
Thomas Piketty’s Capital in the 21st Century, in 20 minutes (2014) [video] - based2
http://boingboing.net/2014/10/23/thomas-pikettys-capital-in-t-2.html
======
jernfrost
I wish more people could have Thomas Piketty's balanced view on capitalism.
Too often it is treated as some sort of game where you have to pick sides
whether you are for or against capitalism.

Especially in America there seems to be a kneejerk reaction to any calls for
regulations or moderations of the effects of the free market. Usually it is
dismissed without further discussion with "look what happened in the east
block countries!"

But I think Thomas Piketty has a very good point in his book that if you in
fact favor capitalism, you ought to be open to regulation of it. The
alternative is what we have seen again and again in history, inequality gets
so bad that we get uprisings and revolutions. Inequality is breeding ground
for radical ideas like communism. Otto von Bismarck understood that and gave
Germany the beginnings for a welfare system. Not because he really cared about
workers but because he understood the dangers of inequality with respect to
radicalization of the poor.

Today we can see the same thing starting to play out in America. The US have
now been on a path towards ever higher inequality for many years and we can
see it reaching a breaking point. Politics is getting ever more radical.
Donald Trump and Bernie Sanders would never had gotten the support they got
without the economic fundamentals having shifted so much.

We already know what high inequality leads to in modern times, because we have
seen it play out in South America again and again. They oscillate between one
political extremist or populist after another.

I think if the US doesn't actually seriously try to reduce inequality, the US
risks ending up with its own Hugo Chavez character, or alternatively a right
wing authoritarian.

And if inequality doesn't cause revolutions, there seems to be a good case for
it causing asset bubbles. We saw this in 1929 which market the end of a
dramatic wealth inequality increase, just as 2008. I think it will happen
again because the fundamental problems have not been solved.

~~~
broke_wagon
Communism isn't some "radical" boogeyman, it's just a process to eliminate
inequality. (Why should there be any inequality at all?) We don't need to be
diminutive about relatively different ideas; that's unhelpful at best.

~~~
hash-set
Yeah, tell that to the millions of dead left in its wake.

~~~
quadrangle
There have been nowhere near enough actual trials of communism to conclude
anything fully. The core examples were all poorer countries with various
problems, corruption… To reject communism as a concept over the atrocities of
Stalin et al is as reasonable as rejecting capitalism because the U.S. was
built on slavery and the genocide of first peoples.

The atrocities were real, and they did connect to economics, but to just
assert that capitalism _is_ the slavery of U.S. history or that communism just
_is_ gulags and bread lines is extremely short-sighted. Neither system was
anything like the core principles of the economic models (which are just
models, so we _should_ reject anyone who focuses only on the models and not on
practical reality, but we can't treat each real-world case as the definitive
case either).

~~~
WalterBright
Review "The Black Book of Communism" for a catalog of the death and misery
from communist countries, over and over.

Voluntary communes and Kibbutzen have failed as well - none have been capable
of operating without subsidy.

~~~
quadrangle
All you're saying is that attempts at communism have all had major problems.
That's true, but it's not enough to be conclusive.

If you want to pick examples that point various ways, you can note that Cuba
has corruption, lack of democracy, is an impoverished island suffering the
effects of significant economic embargoes in the global system and yet still
vies for having one of the best health care systems. They even a top country
in providing doctors to serve abroad in troubled places!

And the Soviet Union was a horrendously corrupt place that failed in most
respects to live up to communist ideals and yet still managed to compete
technologically with the richest countries on the planet despite being
economically far far far weaker in fundamentals. The U.S. only barely beat the
Soviets in the space race etc while being massively richer. The Soviets had
many orders of magnitude more losses in WWII also.

The history of Communism is one where anti-communists did everything they
could to undermine any success, the trials were full of corruption and abuse,
and even _still_ they had notable successes.

The kibbutzen failed not strictly because all the ideas were unworkable. They
failed because they had to function economically in a larger context. None of
them had wealth along the lines of successful capitalists either. Capitalists
have only ever operated capably by controlling a lot of capital or getting
subsidy, at least in the form of law enforcement that serves the side of
capital.

We _can_ conclude that all attempts at communism so far have had serious
flaws. We can also conclude that capitalism has always had serious flaws too.
Anyone who takes a polarized one-sided view on this stuff can be rejected as
just being dogmatic. Piketty is not one of these one-sided dogmatic people,
he's actually interested in studying empirical evidence and not concluding
more than the evidence can truly support.

