Capital in the Twenty-First Century
by Thomas Picketty
Harvard University Press, 2014
It’s not everyday that a dense economics tome tops the bestseller lists, especially one that is roughly 600 pages (not including about 100 pages of notes), but Thomas Picketty’s new Capital in the Twenty-First Century has done exactly that. Unfortunately there seem to be only two ways to review this book, either by providing a very brief explanation of the argument or a very long explanation of its points. I’ll here opt for the former.
If you’re interested in Picketty’s argument alone, thanks to the organization of the book it is set apart from the historical data driven analysis at the center of the book. For those interested simply in the argument, I think it is wholly attainable by reading the Introduction, Part I, Part IV, and the Conclusion. This cuts the reading down from about 600 pages to something like 250.
Picketty’s argument in Capital is rooted in a simple inequality: r > g , where r is the rate of return on capital and g is the rate of the growth of the economy. This means that in currently existing market capitalist economies (and he studies several, including the US), when the rate of return on capital exceeds the rate of the growth of the economy wealth disparity will follow (and increase rapidly). Picketty claims that this inequality most often results from slow, stagnant, or slow population growth stagnant (as there are natural factors to rapid population growth, which is infrequent and severely temporary, that help limit the inequality). Picketty is quick, like most economists, to bracket out the post-war years as an exception and diagnose our current increasing inequality as a problem intrinsic to capitalism.
I’ll leave Picketty’s suggested solutions – which include limiting inherited wealth and implementing a high global tax on the wealthiest – to the reader who will take the time and effort to plow through the book. The book is full of charts and explanations, and while the massive amounts of data that make this point are now being sifted through by economists around the world, the strength of the argument mathematically and methodologically will be scrutinized for some time. Yet the book’s argument as presented is quite compelling.
This book is significant because it locates an inequality within (largely) unregulated capitalism. Because rapid population growth, the most promising of natural counters to this phenomenon, is neither frequent nor sustainable, this issue is inevitable in some sense. If this is the case we must think much more about the morality of such a system and what to do about it. In this age wherein wealth and income inequality have become fodder for dinner conversations, people like Picketty, Robert Reich, Paul Krugman, and Joseph Stiglitz (two of which are Nobel laureates, and I’m betting Picketty is now on the shortlist) will undoubtedly lead the way. This book is potentially a generation defining one and shouldn’t be missed.
Manager, Christian Theological Seminary Bookstore
Master of Theological Studies ’14