Capital in the Twenty-First Century by Thomas Piketty
$23.97 at Amazon ($19.99 on Kindle)
Given my interest in economics, Thomas Piketty’s Capital in the Twenty-First Century has been on my “should read” list since it came out, but it really caught my attention after shooting to the top of Amazon’s bestseller list, with almost everyone who actually read the book giving it a five-star review. Of course, by that time it was sold out and I had to wait for the reprint.
The first thing to realize is that, while it may be aimed at general audiences, this is a research book; it’s heavily endnoted (77 pages of endnotes, not counting the technical appendix on the author’s website) and the writing level is probably close to what you’d find in a graduate text. That said, the writing (at least in the English translation) is very good and quite readable. The book starts off quickly; in the first dozen pages or so, Piketty has introduced his thesis (that inequality tends to increase because return on capital is greater than economic growth as a whole, leading to more concentrated wealth), provided a short history lesson (both political and economic), and dismissed Marxism and communism. The central theme is that, because capital tends to grow faster than the overall economy, the rich will tend to accumulate a larger and larger share of the pie simply by virtue of how quickly their existing money grows.
The book is divided into four parts. Part one discusses income and capital: how they are measured, how the different returns on capital and labor lead to inequality, and the effects of the rate of return on capital vs overall economic growth. Part two is largely a history lesson; we see how the capital/income ratio has changed throughout the world over the past two centuries. Part three, which takes up most of the book, focuses on inequality The Financial Times has published an article claiming some errors in the numbers in chapter 10, which don’t appear to much effect the argument in the book. Finally, part four is what most likely gets people excited, as it contains Piketty’s policy prescriptions: a progressive income tax combined with a global progressive tax on capital (he suggests a range from 0.1% on small estates, up to 2% on capital over five million euros) and a progressive estate tax. The purpose of his proposed capital tax is not to increase the amount of money governments raise in taxes (although it would do that as well, and he advocates using either taxes or inflation to quickly reduce public debt); rather, to prevent the infinite accumulation of capital. I should note that while the book primarily covers Britain, France, and the United States (although the other major economies are included as well) the policy at the end is prescribed for Europe as a whole rather than any individual country.
I will admit, I got a little bored a couple hundred pages in, after which I quit stopping to check the endnotes (many of which are references to the online technical appendix) and just read the main text. This is a history text as much as it is an economics text and will appeal most to those interested in both subjects. This is not an easy read, but it’s an interesting one.
Does it live up to the hype? That I’m not sure of, and I’m not sure I agree with his conclusions, but judged on its own merits I can confidently say that this is a very good book.