

Piketty’s Capital in a Nutshell - arnauddri
http://www.openculture.com/2014/04/pikettys-capital-in-a-nutshell.html

======
mjn
If you want the "more than a nutshell, but less than a book" version, Piketty
& co have two journal articles that cover the main historical data analysis in
the book:

[http://gabriel-zucman.eu/files/PikettyZucman2014QJE.pdf](http://gabriel-
zucman.eu/files/PikettyZucman2014QJE.pdf)

[http://gabriel-zucman.eu/files/PikettyZucman2014HID.pdf](http://gabriel-
zucman.eu/files/PikettyZucman2014HID.pdf)

------
nrao123
3 Points about the the latest Piketty book:

========================

1) Churn in Inequality:

========================

12 percent of the population will find themselves in the top 1 percent of the
income distribution for at least one year

39 percent of Americans will spend a year in the top 5 percent of the income
distribution

56 percent will find themselves in the top 10 percent

73 percent will spend a year in the top 20 percent

Although 12 percent of the population will experience a year in which they
find themselves in the top 1 percent of the income distribution, a mere 0.6
percent will do so in 10 consecutive years

54 percent of Americans will experience poverty or near poverty at least once
between the ages of 25 and 60

Half of those who earned over $1 million a year did so just once during this
period (1999 and 2007), while only 6 percent reported millionaire status
across all nine years

Data analyzed by the I.R.S. showed similar findings with respect to the top
400 taxpayers between 1992 and 2009. While 73 percent of people who made the
list did so once during this period, only 2 percent of them were on the list
for 10 or more years.

via: [http://www.nytimes.com/2014/04/20/opinion/sunday/from-
rags-t...](http://www.nytimes.com/2014/04/20/opinion/sunday/from-rags-to-
riches-to-rags.html)

=========================================================

2) How much is the inequality being driven by Technology?

=========================================================

Sam Altman @YC: [http://blog.samaltman.com/technology-and-wealth-
inequality](http://blog.samaltman.com/technology-and-wealth-inequality)

Albert Wenger @ USV : [http://continuations.com/post/52302452621/internet-and-
incom...](http://continuations.com/post/52302452621/internet-and-income-
inequality-we-need-to-think-ahead)

=========================================================

3) How much of this technology led inequality is transistionary?

===========================================================

Innovation has brought great benefits to humanity. Nobody in their right mind
would want to return to the world of handloom weavers. But the benefits of
technological progress are unevenly distributed, especially in the early
stages of each new wave, and it is up to governments to spread them. In the
19th century it took the threat of revolution to bring about progressive
reforms. Today’s governments would do well to start making the changes needed
before their people get angry.

Via:
[http://www.economist.com/node/21594298/print](http://www.economist.com/node/21594298/print)

~~~
mjn
With all due respect, I don't see how your post is actually related to
Piketty's book at all, in the sense that it isn't even discussing the same
subject, let alone engaging with Piketty's actual analysis!

Your post seems mainly to be about income inequality, particularly pointing
out that it's often transitory and different over lifetimes than in single
years. Those are interesting points, but Piketty's book isn't about income
inequality. The book is mainly about capital holdings and what they do in
economies over time. With issues such as: returns on capital vs. labor;
concentration of capital holdings; persistence of large capital holdings over
time; ratios between economies' capital holdings and rates of income; etc.

Even looking only at the _political_ part of the book (which is not the
biggest part), his concern isn't about income inequality, or even inequality
in general, but about wealth inequality that can maintain itself persistently.
He predicts (with some caveats) that current trends suggest large holders of
capital will increasingly be able to maintain and increase their capital
holdings, producing stable multigenerational stocks of wealth akin to those
seen in 18th and 19th century Europe. Whether right or wrong, that's not at
all the same an issue as inquiring into things like income ratios between
Google's programmers and janitors. He's interested in a more structural level
about e.g. the differences between an economy where extant wealth equals 10
years of annual income, versus one where it equals 2 years of annual income
(he argues that in the latter case existing wealth stocks are less entrenched,
because they in effect represent fewer years "head start" over current income
earners, and that this ratio explains some things about the relative roles of
capital in 19th-century France vs. 19th-century U.S.).

