Pocket Piketty

By Jesper Roine

Click here to buy Pocket Piketty .

Does capitalism have a natural tendency to reinforce differences in people’s income and wealth? Or is it per¬haps the other way around—initial differences become smaller as the economy develops? Perhaps this phe¬nomenon has varied between societies, and over time. To what extent does the answer depend on the way the economy is organized? How do these economic relation¬ships relate to our views on fairness and meritocracy?

Classic theories from Ricardo to Marx to Kuznets have all dealt with this broad subject: the relation¬ship between economic growth and the distribution of the gains from this development within the popu¬lation. This is also the focus of Thomas Piketty’s book Capital in the Twenty-First Century. The big differ¬ence is, in contrast to its predecessors, Piketty’s book is not just a theory about how the economy works, but a theory based on facts about income and wealth dis¬tribution over the entire twentieth century, and on the relationship between capital and income all the way back to the eighteenth century. The reason Thomas Piketty was the first to formulate a theory on the basis of such facts is that our knowledge of these conditions is largely new. Much of this new knowledge has come out of research to which Thomas Piketty devoted him¬self over the past fifteen years.

Increased knowledge does not automatically mean the theory presented by Thomas Piketty in his book must be true. As with all theories, his was based on assumptions open to debate and challenge. It is also pos¬sible that, like so many of his predecessors, he was wrong in his predictions about the future—something he repeatedly emphasizes in the book. This does not make Capital in the Twenty-First Century any less important and it certainly does not diminish his research contribu¬tions. We now know more about key relationships in the economy, and in particular much more about income and wealth distribution over time, than we did a decade ago, and much of this is thanks to Thomas Piketty.

This new knowledge also creates a whole new plat¬form for the debate on core issues for the future: What will happen to income and wealth distribution? Is it evi¬dent the modern economy automatically guarantees a meritocratic and democratic social order? How should we react if, for example, technological advances and glo¬balization result in enormous returns but mainly for a small share of the population. What roles do policy and redistribution have to play in future developments and how do these affect inequality? Piketty does not answer all these questions, and objections can be raised to the answers he did provide, but as Harvard economics pro¬fessor Larry Summers put it in a comment on Piketty’s book: “Books that represent the last word on a topic are important. Books that represent one of the first words are even more important.”

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