Thomas Piketty’s Capital in the Twenty-First Century may well be the most important economics book published this century; or maybe just the most important book. Its physical version is sold out. I just finished it, and while it’s been reviewed to death (by Nobel-Prize winners, forsooth), I haven’t heard any Net-head or software-geek voices. And there are angles there our tribe should pay attention to.

What does it say? · Oh gosh, read one of those other reviews (I link to a ton of them below). Better still, read the damn book already. Really.

What... still want to know? Well, it addresses issues like “How much wealth is there?” and “How is it distributed?” and “How has this trended over history?” and “Is the present like the past?”

Piketty introduces interesting metrics for the economy as a whole, for example r, the average rate of return on wealth (farmland, urban real-estate, financial instruments). Also g, the growth rate of the economy, a complicated function of productivity and population.

The headline finding concerns this inequality: r > g

Which describes the situation when the return on wealth is bigger than the growth of the economy. When this happens, Piketty shows, wealth accumulates and inequality (however you measure it) increases. The math isn’t rocket science.

Finally, he says that r > g has been mostly true throughout modern history, with the exception of the period between 1914 and 1980, and that it’s true now.

Why would we believe him? · Because data. He and his colleagues have invested years in building the World Top Incomes Database — WTID. Piketty is obviously a first-class data geek. To the extent that it’s amusing: He is unique among humans in really liking income tax, because income-tax records, as a side-effect, feed his database. The WTID has way more sources than tax records though: Probate , university-endowment-fund performance, lots and lots and lots.

His scorn for second-rate data — for example Forbes’ lightweight, anecdotal Rich List — is fierce. And when, at the end of the book, he offers proposals for a new tax regime, he’s at pains to point out that one benefit would be comprehensive data gathering about wealth-related aspects of the economy.

This matters, in general, because you can’t manage what you can’t measure.

It matters in the particular context of this book because it makes his arguments awfully hard to refute, even when they’re counter-intuitive. For example r > g; there’s a school of economics which says “Excuse me, that can’t happen, because as wealth builds up and chases fewer opportunities, the return on capital inevitably falls.”

But Piketty isn’t saying that this should be true, he’s saying he has centuries of data showing that it has been true before, and is true now, but wasn’t for a while in the twentieth century.

Why does it matter? · Because on current trends, we’re heading for a future in which the best route to wealth is to inherit or marry it, not join a high-paying profession or be an entrepreneur. Sound weird? That’s how European civilization worked up till 1914; which Piketty has fun illustrating not just with numbers, but with recourse to the stories of Jane Austen and Honoré de Balzac.

And while that scenario sort of sucks in and of itself, it’s also dangerous: In France, it led to a series of political events one of which is remembered simply as “The Terror”.

Think something like that can’t happen here? Are you really sure?

Is it fun to read? · Pretty much, assuming you’re interested in understanding the world and aren’t frightened of some simple numbers. The writing — in the English translation of the French original, at least — is perfectly competent, is regularly amusing, and those constant references back to Austen and Balzac add flavor.

Well, the first three quarters, anyhow. The closing section, where Piketty offers ideas on how better to structure our economies, is OK, and often thought-provoking, but at the end of the day it’s Piketty’s opinions and extrapolations. It lacks the inexorable rhythm of the opening sessions where Piketty asks one really interesting question after another about how much money there is and how it moves and who has it and what it does, and then shows you what the data says, usually with simple charts.

I will say that it’s a big book, and reading it will take chunk out of the rest of your life.

Electronic or dead-tree? · Well, at the moment you can’t get the latter. I’ve been increasingly mad at Amazon recently for shoddy production practices on Kindle books: Lousy typography, busted graphics, missing multimedia. This, for example, mostly ruined the Kindle version of David Byrne’s otherwise-pretty-good How Music Works.

But the Kindle-on-Android version of Capital in the Twenty-First Century is OK. The charts are crucial; you can long-press any of them and a menu pops up with “Zoom” on it, so you can see all the details.

Is Piketty right? · I’m inclined to think so. He’s working from Open Data, and anyone who thinks he’s wrong needs to either show that his data is bogus, or else that his conclusions from it are mistaken.

There have been negative reviews; I’ve read a few and been profoundly unimpressed. Some people say “He’s just a Commie” because he talks seriously about class issues and only Marxists do that. Well, except for he’s not: He’s scathing about Marx, if only because of Karl’s lack of attention to quantitative data, even the modest amount that was available back then.

Other detractors say things like “Piketty claims X but that’s obviously not true” and, having read the book, I observe that he either doesn’t actually assert X or, rather than claiming, says “The data series in this chart right here show that X has historically been true.”

Are we done yet? · Nope: For the first time ever, as I read this book I found myself highlighting passages and writing notes to myself. So I thought I’d finish up by sharing a few Piketty zingers.

“Malthus, Ricardo, Marx, and many others had been talking about inequalities for decades without citing any sources whatsoever or any methods for comparing one era with another, or deciding between competing hypotheses.”

