The Daily Piketty: Some More Reviews of Piketty

One from the left that I like:

1. Jedediah Purdy: To Have and Have Not: “Piketty recommends a small, progressive global tax on capital to draw down big fortunes and press back against r > g. He admits this idea won’t get much traction at present, but recommends it as a… measure of what would be worth doing and how far we have to go to get there. It’s an excellent idea, but it also shows the limits of Piketty’s argument. He has no theory of how the economy works that can replace the optimistic theories that his numbers devastate. Numbers — powerful ones, to be sure — are what he has…. Without a theory of how the economy produces and allocates value, we can’t know whether r > g will hold into the future. This is essential to whether Piketty can answer his critics, who have argued that we shouldn’t worry much… [because other economic forces will] blunt r > g. Piketty doesn’t really have an answer to these challenges, other than the weight of the historical numbers….

   “We should grope toward a more general theory of capitalism by getting more systematic about two recurrent themes in Piketty’s work: a) power matters and b) the division of income between capital and labor is one of the most important questions…. The period of shared growth in the mid-20th century was not just the aftermath of war and depression. It was also the apex of organized labor’s power in Europe and North America….

   Piketty shows that capitalism’s attractive moral claims — that it can make everyone better off while respecting their freedom — deserve much less respect under our increasingly ‘pure’ markets than in the mixed economies that dominated the North Atlantic countries in the mid-20th century. It took a strong and mobilized left to build those societies. It may be that capitalism can remain tolerable only under constant political and moral pressure from the left, when the alternative of democratic socialism is genuinely on the table…. Reading Piketty gives one an acute sense of how much we have lost with the long waning of real political economy, especially the radical kind…. Ideas need movements, as movements need ideas. We’ve been short on both…”

Two from the left that I do not like very much:

1. Eric Alterman: The Power of Piketty’s ‘Capital’: “It’s hard to imagine any measurable impact from Piketty’s work…. The chances that significant national action will be undertaken to improve the lives of the vast majority of our citizens have fallen to nearly zero…. The ability of money to win what it wants is the defining characteristic of our politics… demonstrable bullshit is able to dominate our political discourse and thereby mask all of the above behind ideological assertion and meaningless cliché…. Martin Gilens and Benjamin Page note… that “economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while mass-based interest groups and average citizens have little or no independent influence…”

2. James Galbraith: Kapital for the Twenty-First Century?: “Although Thomas Piketty… has written a massive book… he explicitly (and rather caustically) rejects the Marxist view. He is in some respects a skeptic of modern mainstream economics, but he sees capital (in principle) as an agglomeration of physical objects, in line with the neoclassical theory…. He conflates physical capital equipment with all forms of money-valued wealth…. His measure of capital is not physical but financial. This, I fear, is a source of terrible confusion…. Piketty wants to provide a theory relevant to growth…. The basic neoclassical theory holds that the rate of return on capital depends on its (marginal) productivity…. But the effort to build a theory of physical capital with a technological rate-of-return collapsed long ago, under a withering challenge from critics based in Cambridge, England in the 1950s and 1960s, notably Joan Robinson, Piero Sraffa, and Luigi Pasinetti…”

Eleven from the modern American right that, in my view at least, amount to a declaration of intellectual bankruptcy:

1. James Pethokoukis: The New Marxism, Part I: “‘Karl Marx wasn’t wrong, just early. Pretty much. Sorry, capitalism. #inequalityforevah’…. The above Twitter-fication of economist Thomas Piketty’s much-awaited Capital in the Twenty-First Century captures the gist of the author’s argument. Piketty thinks the German progenitor of Communism basically got it right…. Piketty and fellow French economist… Emmanuel Saez are arguably the most important public intellectuals in the world today. Their research is driving the economic agenda pushed by Washington Democrats and promoted by the mainstream media. The soft Marxism in Capital, if unchallenged, will spread among the clerisy and reshape the political economic landscape on which all future policy battles will be waged. We’ve seen this movie before…”

2. James Pethokoukis: The New Marxism, Part II: “Leftists have their dearest Das Kapital fantasies confirmed by the theories of a Parisian economist. It’s certainly an ill century of mass destruction and economic upheaval that blows no one any good. In the buzz-generating (at least on the left) new book… économiste célèbre Thomas Piketty…argues that two world wars and a depression did have one upside: Those systemic shocks momentarily reversed capitalism’s inherent drive toward increasing inequality… the wealthy and the near-wealthy really took it on the chin…. The next generation was an age, as Democrats like to put it, of ‘shared prosperity’…. But by the 1980s, capital, much like Tolkien’s phantasmal villain, Sauron, ‘began to reconstitute itself’…. Recall the 1999 comedy Galaxy Quest, which parodied the original Star Trek television series and the way its fervent fans sometimes fail to distinguish fantasy from reality…. Thanks to Piketty, the Left is now having a Galaxy Quest moment. All that stuff their Marxist economics professors taught them about the ‘inherent contradictions’ of capitalism and about history’s being on the side of the planners… well, it’s all true after all. In their progressive hearts, they always knew it, knew it, knew it!”

