Sunday, September 14, 2014

Quickie Book Review: ‘Capital In The Twenty-First Century’

Thomas Piketty’s ‘Capital In The Twenty-First Century’ is long, too long really, as I reckon he could have made his argument in half to two-thirds of the pages. But is it worth reading? Probably more so if you are an economist, which is not to sound exclusionary, but just to note that you are more likely to be interested in the detail of Piketty’s ideas if they pertain to your chosen vocation. For others by all means give it a go, especially if you are interested in the politics of inequality, but don’t feel bad about skipping large chunks or reading one of the several one-page summaries instead.

What did I think of Piketty’s ‘thesis’ in the end? I think he argued it about as well as one could argue it. Essentially, Piketty shows that, since the rate of return on capital has almost always exceeded the rate of economic growth, then those wealthy individuals who own the capital get further and further ahead. The exception was the period from the 1930s to the 1970s, in part because a lot of wealth was destroyed by the two world wars.

To counter this tendency Piketty proposes a progressive global tax on wealth. His arguments do flow reasonably well into this prescription, although to make the leap you do have to hold that rising inequality is something to be combatted. And this may just be a function of how quickly I read the last few chapters, but his wealth tax suggestion then seemed to flow too easily into his 80 per cent top marginal tax rate suggestion, which had a bit too much of the Beatles’ ‘one for you, nineteen for me’ for me. Still, perhaps if you look at the maths more closely, it makes more sense as a policy prescription.

In summary then, the historical and data analyses look sound, though they are a bit boring to trudge through, while the policy recommendations are intriguing but not quite as convincing. Of course if Piketty’s predictions about the future turn out to be on the mark, then you may feel obliged to read this a decade or two down the track anyway.

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