“The history of the distribution of wealth has always been deeply political, and it cannot be reduced to purely economic mechanisms.”

“Many people think that growth ought to be at least 3 or 4 percent per year. As noted, both history and logic show this to be illusory.”

“In other words, the United States is more than 95 percent American owned and less than 5 percent foreign owned.”

“In stagnant societies, wealth accumulated in the past naturally takes on considerable importance.”

“Technology, like the market, has neither limits nor morality... If one truly wishes to found a more just and rational social order based on common utility, it is not enough to count on the caprices of technology.”

“... the United States in the early 2010s (where, as will emerge later, income from labor is about as unequally distributed as has ever been observed anywhere)”

“The way one tries to measure inequality is never neutral.”

“The history of inequality has not been a long, tranquil river. There have been many twists and turns and certainly no irrepressible, regular tendency toward a ‘natural’ equilibrium.”

“The French Revolution had relatively little effect on the capital/income ratio. As just shown, the Revolution also had relatively little effect on the distribution of wealth.”

“There is no doubt that the inequality of wealth today stands significantly below its level of a century ago... The essential difference is that there is now a patrimonial middle class, which owns about a third of national wealth — a not insignificant amount.”

“The inequality r > g in one sense implies that the past tends to devour the future.”

“In other words, parents’ income has become an almost perfect predictor of university access.”

“... in most countries taxes have (or will soon) become regressive at the top of the income hierarchy.”

“There is no statistically significant relationship between the decrease in top marginal tax rates and the rate of productivity growth in the developed countries since 1980.”

“The rich world is rich, but the governments of the rich world are poor. Europe is the most extreme case: It has both the highest level of private wealth in the world and the greatest difficulty in resolving its public debt crisis — a strange paradox.”

And the last sentence in the book:

“Yet it seems to me that all social scientists, all journalists and commentators, all activists in the unions and in politics of whatever stripe, and especially all citizens should take a serious interest in money, its measurement, the facts surrounding it, and its history. Those who have a lot of it never fail to defend their interests. Refusing to deal with numbers rarely serves the interests of the least well-off.”

Still not done? · Nope; I mentioned the book having been reviewed to death, and I enjoyed reading some of that, even before I’d finished. Here are pointers. Not all of them are reviews, some are just politics/economics pieces that call out to Piketty.


Comment feed for ongoing:Comments feed

From: Örjan (May 02 2014, at 04:13)

I find the "end of cheap energy" relevant in this discussion, see the below for a discussion of the changes since 2005:

Tl;DR - oil supply (transport energy) is getting harder to get at since 2005. (in export markets, with local exceptions such as the US shale oil stock induced bubble (who pays)

For more, (but maybe to alarmistic materials: )


From: Vidar Masson (May 02 2014, at 07:47)

You seem to be enjoying your time off. Thats a good thing!


From: Doug K (May 02 2014, at 08:47)

the standard for negative reviews was set by Megan McArdle, who wrote a review without reading the book. The other negative reviewers didn't read the book either (or didn't comprehend it as you point out, which is which) but none of them admitted it: one point to McArdle for honesty at least. Freddie De Boer's response to Megan's review was very funny,

"He is unique among humans in really liking income tax"

I like paying taxes: with them I buy civilization. Justice Oliver Wendell Holmes. Me and Judge Holmes like taxes..


From: Martin McCallion (May 02 2014, at 09:17)

Lots of us like income tax: it's how we pay for civilisation (which is a near-quote from someone, but I can't remember who at the moment).


From: Emmanuel Lécharny (May 02 2014, at 09:44)

Tim, an excellent review, it made me wish to read this book.


From: Christopher Galtenberg (May 02 2014, at 10:48)

There's a bit of "check your assumptions" concern from an associate of Nassim Taleb, worth following:


From: John Cowan (May 02 2014, at 14:14)

The people who passed the current U.S. federal income tax definitely liked it: it was a tax on the profits of inherited wealth, with earned income essentially exempt. Imagine if everyone with an income of US$10,000,000 paid 7% and everyone else paid nothing. Piketty would be very happy.


From: Simon Griffee (May 05 2014, at 05:37)

The more I think about money, the more I like the idea of a [basic income][1], or [salary rights][2].




From: Conny (May 08 2014, at 02:47)

"Piket­ty shows, wealth ac­cu­mu­lates and in­equal­i­ty (how­ev­er you mea­sure it) in­creas­es. The math isn’t rock­et science."

Taleb and Douady [2] show that Piketty's claims could simply be based on a measurement error.

Further, Taleb [1] debates the usefulness of a wealth tax, which would shift incentives away from innovation into the direction of lower risk/ more bureaucracy. Moreover, he observes that the top is fragile, at least in some places:

"The top is the US is not the same in 2014 as it was in 1984, and it is a healthy system. In places with cronism (Europe), the top is sticky."


[2] 156 The Pikettistas' Reasoning Error


From: gaddeswarup (May 08 2014, at 20:44)

Apart from the initial Milanovic review, two good discussions that I have seen are by Michael Hudson in


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