3. Clive Crook: The Most Important Book Ever Is All Wrong: “It’s hard to think of another book on economics published in the past several decades that’s been praised as lavishly as Thomas Piketty…. The adulation tells you something, though not mainly about the book’s qualities. Its defects, in my view, are greater than its strengths–but the rapturous reception proves that the book, one way or another, meets a need…. There’s a persistent tension between the limits of the data he presents and the grandiosity of the conclusions… this borders on schizophrenia…. Piketty’s terror at rising inequality is an important data point for the reader. It has perhaps influenced his judgment and his tendentious reading of his own evidence. It could also explain why the book has been greeted with such erotic intensity…”

4. Megan McArdle: Piketty’s Tax Hikes Won’t Help the Middle Class: “I apologize in advance, because I am going to talk about a book that I have not yet read…. It’s far down in the queue, and I’m afraid that I can’t wait to weigh in…. According to many of the book’s reviews, inequality is about the most important thing that is happening in the world…. In terms of how it matters to lived human experience, I doubt it even makes the top 20…. Writing checks to the bottom 70 percent would not fix the social breakdown among those without a college diploma…. To the extent that it helps people to stay on the dole and look for a perfect job that doesn’t exist, it may make people less happy, not more so…. Writing a check will let a high-school dropout sit at home with her three children, but it will not make her employable at something better than McDonald’s. It will not create a more hopeful future for those children…. When you look at places where a large percentage of the people are completely dependent on government benefits, you don’t really see a great explosion of human flourishing. Nor do I think we would see it if only the checks were larger…. Writing checks certainly won’t offer a more hopeful future to the middle class…”

5. Scott Winship: Whither The Bottom 90 Percent, Thomas Piketty?: “While not quite inducing Beatlemania, French economist Thomas Piketty’s visit this week to America has inspired the Washington analog of teenage frenzy…. To a certain crowd that is convinced that inequality is a dire economic problem, it’s kind of like ‘I Want to Hold Your Hand.’ Piketty… lays his cards on the table…. He titles it to evoke Marx and begins with an epigraph quoting the ‘Declaration of the Rights of Man and the Citizen’…. His modesty goes out the door…”

6. Repair Man Jack: Thomas Piketty, Jedediah Purdy And The Leftist Ethic of Resentfulness: “‘We need a foundation of political equality and social guarantees: education, personal security, health care for those who need it, and the expectation of a fair retirement.’ –Jedediah Purdy, The Daily Beast. The quote above gives you the typical entitled attitude of the Modern Leftist. They need everything. Human life didn’t really exist on Earth before these things were all available. The world is really less than 200 years old and is a cruel and unjust place until these needs are entirely fulfilled. The idea that people who do things better, try harder, and think more deeply should be rewarded with more is flawed and dishonest. Everybody needs whatever they need. The recently ballyhooed champions of this ethic of resentfulness Thomas Piketty, and Jedediah Purdy, arrive at this more erudite version of the typical 3 Year-Old’s tantrum from different paths. Piketty… has written a manual of academic class resentment entitled ‘Capital in the Twenty-First Century’. In this masterpiece of Leftist whinging, he laments the fact that incomes are unequal. Predictably, it’s people who earn more who don’t have any right to what they take home…”

7. Daniel Schuchman: Book Review: ‘Capital in the Twenty-First Century’ by Thomas Piketty: “Poverty, unemployment and unequal opportunity are major challenges for capitalist societies, and varying degrees of luck, hard work, sloth and merit are inherent in human affairs. Mr. Piketty is not the first utopian visionary. He cites, for instance, the ‘Soviet experiment’ that allowed man to throw ‘off his chains along with the yoke of accumulated wealth’. In his telling, it only led to human disaster because societies need markets and private property to have a functioning economy. He says that his solutions provide a ‘less violent and more efficient response to the eternal problem of private capital and its return’. Instead of Austen and Balzac, the professor ought to read Animal Farm and Darkness at Noon…”

8. Thomas Lifson: White House honors French neo-Marxist: “Thomas Piketty… the French economist who is updating Karl Marx has quite a following at the White House and among thought leaders of the Democratic Party…. And what are his ‘findings’? Pretty much an update of Karl Marx’s failed prediction that capitalists would appropriate an increasing share of ‘labor surplus’ and make the lot of the proletariat worse and worse, leading to revolution…. Although Piketty claims a 20 year history of researching the subject and an ‘unprecedented’ set of ‘data covering three centuries and more than twenty countries’, even lefty American economists see some holes…. One suspects the respectful greeting Piketty is receiving is because the White House crowd wants to believe free markets are bad and must be thwarted in the name of justice…”