~~~
WalterBright
> major problems

That's a bit of an understatement. It has a pretty much 0% success rate, for
both coercive and voluntary attempts.

> capitalism has always had serious flaws too

Yes, but nothing like the communist failures, and capitalism has had
incredible success stories.

> The Soviets had many orders of magnitude more losses in WWII also.

Nobody doubts the heroism and sacrifice of the Red Army in WW2. That's a whole
'nother topic, though.

> The U.S. only barely beat the Soviets in the space race etc while being
> massively richer.

The USSR was able to direct massive resources at single problems, at the
sacrifice at most everything else, but the US could do it with little
sacrifice.

> did everything they could to undermine any success

Nobody made the communist countries perform mass slaughter.

> The kibbutzen failed not strictly because all the ideas were unworkable.

They couldn't feed themselves. No communist system has ever been able to feed
itself. All have required imports from capitalist economies, or starved, or
tolerated capitalist farmers.

~~~
quadrangle
> Nobody made the communist countries perform mass slaughter.

And _communist ideas_ also had zero to do with those countries committing mass
slaughter.

Communism, even in a very flawed form, has indeed succeeded. See Cuba. The
_main_ reason they would be wealthier with capitalism is because the U.S.
would have proactive economic ties instead of working to isolate them. Given
their isolation and inherent lack-of-wealth relatively speaking, communism
there is at least in a state no reasonable person can describe as 0%
successful, even if you have points of criticism.

In terms of kibbutzen, you do realize that the entire premise of self-
suffiency, i.e. sustinance farming, is basically the definition of poverty,
right? I mean, the whole premise that a small community can achieve for
themselves in isolation a whole decent standard of living is nonsense. We
acheive the greatest standards of living through widespread connection in
larger groups on larger scales. Trade and all and specialization… No effort
for tiny isolated communes could ever achieve the quality of life of large
cosmopolitan economies, That issue isn't a strictly communist vs capitalist
one.

Communism is indeed a simplistic model that is unworkable in a rigid dogmatic
sense, just like anarchy or capitalism. There's no example of pure version of
any of these ever existing.

Being closed to discussing the actual ideas of communism by just talking about
Stalin's atrocities or tiny communes failing is a good way to just close
yourself to actually engaging with the intellectual questions. Obviously, all
philosophical / political principles are distinct from the complexity of real-
world economic practice. We can still discuss the principles as a way to think
about and explore the issues. Communist principles, as ideas, have _nothing_
to do with mass slaughter.

~~~
WalterBright
> kibbutzen..

..simply do not produce enough to sustain themselves. Capitalist farmers do,
with a surplus they sell. All such voluntary collectives have collapsed
(unless they get subsidies from the government).

> have nothing to do with mass slaughter

I strongly suggest reading "The Black Book of Communism". Every advocate of
communism needs to read it, if only to prepare an answer.

You're right that nothing in the principles of communism suggest mass
slaughter. But those who try to implement it time and again resort to it. The
reason is fairly straightforward - people resist having all their property
expropriated and being forced to work on collectives. The response is to kill
them.

Again and again.

~~~
quadrangle
I'm not an "advocate of communism". And it's nonsense to say that capitalist
farmers produce enough to feed themselves as a response to my point about
internal isolation. No capitalist farmer with the same amount of resources and
wealth as a kibbutz would be all that productive without utilizing the
benefits of the rest of our complex market economy and what that provides to
them. In other words, it's the larger context that is the factor, not the
internal structure of the farm. The kibbutzen were only communist in an
internal way, not living in a communist world.

"having all their property expropriated and being forced to work on
collectives" is also not a principle of communism. Forced labor is not a
communist value.

~~~
WalterBright
> nonsense

In simple terms, capitalist farmers produce a surplus, kibbutz farmers produce
a deficit. Kibbutzen operate within a market economy and have all the
resources of it that are available to the capitalist farmer - they still can't
make a go of it.

> not a principle of communism.

Collective ownership of the means of production means confiscating it.

