The many reviews of Piketty’s book are surprisingly unanimous on one point: that the weakest part of the book is the final part, where Piketty moves away from diagnosis and starts attempting to formulate a solution. Piketty’s rather French idea of a global wealth tax isn’t getting nearly the same amount of acclaim as the rest of the book is, and is very unlikely to happen: countries will always compete with each other to attract the stateless rich by not taxing them.
Which means that my reading of Piketty is ultimately pessimistic. The dynamics of the world economy are bad, and they’re getting worse; inequality is natural in human history, and right now we’re reverting to a state of affairs which is highly unfair but also both sustainable and, in its own way, unsurprising. Piketty has diagnosed a nasty condition. But I don’t think there’s a cure.
Ryan Avent’s take on Part 4 exemplifies that consensus:
The economics gets a serious treatment in this book, but the politics does not. That’s somewhat ironic; Mr Piketty winds down his conclusion by saying that economics should focus less on its aspirations to be a science and return to its roots, to political economy. But theories of political economy should be theories of politics. And there is no r>g for politics in this book.
There are nods at the importance of the interdependence between the political and economic. He notes that epoch-ending political shifts, like the French and American revolutions, were motivated in large part by fiscal questions. Similarly, he observes that progressive income taxation tended to emerge alongside the development of democracy and the expansion of the franchise. (Though, he also admits, the fiscal demands of world war one deserve most credit for adoption of meaningful income taxation across the rich world.) And he discusses how concern about rising inequality (often among elites) helped motivate rising tax rates in America in the early 20th century.
But the ending the book deserved was another look back at the data, to see whether patterns in the interaction between wealth concentration and political shifts could be detected and described. That’s not Mr Piketty’s area of expertise, necessarily, but neither is most of the stuff in Part 4.
Piketty’s data on the rise of middle-class capital ownership raise an important point. A key theme of the book is that poor people don’t own productive assets, so they must rely entirely on labor for income. But is taxation and redistribution the only way to address this situation? This poses a difficult question for those who oppose some form of privatization of government retirement programs. One cannot simultaneously claim that owners of capital stand to gain absurd riches in coming decades and that privatization and choice for Social Security is a terrible idea.* This is not the only possible alternative to taxation, but it is a reminder that one way to treat the problem of poor people not owning stuff may be to help poor people, well, own more stuff. But Piketty simply asserts that “only a progressive tax on capital can effectively impede” increasing wealth concentration (439). More generally, Piketty decries the ability of those with large fortunes to access opportunities for higher rates of capital return than those with smaller starting funds, but he makes no mention of the fact that this is due in part to laws banning small investors from participating in alternative investments. By law, if I want to invest in a startup, I can only do it in undiversified ways (like starting my own firm or investing in a friend’s). We don’t need higher taxes to help lower classes invest better.
Though he praises Piketty’s history of inequality and wealth, Greg Mankiw takes issue with his predictions and prescribed solution:
As we all know, you can’t get “ought” from “is.” Like President Obama and others on the left, Piketty wants to spread the wealth around. Another philosophical viewpoint is that it is the government’s job to enforce rules such as contracts and property rights and promote opportunity rather than to achieve a particular distribution of economic outcomes. No amount of economic history will tell you that John Rawls (and Thomas Piketty) offers a better political philosophy than Robert Nozick (and Milton Friedman).
The bottom line: You can appreciate his economic history without buying into his forecast. And even if you are convinced by his forecast, you don’t have to buy into his normative conclusions.
Douthat, on the other hand, credits the Frenchman with helpfully complicating our national conversation about inequality:
Piketty’s book, as my colleague David Brooks suggests today, has ended up folded into that “we are the 99 percent” framework by some of its interpreters. But I’m not sure it completely belongs there. Indeed, insofar as he focuses on capital more than income, raises the issue of the petits rentiers and their increasing patrimonies, and … explicitly talks about the 10 or 12 or 15 percent and not just the 1 percent, I think Piketty implicitly challenges that framework, and in the process raises much harder questions for his professional-class liberal readers … because he’s saying, in effect, that they too are the problem, they too are part of the anti-egalitarian trend, in ways that the comforting “we are the 99 percent” narrative doesn’t capture or admit.