9. Veronique de Rugy: What’s Wrong with Piketty’s Answer To Inequality: “Let’s leave aside the question of whether inequality is really growing out of control as he claims it is, or the idea that the main reason inequality has increased is that the return to capital has been greater than the general growth in the economy…. I have an issue with his prescription that all that’s really needed is a global wealth tax (meant to destroy some wealth at the top) to lower the rate of return on capital as a means of controlling income inequality. But if everyone recognizes that people who own wealth are in a better position than those who don’t, and that this advantage is cumulative over time, why not try to increase access to capital for more people, especially for those in the bottom, rather than try to hammer the ones at the top?… I don’t necessarily endorse all these policies, [but] here are a few ways to improve access to capital for middle- and lower-income Americans…. Again, I am not endorsing all of these…”

10. Robert Samuelson: Class warfare justified?: “An academic treatise that, though clearly written, is no page-turner…. Piketty presents Scandinavian countries in the 1970s and ’80s as examples of ‘low inequality’. Still, the richest 10 percent commanded about 25 percent of national income and the poorest 50 percent got only 30 percent…. Though Piketty is an economist, his book is essentially a work of political science. He objects to extreme economic inequality because it offends democracy…. His economic analysis sometimes seems skewed to fit his political agenda…. He doubts [tax increases] they would hurt economic growth. This seems questionable. Incentives must matter…. As for the power of the super-rich, they hardly control most democracies. In the United States, where about 70 percent of federal spending goes to the poor and middle class, the richest 1 percent pay nearly a quarter of federal taxes…”

11. David Brooks: The Piketty Phenomenon: “Progressives have found their worldview and their agenda. This move opens up a huge opportunity for the rest of us in the center and on the right. First, acknowledge that the concentration of wealth is a concern with a beefed up inheritance tax. Second, emphasize a contrasting agenda that will reward growth, saving and investment, not punish these things, the way Piketty would. Support progressive consumption taxes not a tax on capital. Third, emphasize that the historically proven way to reduce inequality is lifting people from the bottom with human capital reform, not pushing down the top. In short, counter angry progressivism with unifying uplift…”

And some interesting–but I believe unsupportable–thoughts on the benefits of inherited wealth, aka patrimonial capitalism:

1. Tyler Cowen: “Piketty fears the stasis and sluggishness of the rentier, but what might appear to be static blocks of wealth have done a great deal to boost dynamic productivity. Piketty’s own book was published by the Belknap Press imprint of Harvard University Press, which received its initial funding in the form of a 1949 bequest from Waldron Phoenix Belknap, Jr., an architect and art historian who inherited a good deal of money from his father, a vice president of Bankers Trust. (The imprint’s funds were later supplemented by a grant from Belknap’s mother.) And consider Piketty’s native France, where the scores of artists who relied on bequests or family support to further their careers included painters such as Corot, Delacroix, Courbet, Manet, Degas, Cézanne, Monet, and Toulouse-Lautrec and writers such as Baudelaire, Flaubert, Verlaine, and Proust, among others.

   “Notice, too, how many of those names hail from the nineteenth century. Piketty is sympathetically attached to a relatively low capital-to-income ratio. But the nineteenth century, with its high capital-to-income ratios, was in fact one of the most dynamic periods of European history. Stocks of wealth stimulated invention by liberating creators from the immediate demands of the marketplace and allowing them to explore their fancies, enriching generations to come…”

2. Corey Robin: “In The Constitution of Liberty, Hayek developed this notion into a full-blown theory of the wealthy and the well-born as an avant-garde of taste, as makers of new horizons of value from which the rest of humanity took its bearings. Instead of the market of consumers dictating the actions of capital, it would be capital that would determine the market of consumption…

   “Hayek has much more in mind than producers responding to a pre-existing market of demand; he’s talking about men who create new markets—and not just of wants or desires, but of basic tastes and beliefs. The freedom Hayek cares most about is the freedom of those legislators of value who shape and determine our ends.…

   “More interesting is how explicit and insistent Hayek is about linking the legislation of new values to the possession of vast amounts of wealth and capital, even—or especially—wealth that has been inherited. Often, says Hayek, it is only the very rich who can afford new products or tastes….

   “The most important contribution of great wealth, however, is that it frees its possessor from the pursuit of money so that he can pursue nonmaterial goals. Liberated from the workplace and the rat race, the ‘idle rich’—a phrase Hayek seeks to reclaim as a positive good—can devote themselves to patronizing the arts, subsidizing worthy causes like abolition or penal reform, founding new philanthropies and cultural institutions….

   “The men of capital, in other words, are best understood not as economic magnates but as cultural legislators: ‘However important the independent owner of property may be for the economic order of a free society, his importance is perhaps even greater in the fields of thought and opinion, of tastes and beliefs’…”