What Piketty Leaves Out

April 29, 2014 | | The American Prospect |

We have many reasons to be grateful to Thomas Piketty. His justly celebrated book makes it impossible to deny that the concentration of income and wealth are again approaching Gilded Age levels, far beyond what is required for incentive and efficiency. For the past 15 years, Piketty and his colleagues have put together the most comprehensive data set on inequality ever assembled. Now, in Capital in the Twenty-First Century, Piketty addresses his subject as a well-educated intellectual, not a myopic number-cruncher. He is as likely to rely on novelists Jane Austen and Honoré de Balzac as on economist Simon Kuznets for insights on social class and inherited wealth, and the tale he tells reconnects the economic with the political. The prose is precise, but this is just not a technical tome, and the fine translation by Arthur Goldhammer renders the text in clear, idiomatic English.

As an economic historian, Piketty begins by rebutting the theorem propounded by Kuznets in the mid-1950s that early capitalism increases inequality as vast fortunes are made and redoubled but that mature capitalism tends to diffuse its benefits. Piketty demonstrates that Kuznets was extrapolating from a special case in the history of capital, and his optimism was premature. Rather, wealth in a capitalist economy tends to concentrate absent exceptional circumstances. More on those exceptions in a moment.

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