> Forced labor

When the collective decides that certain work must be done, and with no market
forces, that means assigning people to the jobs. I.e. forced labor.

~~~
quadrangle
Anyone who views any of these ideas with a rigid dogma is misguided. The broad
scope of varied ideas that fall under the concepts of communism do not exclude
the concept of markets. Markets are extremely valuable.

If you wanted to say that there are major fundamental problems with having no
markets, I'd agree completely. Communism is not a set of ideas necessarily
anti-market.

[https://en.wikipedia.org/wiki/Market_socialism](https://en.wikipedia.org/wiki/Market_socialism)

Or, to be pragmatic, if we agreed for this exchange that "communism" meant
precisely an economic structure without markets, then I'd agree that's simply
unworkable. All of my points in this thread rely on my assumption that the
term "communism" refers to a wider scope of ideas and models, some of which
have _some_ merit but which nobody ever should dogmatically advocate (nor
should they dogmatically reject as being synonymous with Lenin/Stalin/Mao).

~~~
aminok
To the best of my understanding, market socialism is just worker coops
operating within a traditional market economy. That would mean it's not an
actual political ideology.

------
VodkaHaze
In the interest of giving the fuller discussion:

Picketty's book has been out for a while now. It is good economics. It
deserves rightful praise, and scrutiny.

Acemoglu and Robinson's answer[1] is also good economics. Digestible podcast
form here [2]. It purports that Picketty's "r>g" model is flawed. It also
deserves a reading.

All of this is part of a larger discussion, which C21 started. r > g doesn't
seem to explain nearly as much as Picketty presents in the book, but that
doesn't mean his larger idea is fundamentally invalid, or that he didn't
introduce something valuable.

[1]
[http://economics.mit.edu/files/10422](http://economics.mit.edu/files/10422)
[2]
[http://www.econtalk.org/archives/2014/11/daron_acemoglu.html](http://www.econtalk.org/archives/2014/11/daron_acemoglu.html)

~~~
om2
One thing that always puzzles me about r > g is that it's comparing a first
derivative to a second derivative. How can this be meaningful?

To explain further, r is return on investment, which approximately means rate
of growth of wealth of capital. That is, it is a the first derivative of a
stock, or equivalently a flow. g is the rate of growth of income, where income
itself is a flow. So it's the second derivative of a stock. How does it even
make sense to compare these two quantities when they don't have the same
units?

~~~
Mikeb85
> One thing that always puzzles me about r > g is that it's comparing a first
> derivative to a second derivative. How can this be meaningful?

It's not. It's Piketty trolling the economics field, which has become overly
math-y, and try too hard to distil complex interactions into basic formulae.

It's basically his way of saying that capital's share of income is growing
faster than labour's share of income, or that the return (r) on capital is
outpacing the return on labour, which is represented by the growth rate (g) of
the economy.

In other words, it's not a real mathematical formula. It's an idea, a basic
premise, merely represented by a 'formula' because hey, it's how every
economist does it nowadays, right?

~~~
om2
r isn't the growth rate of capital's share of income though.

r represent the return on capital (which is proportional to capital's share of
income), not the growth rate of the return on capital, or the growth rate of
capital's (share of) income.

On the other hand, g isn't the return on labor, or labor's share of income.
It's (approximately) the _growth rate_ of the return on labor.

Would you rather have $100 and then get 200% of it every year (r = 200%) or
get an amount that increases at 100% every year (g = 100%) starting with $1?
With the second option you'll have twice as much money in just 11 years. So in
this picture income eventually wins, even though r > g. It's not just "not a
formula" it is total nonsense. It doesn't make sense to compare a growth rate
of an amount to a growth rate of an annual increase!

~~~
Mikeb85
In Piketty's model, r is return on capital. So that means it's the return on
things like equities (and btw, interest is compounding on investments, don't
know why you represented otherwise), real estate (Piketty is not overly find
of the role of rentiers/landlords in the economy), machinery and so on. So the
money accrued by the owners of wealth and machinery that is, essentially
passive income, or income generated by capital, is r.

g is the growth of the economy. We calculate it as GDP, what he's interested
in is basically people's combined incomes and economic activity that goes with
it.

The premise that r > g is saying that people who have wealth, their return on
that wealth will always be higher than the growth of the economy. If the
economy grows 1%, the return on capital (remember it's all capital in the
economic sense) will be more than 1%. Now this isn't true for all years in all
places, but it has been shown to be true in the long run, which is how wealth
is accrued quicker by those who already have wealth, and how inequality
increases. Keep in mind Piketty's book is a massive tome.

