My Review of Thomas Piketty’s “Capital in the Twenty-First Century”

I posted the first part of my review on

Capital-My Review I

And here is the second and last part:

(J. H. Moromisato, 4/26/2014)

Part II.

Following on the convoluted footsteps of Adam Smith, after Karl Marx had pushed Smith’s ideas to the limits of their own absurdity, Mr. Piketty follows in his book the ups and downs of capital and income for a couple of centuries, and throughout four of the world largest economies (the U.S., France, U.K., and Germany), but including sporadic references from Japan, China, Greece, Netherlands, and the Scandinavian countries, to ‘universalize’ his findings—perhaps forgetting his own finding that “the history of income and wealth is always deeply political, chaotic, and unpredictable”. And in the process of describing the new data, he manages to resuscitate sundry ‘ad-hoc models’ that ‘explains’ particular sets of data—e.g. “our findings suggest that skyrocketing executive pay is fairly well explained by the bargaining model”. I found that part of the book somewhat illuminating, mostly for its detailed historical association.

The last of the four parts that make up the book is dedicated to taxation and fiscal debt. He concludes that taxes higher than 80 percent would be desirable (particularly in a large country as the U.S.):

“The evidence suggests that a rate on the order of 80 percent on income over $500,000 or $1 million a year not only would not reduce the growth of the US economy but would in fact distribute the fruits of growth more widely …

Nevertheless, it seems quite unlikely that any such policy will be adopted anytime soon.” (p. 513)

He is even more pessimistic that his proposal to solve the ‘fiscal debt’ problem—the application of a ‘wealth-tax’ of up to 20 percent, at a global level—would ever be adopted.

In Part I of my review, I revealed the basic flaws in the concepts of capital and labor; that ‘capital’ was invented—or more precisely, plagiarized from A. R. Jacques Turgot—by Adam Smith, only to avoid using the concept of money as an economic factor. Mr. Picketty toes the line on capital quite faithfully throughout 576 pages of his book; he even ‘explains’ why the mention of money, in the literature for example, which was in vogue in the 1800s, went out of fashion because of the bouts of inflation in the 20th century—that could have changed the perception of the currency, but certainly not that of money. Nevertheless, the very last six lines he wrote in the book go like this:

“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.” [The End]

He seems, belatedly, to be following on the footsteps of John M. Keynes—who died before his break with capitalism was completed. There is still hope for Mr. Picketty!

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