~~~
nrao123
My understanding was that a large part of the book was about wealth inequality
& persistence over time.

My assumption was that income (flow / p&l) & wealth (stock / balance sheet)
are correlated.

By pointing about churn in income & some of the causes of income inequality -
we could have a different perspective on the wealth inequality question.

Also - the HBR review the article references talks about the income question:

Since the 1970s, though, the U.S. has seen a sharp and unparalleled increase
in the percentage of income going to the top 1% and especially 0.1%.

------
mark_l_watson
The HBR review, when I first read it, struck my as the establishment trying to
downplay the importance of this book.

Krugman, who I sometimes do not agree with, but was right on in reviewing this
book, rightly points out that the elites are freaking out over this book
because the facts are against their position.

This is an important book depicting how bad income equality has become because
of inherited capital.

~~~
vixin
Your 2nd paragraph: merely your assertion ('freaking out' suggests you're not
dispassionate about this). Plenty of rebuttals. A short one to be going on
with here: [http://www.adamsmith.org/blog/economics/thomas-pikettys-
late...](http://www.adamsmith.org/blog/economics/thomas-pikettys-latest-
bright-idea)

~~~
davidw
Here's another one:

[http://www.foreignaffairs.com/articles/141218/tyler-
cowen/ca...](http://www.foreignaffairs.com/articles/141218/tyler-
cowen/capital-punishment)

Ultimately a very political subject though, so I flagged it.

~~~
mjn
While we're at it, another (moderately detailed) critical review, from someone
with the opposite political preferences:

[http://www.dissentmagazine.org/article/kapital-for-the-
twent...](http://www.dissentmagazine.org/article/kapital-for-the-twenty-first-
century)

------
Tycho
N.N. Taleb has been seriously slamming this guy recently. I wonder if Picketty
will respond

[http://www.fooledbyrandomness.com/notebook.htm](http://www.fooledbyrandomness.com/notebook.htm)

~~~
crayola
Taleb seems to be engaged in two vendettas (as is clear from reading the Black
Swan): first, economists; second, the French.

One would therefore be well advised to take his notes about the work of a
French economist with a pinch of salt.

"The optimal strategy is to go become an academic or a French-style civil
servant, the anti-wealth generators."

To pick but one example among many others, Louis Pasteur was French, an
academic and (therefore) a civil servant, and arguably contributed to save
many lives. Or does that not qualify as wealth generation?

~~~
yummyfajitas
Taleb backs up his argument with careful math - is the math right or wrong?

~~~
notacoward
I don't agree that Taleb's math is any more careful than Piketty's. He has his
own set of "fat tail" hobby horses to ride, and does a poor job showing how
they apply here. The question should not be whether Taleb's math is right or
wrong, since it could be right but irrelevant. The question is whether
_Piketty 's_ math is right or wrong. Neither Taleb, nor Brooks, nor many here,
seem to be addressing that.

~~~
yummyfajitas
Taleb has a statistics paper that shows measurements of the exact sort Piketty
is making are biased. Here is the paper.

[https://docs.google.com/file/d/0B8nhAlfIk3QIbzRrRkhhc1RNY0U/...](https://docs.google.com/file/d/0B8nhAlfIk3QIbzRrRkhhc1RNY0U/edit)

So far as I can tell (I'm only halfway through Piketty) he has no math. Just a
bunch of pretty graphs and lots of words.

~~~
crayola
This is a book for a wide audience. Not the right place for maths. But Piketty
is a very respected researcher (at home and internationally), with an
excellent grasp of the state of the art in econometric and economic modelling
('math'). Read his papers if you mistrust text and graphs.

~~~
yummyfajitas
I'm aware of who Piketty is. That's why I'm so surprised that he wrote such a
voluminous tome with so little point. Last week before I read the book, I
assumed it was just vapid reporters misunderstanding him.

If he has a paper which clearly and succinctly summarizes the point book,
please point it out. Cause the book doesn't even contain a hint of that.