And btw, comparing a rate that's calculated as %/year to another calculated as
%/year is mathematically correct.

Your example is nonsense btw, it almost seems like you've confused r with g,
because interest certainly compounds with capital, whereas with income, while
you'll get increases over time, it generally isn't of the same magnitude and
relates to labour, of which you have a finite amount.

~~~
om2
I haven't confused r with g. I think you may not have thought through what
these quantities represent. r is the return on capital. An asset worth A
returns A*r per year. This says nothing about wether A increases or decreases.
You can use your capital income to buy more capital assets. But you can also
use labor income to buy more capital assets. Basically the argument only works
if you assume all capital income is saved, but no labor income is saved. But
then the savings rate is doing all the work.

------
trapperkeeper79
Wonderful talk. One thing he called for was a wealth tax, which is something
that makes complete sense but is going to be very unpopular. On the otherhand,
he also calls for progressive income taxes (something that is reported by the
media and an easier pill to swallow) - in my country, Canada, progressive
income taxes are not the answer IMHO.

We didn't have as much inequality for education (i.e. lots of decent
Universities, not terribly expensive). The problem is wealth in the form of
housing has exploded for a large fraction of the population (typically older
people) and has left young people (well, anybody without a house) in the dust.
In major cities like Toronto and Vancouver, average detached houses cost well
over a million bucks. This is also happening because of bone-headed
environmental policies (I'm all for the environment, I just don't understand
why people without homes are punished for having a green belt while people
with homes are rewarded). Our current PM (I'm a fan) has done many good things
but he doesn't get this. We had something called the child tax credit, which
families with children would get unconditionally - this became something you'd
get based on income. Now, young people who are desperately saving for
downpayments are hampered even more ... buying a home is just out of reach. In
my humble opinion, a wealth tax is the way to go and young people should make
their voices heard to our representatives.

In summary, people need to understand the difference between income inequality
and wealth inequality. I argue the problem is NOT income inequality - it is
wealth differences.

~~~
eldavido
I'm tempted to blame ultra-loose monetary policy, but I'm not so sure. I live
in the Bay Area where house prices are also out of control, but I'm not sure
why we focus on prices (rather than monthly debt payments) since what, 90% of
the market is payment buyers?

In any case, I do believe the current interest rate environment has
distributional consequences that haven't been well-studied. It seems the
biggest beneficiaries of this environment will be people with lots of debt-
financed assets who manage to sell for high nominal prices. On the other hand,
a lot of people think rates aren't coming down any time soon (check the yield
curve on US treasuries, the 30-year rate is like 3.4%) so maybe this will be a
one-time shock where people who took on a ton of debt ca. 2008 will reap big
one-time profits as cheaply-acquired assets realize big capital gains.

In any case, I think it's naive to assume holding rates so low, for so long,
doesn't have major wealth transfer effects.

~~~
trapperkeeper79
Agreed. The question is what does a young person do? Take on an asset that is
known to be overvalued or wait for the rate climate to change.

As a data point, condos in Toronto (condos in Toronto are generally tiny and
not the most desirable place to raise 2 kids) appreciated by 9-10% this year
despite continuous bubble talk by various levels of govt. You and I both know
this will not stop until rates rise; and they won't - at least in canada -
because of a significant problems in the oil sector of our economy. Is the
right thing to do to buy into this "ponzi" scheme and try to time the exit? Or
continue to hold the course of staying out of it and waiting for rates to
rise. I have rented since 2008 when I graduated and I'm tired of shoveling my
money into the fire :'(

~~~
shostack
Doesn't logic on trying to time the market apply here?

------
nathan_f77
Serious question: How much more information do you typically retain by reading
all 696 pages, versus watching a 20 minute summary?

The linked webpage talks about that, saying that it needed to be condensed
into a TED talk because the book scared of many people (myself included).

But for all the prodigious evidence, how much do you really remember? Does any
of it come up in conversation at a dinner party?

> Piketty predicted (correctly) [that it] ... would attract vicious assaults
> from the mainstream of economic thought.

