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on 18 May 2014
The book is full of good data covering many countries and the world plus thoughtful suggestions for the future. It brings a clear perspective to assess actions for the future.
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on 27 December 2016
Good reading
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on 10 February 2017
Arrived in good time, and of qood quality. I am happy with this purchase
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on 26 March 2014
The main argument: The unequal distribution of wealth in the developed world has become a significant issue in recent years. Indeed, the data indicate that in the past 30 years the incomes of the wealthiest have surged into the stratosphere (and the higher up in the income hierarchy one is, the greater the increase has been), while the incomes of the large majority have stagnated. This has led to a level of inequality in wealth in the developed world not seen since the eve of the Great Depression. This much is without dispute.

Where there is dispute is in trying to explain just why the rise in inequality has taken place (and whether, and to what degree, it will continue in the future); and, even more importantly, whether it is justified. These questions are not merely academic, for the way in which we answer them informs public debate as well as policy measures--and also influences more violent reactions. Indeed, we need look no further than the recent Occupy Movement to see that the issue of increasing inequality is not only pressing, but potentially incendiary.

Given the import and the polarizing nature of the issue of inequality, it is all the more crucial that we begin by way of shedding as much light on the situation as possible. This is the impetus behind Thomas Piketty's new book Capital in the Twenty-First Century.

One of Piketty's main concerns in the book is to put the issue of inequality in its broader historical context. Specifically, the author traces how inequality has evolved from the agrarian societies of the 18th and early 19th centuries; through the Industrial Revolution and up to the First World War; throughout the interwar years; and into the second half of the twentieth century (and up to the first part of the twenty-first).

With this broad historical context we are able to see much more clearly the causes of inequality. As we might expect, what we find is that inequality is influenced by a host of societal factors--including economic, political, social and cultural factors. However, what we also find is that inequality is influenced by a broader set of factors associated with how capital works in capitalist societies (and market economies more generally).

Specifically, we find that capital (and the wealth it generates) tends to accumulate faster than the rate of economic growth in capitalist societies. What this means is that capital tends to become an increasingly prevalent and influential factor in these societies (at least up to a point). What's more, wealth not only tends to accumulate, but to become more and more concentrated at the top (mainly because those with more capital are able to earn a higher rate of return on their capital investments). For these reasons, capitalism on its own tends to produce a relatively high degree of inequality.

The natural tendency of capital to accumulate and to become ever more concentrated largely explains the high degree of inequality that was witnessed in the developed world in the early part of the twentieth century. This inequality was largely dashed, however, in the interwar years. The reason for this is that the major events of the first half of the twentieth century (including the two world wars, and the Great Depression) thwarted capital's natural tendency to accumulate, and also destroyed large stocks of wealth. The end result was that by the time World War II was over, inequality in the developed world had reached an all-time low.

After the Second World War, the natural tendency of capital to accumulate resumed. However, various political and economic measures (including progressive taxation, rent control, increasing minimum wages, and expanded social programs) worked to redistribute this growing capital, thus preventing inequality from growing as quickly as it would have otherwise.

In the 1980s, though, the developed countries did an about-face, and began eliminating many of the measures that had prevented inequality from rising according to its natural tendency. The consequence was that inequality reasserted itself in a major way, such that it is nearly as extreme today as it was on the run up to the Great Depression. Furthermore, the historical evidence indicates that capital will likely continue to accumulate and become ever more concentrated, such that we will witness an even greater level of inequality moving forward.

As far as justifying the growing inequality that we are currently seeing, Piketty raises serious doubts as to whether it may rightly be considered fair. What's more, as inequality continues to grow, it is increasingly likely that large parts of the population will also come to see it as unfair and unjustified--thereby increasing the likelihood of political opposition.

For Piketty, the best and fairest solution to these problems would be to steepen the progressive taxation applied to the wealthiest individuals. The problem, though, is that in a world of financial globalization (where there is a high degree of competition for capital--as witnessed by tax havens), it is extremely difficult to apply the appropriate tax scheme without the cooperation and coordinated efforts of the international community--and this is simply not something that is easy to achieve.

The alternative, however, is much more troubling for it is likely that it will involve reverting to protectionism and nationalism--and this is really in no one's interest.

This book is an absolute tour-de-force. The broad time-frame that Piketty explores, and the enormous body of data that he brings together, makes this study extremely comprehensive (no one will even think of accusing Piketty of cherry picking the data). Also, the reader is struck by how dispassionately Piketty analyzes the evidence he brings to the table. Indeed, while the author does have a position on inequality, one never receives the impression that this is corrupting his analysis (I consider myself to be a pragmatist politically, and often find that writers on both the left and the right massage the truth, but that was never the case here). Finally, it should be said that the book is very long, and just as dense, with the author often delving into extreme detail, so be prepared for a challenge. A must read for anyone with a serious interest in economics.
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on 12 March 2015
The facts, the analysis, the conclusions all point to the inevitability of the increasing growth of capital and its claim on real goods and services in the hands and control of a minority of the population in western capitalist countries in particular but including analysis of Japan's experience. The logic points to either collapse of the capitalist system when the majority recognises the problem of their impoverishment vis-a-vis the capital owning class, (who remain few in number and beyond the taxing ability of governments who might have some wish to serve the majority population), and make the revolution themselves or who will stand silently by and watch the system's continuation as advocated by the New World Order who seek to sustain this trend bycurtailing civil liberties and suppressing alternative views of how to organise and manage an economy with a different vision and outcome for"a good society".
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on 3 July 2015
This book is quite a tome but thankfully, for us non economists / academics, it has a very well written summary that is easy to understand, full of interesting information and is probably all that most of us need. Everyone should read it - rising inequality in the world is a huge issue and Piketty's book helps to explain why it is happening and likely to get worse.
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VINE VOICEon 21 June 2015
I am surprised that so many people take an interest in this extensive view of "Capital in the Twenty-First Century" by Tomas Piketty.