~~~
crayola
His most relevant papers (already linked by another commenter) are
[http://piketty.pse.ens.fr/files/PikettyZucman2014QJE.pdf](http://piketty.pse.ens.fr/files/PikettyZucman2014QJE.pdf)
and especially [http://gabriel-
zucman.eu/files/PikettyZucman2014HID.pdf](http://gabriel-
zucman.eu/files/PikettyZucman2014HID.pdf).

More research here:
[http://piketty.pse.ens.fr/fr/publications](http://piketty.pse.ens.fr/fr/publications)

I haven't said anything about clearly and succinctly though; I do not know if
that kind of material exist. I believe the book to be a mix of original
material, existing research (as linked above), and most of all the fruit of
many years of productive research on these topics.

You are of course free to not buy Piketty's thesis based on his book alone;
however, to convincingly build your case to convince others, it looks like you
may have to absorb a fairly considerable body of knowledge.

On a more personal note -- while I am an economist by training (doctorate
obtained in early 2010s in a top 10 uni), my field was quite far from
Piketty's, so I am not in a position to know with any confidence whether he's
right or wrong. (I would say though that his position certainly has merit and
deserves the attention it is getting.) That being said, I maintain that Taleb
shows himself as disconcertingly naive and frankly quite condescending to
think that he can dismiss years of research in a few witty disparaging
paragraphs. (Possibly without reading the book, almost certainly without
reading the research, and very definitely without looking at the raw data.)

~~~
Tycho
On the other hand, Taleb has made a literary career out of busting unsound
social science. He has quite a lot of practice at it. So a few disparaging
paragraphs is just the surface.

What is really need is a rebuttal/response to Taleb's probability based
argument.

------
soneca
A more complete analysis by Solow:

Thomas Piketty Is Right: Everything you need to know about 'Capital in the
Twenty-First Century'

[http://www.newrepublic.com/article/117429/capital-twenty-
fir...](http://www.newrepublic.com/article/117429/capital-twenty-first-
century-thomas-piketty-reviewed)

------
lmg643
i think a lot of people miss the joke about why piketty is so popular. it's
not the theorizing about the cause of inequality, which seems fairly obvious
if you read financial news and blogs. the "novel" piece - at least in polite
conversation - is that his solution to the problem is a wealth tax, which goes
after assets instead of income. (i say polite conversation, since wealth taxes
normally apply in cases where there is a sovereign liquidity crisis, which is
not a polite situation.)

so, we think the wealth tax this sounds like a great idea, let's go after the
billions that accrued in offshore hedge funds for US citizens and take 30%,
sounds fair since it avoided taxes in the first place.

of course, when it comes time to implement the tax, that money is gone,
perhaps to some other jurisdiction, and they settle for enforcement by having
the average joe write a check based on money in your bank or brokerage
account, whatever meager amount over $100k you may have. and, probably convert
401ks into a myRA account, which gives the government a new forced buyer of
treasury securities, while pretending it was for some other reason.

~~~
chrisgd
I disagree. I think the popularity is stemming from this quote "But his real
beef is with the mainstream economic teachings that more capital and lower
taxes on capital bring faster growth and higher wages, and that economic
dynamism will automatically keep inequality at bay."

He is basically using mainstream economics techniques to prove that mainstream
economic ideas, especially those centered around free-trade and low taxes to
chase growth maximize inequality, they don't minimize them.

Everyone who has had problems with the teaching of mainstream economics as a
means to lessen inequality now have more evidence.

~~~
zo1
" _Everyone who has had problems with the teaching of mainstream economics as
a means to lessen inequality now have more evidence._ "

So when I read most of the articles regarding this book, all I can picture is
a slew of angry mob-like people shouting: _Those pesky economists must be
wrong! This guy is saying stuff we all like to hear, therefore he is correct!_
Indeed, the public is fickle, and will naturally gravitate to what feels good
and re-affirms what they feel is true. There has been a growing mistrust of
intellectuals of late, and it's because people are dissatisfied. Intellectuals
have been losing the media war with the government.

------
jokoon
"Insanity: doing the same thing over and over again and expecting different
results."