Ah, so is this more of an academic thing. Not just for the layperson, but for
the economist. Like a dissertation that needs to be backed up with a ton of
evidence and references. Ok, I think I answered my own question. I also just
changed my own attitude towards reading books like this. It's not
entertainment, it's knowledge.

~~~
lnanek2
Reading the whole thing is more in the entertainment realm. He advises some
things that aren't acceptable in the US like government control of CEO
salaries, but also some things that aren't acceptable anywhere, like
confiscatory taxes. I.e. he states that there wouldn't be government benefit
to taxing the super rich so heavily they are no longer rich because there are
too few of them to contribute meaningfully to large state projects, but he
still states they should have confiscatory (his term) taxes applied to them
just to remove their wealth so that there is less income inequality.

When people talk about the book or summarize they often stick to the more
factual stuff, like the fact that income equality is real and growing, but
they often skip over the other parts that no one would actually agree with
like the above.

------
patrickg_zill
My problem with this book is that he doesn't deal at all with the gold
standard. During the timeline of his survey, the currencies were almost all
gold-backed and by the end, are all fiat currencies. He completely ignores it,
yet at the least he should have explained why it was not relevant.

~~~
smallnamespace
This is a sort of facile answer, since there are a lot of details to prove,
but in short, because monetary policy _over the long run_ should not have any
effect on the real rate of return _r_ and economy-wide growth rate _g_ , which
is what the book's argument hinges on.

The two big differences between the gold-backed system before the 70s and
afterwards are:

\- We picked fixed pegs to gold, meaning exchange rates were fixed and not
floating as they are now

\- Fixed exchange rates + free flow of capital is incompatible with being able
to exercise monetary policy (banks can't print money since it needs to backed
by gold) [1]

But it doesn't matter whether central banks exercise monetary policy or not!

Let's say a central bank today decides to print money. In the short run, that
stimulates the economy, but in the long run it will lead to large rises in
both nominal rates and inflation expectations, which cancel out (since real
return = nominal return - inflation). The long run real rate of return is
unaffected, as is the GDP growth rate.[2]

[1]
[https://en.wikipedia.org/wiki/Impossible_trinity](https://en.wikipedia.org/wiki/Impossible_trinity)

[2] [http://www.frbsf.org/education/teacher-resources/us-
monetary...](http://www.frbsf.org/education/teacher-resources/us-monetary-
policy-introduction/real-interest-rates-economy/)

~~~
trapperkeeper79
Some people believe central banks are essentially printing money right now
(since 2008, so for nearly a decade). Why has inflation not picked up?

~~~
smallnamespace
'Long run' in economist-speak means multiple decades, generally.

But to answer your question directly, it's because the financial crisis and
the massive deleveraging it caused effectively sucked a lot of money from the
world economies. In the absence of QE we would've seen a painful, grinding
deflation like Japan went through during the 90s.

Central banks can print money to increase the monetary base, but that's
directly offset by 1) the large destruction of financial value during the
crisis and 2) the fact that people are just taking that money and sitting on
it. The net effect is less leverage in the system and not much effective
change in liquidity.

Note that less leverage is a good thing in this case -- it makes banks less
likely to go bankrupt, and makes a repeat of the '08 crisis much less likely.

[http://www.investopedia.com/articles/investing/022615/why-
di...](http://www.investopedia.com/articles/investing/022615/why-didnt-
quantitative-easing-lead-hyperinflation.asp)

~~~
tonfa
On that topic (contemporary monetary policy), I've found "the end of alchemy"
by Mervyn King fairly interesting and accessible.

------
bko
Suppose r > g as Picketty claims. What would be the implications? One I could
think of is that rather than investing in human labor (e.g. education), it
would make more sense to invest in capital (e.g. stock market) since that
would yield you higher returns. Also, all the talk about wealth inequality
uses percentages like the top 10%. However, the top 10% is not stable. In
fact, the turnover is very high, much higher than it has been in the past. For
instance:

> Over the past 30 years, the origin of the wealth of the richest people in
> the United States has shifted away from old, inherited money. Our new
> metric, the self-made scores developed for the Forbes 400, shows that
> increasingly we find self-made billionaires among the ranks of the richest
> people in the country. This has accompanied the incredible increase in
> wealth of the members of the Forbes 400, which has jumped 1,832% times since
> 1984, when the total net worth of our list was $125 billion, compared with
> $2.29 trillion today [0]

And just a casual look through the richest lists, you don't see a lot of old
money. Most are first generation wealth.

So my question is, how is it possible that there is high turnover in the
wealthiest while wealth inequality is always much higher than income
inequality as Picketty claims? When Bill Gates generated great wealth by
founding Microsoft, was that considered income or capital appreciation? I
think it would be capital appreciation since he sold stock and the stock
appreciated. But is this really "capital" in the sense that its passive
investment like a money printing machine that was passed down generation to
generation? Or if his wealth would be considered income, then how is wealth
inequality always so much higher than income inequality considering the
richest Americans created their wealth in a similar means to Gates?

[0]
[http://www.forbes.com/sites/afontevecchia/2014/10/03/there-a...](http://www.forbes.com/sites/afontevecchia/2014/10/03/there-
are-more-self-made-billionaires-in-the-forbes-400-than-ever-
before/#21c2355ae0a5)

