Piketty put cap­i­tal at the cen­tre of the eco­nomic uni­verse. All other eco­nomic flows rise and fall un­der its in­flu­ence. The most tech­ni­cal pa­pers in this vol­ume an­a­lyse this promi­nence. In this frame- work, shifts in the com­po­si­tion of cap­i­tal pro­foundly af­fect the na­ture of so­ci­ety. The re­la­tion­ship be­tween the rates of growth in cap­i­tal and eco­nomic growth can hard­wire in­creas­ing in­equal­ity into na­tions and com­mu­ni­ties.

In ar­gu­ing that this is in­evitable Piketty el­e­vates his the­sis to a law, con­tend­ing that it is a “fun­da­men­tal force for di­ver­gence”. Es­says by, among oth­ers, the No­bel lau­re­ate Robert Solow ex­plore this force.

The foun­da­tions of Piketty’s in­sight in­clude a vast quan­tity of eco­nomic data and the use of math­e­mat­i­cal mod­el­ling. But its sum­mit moves into the arena of po­lit­i­cal econ­omy, mak­ing claims that mat­ter to any so­ci­ety con­cerned with co­he­sion and sta­bil­ity. Our fu­ture could re­sem­ble a past we thought buried by the in­ex­orable march of eco­nomic progress. The fu­ture we might be on our way back to, Piketty ar­gues, is that of the 19th cen­tury. The many as­pects of this prospect are ex­plored in a sec­tion of this col­lec­tion that fo­cuses on di­men­sions of in­equal­ity.

The reader does not need a doc­tor­ate in math­e­mat­i­cal eco­nom­ics to ap­pre­ci­ate the grandeur of this ar­gu­ment. Austen, Balzac and pop­u­lar cul­ture play a vi­tal sup­port­ing role in C21. The con­clud­ing pa­per, by Piketty him­self, ar­gues that his work seeks to rec- on­cile eco­nom­ics with broader so­cial sci­ences.

He ar­gues that “the com­plex­ity and mul­ti­di­men­sion­al­ity of his­tor­i­cal, so­cial and po­lit­i­cal pro­cesses in real-world so­ci­eties are so great that there is no way they can be ad­e­quately de­scribed by math­e­mat­i­cal lan­guage alone”. I, for one, could not agree more.

Still, de­spite its size, this col­lec­tion misses so much. Warn­ing signs are found in the in­tro­duc­tion. The ed­i­tors de­scribe them­selves as “def­i­nite fans”, a po­si­tion they are per­fectly en­ti­tled to hold. But their ad­mi­ra­tion goes fur­ther: of crit­i­cism of C21, they write that “we see a large num­ber of ar­gu­ments that seem to us to be largely sub­stance-free”, made by crit­ics guilty of “am­a­teur psy­cho­log­i­cal di­ag­no­sis”. Some of their ar­gu­ments are “more like things de­signed to re­as­sure stan­dard bil­lion­aires who are hop­ing to es­tab­lish a dy­nasty”.

This is such a pity. Piketty has made a won­der­ful con­tri­bu­tion to mod­ern eco­nom­ics. His in­sights res­onate with our dis­con­tents. But this does not in­val­i­date po­tent crit­i­cisms of C21. Such chal­lenges have in­cluded ques­tion­ing whether laws can ex­ist in eco­nom­ics, whether the digital econ­omy dis­rupts the ac­cu­mu­la­tion and trans­fer of wealth, and even whether Piketty con­fuses wealth with cap­i­tal.

I do not be­lieve that in­equal­ity is in­evitable. Pro­gres­sive tax­a­tion and so­cial in­ter­ven­tions make a dif­fer­ence. But such per­spec­tives do not re­ceive ad­e­quate promi­nence. Robert Solow’s es­say is en­ti­tled “Thomas Piketty Is Right”. An ac­com­pa­ny­ing piece con­tend­ing the op­po­site might bet­ter al­low read­ers to reach their own con­clu­sions.

Read­ers look­ing for an in­tro­duc­tion to Piketty will need to look else­where, per­haps to his ear­lier, far shorter The Eco­nom­ics of In­equal­ity. So this is a dis­ap­point­ing col­lec­tion for those seek­ing a rounded ap­pre­ci­a­tion of his think­ing. But such is the mag­ni­tude of Cap­i­tal in the Twenty-First Cen­tury that we can be cer­tain many other col­lec­tions will fol­low.

Piketty put cap­i­tal at the cen­tre of the eco­nomic uni­verse. All other eco­nomic flows rise and fall un­der its in­flu­ence. The most tech­ni­cal pa­pers in this vol­ume an­a­lyse this

Paschal Dono­hoe TD is Min­is­ter for Pub­lic Ex­pen­di­ture and Re­form


Ac­cord­ing to Thomas Piketty (be­low), if r >g, the in­come of the most ad­van­taged will ac­cel­er­ate faster than av­er­age in­come from work.

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