~~~
VodkaHaze
r > g doesn't actually explain that much in terms of wealth inequality. See
Acemoglu and Robinson paper in my other reply.

There is evidence that intergenerational mobility is going down, but not so
much at the tippy top of the ladder. More on the "if you are born from lower
class parents, you are likely to be lower class at 40" side.

Early childhood education is shown to help with the lower rungs of the ladder;
most of the damage in a child's noncognitive skills is done before the age of
4 by bad environment (absentee parents, stressed parents, etc.) This lack of
noncognitive skills effects outcomes everywhere starting with educational
achievement.

I am not as well read in the mobility between the middle and upper classes, so
I won't comment there.

~~~
bko
Right, wealthy parents are able to provide more opportunities for their
offspring. But hasn't that always been true? I imagine the education available
to the least fortunate today is much better than the education available to
someone in the lower class from 100 years ago. Capitalism has allowed for
better high end services, like better teachers and tutors, but overall
information and knowledge has been democratized. There is no secret math or
science you learn for the right price.

The problem I see is that when we talk about social mobility, we always talk
about relative classes, in which case there will always be 1/5th of the
population in the bottom fifth. In terms of absolute wealth, my experience is
that everyone, more or less, is better off from generation to generation, at
least in material terms.

~~~
VodkaHaze
> my experience is that everyone, more or less, is better off from generation
> to generation, at least in material terms.

That is correct. Even when people make claims like "middle class income hasn't
grown in the last xyz years" they're basing it on statistical sleights of
hand, see [1].

> The problem I see is that when we talk about social mobility, we always talk
> about relative classes, in which case there will always be 1/5th of the
> population in the bottom fifth.

Right, but the question is more about opportunity. Like if you created a
Markov transition model, what are the probabilities of going [1/5]->[2/5] (or
[3/5], etc.)

> Right, wealthy parents are able to provide more opportunities for their
> offspring. But hasn't that always been true?

Sure. But the point is that we aspire for our society to be meritocratic. That
is we'd like it to be better to be born smart than rich. Of course that's
never been the case, but we want to isolate the "why".

It's not necessarily even about opportunities. If you make college free, for
example, it ends up being a subsidy on the children of the tiers [4/5] and
[5/5] (playing loose with facts here) because, even if you isolate parent's
wealth they __still__ end up in college more often.

Things that are difficult to measure (like motivation and noncognitive skills)
are built at a young age, and a good environment is needed to foster that.

> I imagine the education available to the least fortunate today is much
> better than the education available to someone in the lower class from 100
> years ago

I know it's been the case in Canada [2], I've been told it's not in the US,
but I'm unsure it's really the case (turns out you need fairly sophisticated
statistical models to measure it properly).

[2]
[http://link.springer.com/article/10.1007%2Fs00181-009-0275-9](http://link.springer.com/article/10.1007%2Fs00181-009-0275-9)

[1] [https://www.minneapolisfed.org/publications/the-
region/where...](https://www.minneapolisfed.org/publications/the-region/where-
has-all-the-income-gone)

------
throw2016
I think the US culture of exceptionalism puts individuals in 2 simple buckets,
winners and losers. I think everyone wants to be a winner and then not improve
the overall system but to look down on the 'losers' and signal 'success'
status.

The idea that they won't be able to validate themselves and their
'specialness' in this way makes them subservient to the status-quo, vulnerable
to hubris and immune to the problems of inequality. Do we have a social
identity because we seem to predominatly seek validation and identity from our
work.

This in group out group is an integral part of US culture and this base
survival of the fittest 'superman' ideology is inherent in a frontier type
economy exploiting new resources.

The system is fine tuned to exploitation but what happens when there are no
resources to exploit. The US problem goes way beyond mere capitalism and
communism. At some point you would need to build a society that values people
independently of their work, success or money or you run the risk of creating
a modern exploitative unfeeling dystopia.

A lot of these discussions especially here are marked by a distinct lack of
emphathy, dehumanization and blame the victims mentality that a quick reading
of the evolution of political, social and economic systems from feudalism till
now will quickly dispel. Power concentrates itself.

------
nyokodo
Thomas Piketty is not without major critics so here are some. Short pieces:
[https://www.youtube.com/watch?v=aL90pISm7Y8](https://www.youtube.com/watch?v=aL90pISm7Y8)
[https://www.youtube.com/watch?v=yqIGnPw3Qkg](https://www.youtube.com/watch?v=yqIGnPw3Qkg)
[https://mises.org/library/thomas-piketty-inequality-and-
capi...](https://mises.org/library/thomas-piketty-inequality-and-capital)
Longer scholarly piece:
[https://papers.ssrn.com/sol3/Papers.cfm?abstract_id=2543012](https://papers.ssrn.com/sol3/Papers.cfm?abstract_id=2543012)

------
betolink
Now we just need a 20 minutes version of Marx's Capital.

------
idanb
I'm a huge fan of Piketty, and have been slogging through his terrific (but
long) book and it's change my perception on a lot of things.

I don't want to challenge capitalism - competition drives innovation, and the
need to survive and to make a better life for oneself is at the core of that.
However, we need to admit that not all people are driven by this, and in our
world (at least in the United States) it's not about survival in terms of life
and death and hasn't been for some time.

The people on our streets are not there because they deserve to be, neither
are many of the people in the boardrooms. Today, there's a disparity between
the have and have nots and it has less to do with capitalism than the reality
of growth which Piketty outlines really well in his book that's definitely
changed the way that I look at it. It's hard to see value in supporting the
status quo when it's only going to return 1-2% year after year - especially
after an excessively long period of unprecedented growth due to the
devastation and rebuilding through the 20th century. However, this results in
a lot of the wrong things being valued in my opinion.

I feel like we're at a pivotal point in human history. We're at income
disparity levels second only to countries scourged by ISIS, we're at wealth
concentrations comparable to Europe pre-world war one. Marginal income
increases have little to do with marginal productivity increases of either
companies or employees. I feel like the fundamental definition of value needs
to be re-evaluated.

I really think that the nature of capital/wealth have really changed. When
cost of living dominates anyone's ability to be a productive member of
society, that's when we should reconsider how to go about either distribution
of wealth that's leading to that (that hardly ever works) or instead how we
quantify and define wealth. Shifting this balance in favor of what we as a
society value, I think is the best way to start to really change things.

~~~
hash-set
All that you said is right--we have allowed a monster to grow. And killing
that monster is going to require sacrifice now. It never comes any other way.

~~~
idanb
yes - either we need to find a new "source of value" or some form of tear down
needs to take place. I think historically tear downs have been at a core of
human growth and progress, so I think that will happen before people are
forced to change their minds.

------
timtas
To those who desperately want free markets proven inherently unjust, Piketty
is a prophet. But he's a false prophet. He's pretty much a hack of a social
scientist.

"We find evidence of pervasive errors of historical fact, opaque
methodological choices, and the cherry-picking of sources to construct
favorable patterns from ambiguous data." [1]

[1]
[https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2543012](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2543012)

------
damptowel
Alternative view on r > g

[http://www.notesonthenextbust.com/2015/06/why-was-r-
greater-...](http://www.notesonthenextbust.com/2015/06/why-was-r-greater-than-
g-will-it.html?m=1)

------
softwarelimits
what is the best open source software for doing oeconomic simulations?

~~~
js8
I don't think this is what Piketty used, but I would look at Minsky:
[http://www.ideaeconomics.org/minsky/](http://www.ideaeconomics.org/minsky/)

------
debt
This is perfect. That book Capital is like 700 pages.

~~~
VodkaHaze
The fact that the book is a best seller when its intended audience is really
people with a graduate education in economics tells me that most people bought
is as a signal of smartness (or as an honest effort to inform oneself, but
without actually slogging through the book)

~~~
Tycho
I feel like there must have been some string pulling that made this book so
popular.

~~~
VodkaHaze
It just came out at an appropriate time; a year after Occupy Wall Street, etc.
Inequality and inter-generational mobility is clearly on people's minds these
days.

Similar story happened with Nassim Taleb's Black Swan book. It's not a
particularly good book -- it's rambling, hand wavy, and only ever presents
anecdotal evidence as support for its claims. But the book came out at an
appropriate time (right before the financial crisis) so it was embraced.

~~~
hash-set
We need a complete top-to-bottom restructuring of our Federal Government--end
welfare, end the giant socialist military system hiding within our economy. We
need to audit the Fed and then probably close it down or somehow come up with
sound money. We need to prosecute every banker and every entity involved in
the 2008 financial crisis.

That would solve 90% of what ails us. Getting the EPA off people's backs and
back to some level of sanity would help a ton, too.

~~~
yongjik
> (...some rant...) That would solve 90% of what ails us.

Somehow this reminds me of [https://xkcd.com/1217/](https://xkcd.com/1217/)

------
aminok
Compelling counter-evidence to Picketty's C21:

[https://medium.com/the-ferenstein-wire/a-26-year-old-mit-
gra...](https://medium.com/the-ferenstein-wire/a-26-year-old-mit-graduate-is-
turning-heads-over-his-theory-that-income-inequality-is-
actually-2a3b423e0c#.cdpw0fizt)

~~~
ebalit
Why would it contradict Piketty's theory? Housing is capital.

This post seems to respond to the theory that wealth inequality is caused by
the rise of automation. That has nothing to do with Piketty's theory.

~~~
eru
Capital and land are different: you can make more capital to compete against
existing capital, you can't really make more land.

~~~
ebalit
Capital is used as a synonym of wealth. It's a book about wealth inequality.

The book was originally written in French, and land is considered as "capital
foncier". Maybe this meaning got lost in translation, but I think "capital"
also has the "wealth" meaning in English.

Nevertheless, the point I was making still holds. The Medium post isn't a
refutation of Piketty's theory.

~~~
eru
Yes, that confusion is a decent enough explanation. The important thing I want
to highlight, is that as factors of production go, increasing returns to land
have different policy implications than increasing return to capital:

A general wealth tax might be required if capital was actually the problem;
with all the economic inefficiency that implies. I don't know for sure.

But increasing returns to land have a simple solution: a land value tax, with
no negative impacts on economic activity, since supply of land is perfectly
inelastic, since land is basically fixed in abundance.

(To forestall a common argument: that the Dutch are converting some of their
land from below the sea level to above sea level doesn't change matters.)

We are fortunate to live in a world where Georgism applies, ie taxation to
finance a welfare state doesn't have to impact the economy at all.

~~~
ebalit
I'm sold to Henry George's land value tax idea, if we were to create a nation.
But we aren't.

In our current situation, I would worry that taxing only the wealth "stored"
in land ownership would create a massive economical crisis as capital tries to
escape this new tax.

A broader wealth tax base, with a slightly higher rate for land, is a more
prudent approach.

~~~
eru
The Australian capital territories are currently phasing in a broader land
taxt and phasing out stamp duty in exchange. Not flight of capital has
happened so far, and no crisis either.

And how is land supposed to flee? You can't take soil with you.

Wouldn't a broader wealth tax that applies to movable capital as well lead to
that very moveable capital fleeing? (As an example, I am currently in the
process of optimizing my own capital gains taxes, by eg choosing the country I
hold my assets in carefully.)

~~~
ebalit
I was more talking about a fall of real estate valuations as you introduce a
significant land value tax. And it must be significant to cancel the impact of
land value on the rise of inequality.

~~~
eru
Phase it in gradually.

Land prizes don't actually fall in practice with introduction of land value
tax, if it goes hand in hand with elimination of other taxes.

In effect, shifting the tax base from labour and capital to land.

------
necessity
And threads like this is why I ignore HN for non tech-related stuff.

------
selarkin
This article and video are from 2014: shouldn't the post title reflect that?