If I start out repeating or commenting on this approximately 700 page book the review will end up a 1400 page review.

I came to this book after reading hundreds of reviews (some just soapbox rants.) Some of the reviews are quite profound. But now it is time to look at the source and not opinions; that is other than mine.

This capital book is not really a book about "Capital" as much as how to keep capital in line with entities such as democracy vs. oligarchy.

So Tomas Piketty really puts his foot in it when it comes to people that do not want to hear about this and spend time arguing about methods of taxation and distribution without addressing the actual premise.

I think the value in this book is by bringing out old and new information and observations by the author's extrapolation thus creating a dialog among readers on the possible futures and whether intervention or insight will have any effect for better or worse.
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on 26 April 2014
One way to summarise is as follows: Piketty's astronomical sales have increased wealth inequality among economists. Is his new-found wealth deserved? What is the impact of this wealth on the democratic process? Should we tax his global sales? Should he set up a foundation to combat the negative effects of inequality?

This book's strength is the novel approach Piketty takes to framing the problem of inequality. We are all aware that the distribution of income and wealth has become more extreme in the last 30 years. It is usually assumed that policies of deregulation and taxation have caused this. More recently, Brynjolfsson and others have argued that technology and globalisation are the underlying causes. Piketty, however, draws attention to the fact that the rate of return which owners of wealth generate is itself a critical determinant of the distribution of wealth. A central part of his thesis is that the very wealthiest in society save more and earn higher returns on their investments. Labour income grows more slowly than wealth. This is a novel focus for the debate.

But Piketty's interpretation of the data and his predictions need to be considered very carefully. There are clear flaws. Much of the increase in the value of wealth in the last 30 years has been caused by declining real interest rates: this lies behind the huge capital gains in property, bonds and equities. But it is not repeatable. It is also likely to have economic consequences which drive down their prospective returns. For example, the surge in technological innovation which is creating many technology billionaires (in part due to financial conditions), is also sowing the seeds for the destruction of wealth in the industries it is rendering redundant.

What Piketty's framework does, however, is force us to focus on which types of assets are owned by whom and what their prospective returns might be. Piketty's tentative conclusion that the trend of wealth compounding at a rate higher than labour income may be right for the wrong reasons. The distribution of what is likely to be the highest returning asset - equity - is even more concentrated than property, or other financial assets, such as deposits. A structural reason why wealth may have an inherent tendency to become increasingly concentrated is that the wealthier you are the greater risk you can take with capital. Surprisingly, Piketty has little to say about shifts in the valuation and ownership of equities, which is hugely relevant to the last 30 years, and probably the next thirty.

Another omission in this fascinating book, is that Piketty does not sufficiently distinguish between the merits of various forms of wealth and returns. This is a legitimate criticism that Nassim Taleb has made. Tax policy should surely take into account the relative social merits of different forms of wealth. We want incentives that reward innovation and philanthropy which is focused on social enterprise and R&D, such as that of the Gates foundation. Unproductive wealth and disincentivising inheritance is a specific and more reasonable target for taxation.

There are also many more philosophical possibilities suggested by this book, which are beyond its remit but worth considering. The distribution of well-being and happiness in developed economies is much less extreme than the distribution of wealth, and arguably takes priority as a policy objective. It may also act as an incentive for more socially productive investment by the wealthy. We should not lose sight of this.

Despite these weaknesses, this book is original and thought-provoking. It is also written with clarity and style.

Eric Lonergan
Author, 'Money' published by Acumen
Money (second revised edition)
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on 12 May 2014
Thomas Picketty offers the disclaimer that his book is ‘as much a work of history as of economics’ (p33) which he then goes on to prove. He introduces his 2 core economic equations and asks readers not well versed in mathematics not to immediately close the book. It is in fact readers who are well versed in mathematics who might well close the book, since his equations make no sense and cannot bear the weight of interpretation he places on them throughout the book. They are core to his argument, but they fail. He nowhere derives them, proves them, or empirically tests them. He merely states them.

According to Picketty, the ‘first fundamental law of capitalism’ (p52) is that α=rxβ where α is the share of capital in national income, r is the rate of return on capital, and β is Picketty’s capital/income ratio. This is a simple identity, is no more than telling us that a/b x b = a. Picketty admits this identity and tautology but nevertheless insists that this is the ‘first fundamental law of capitalism’, a claim he simply cannot justify. His ‘second fundamental law of capitalism’ (p166) is that β=s/g where s is the savings rate and g the growth rate. His example claims that a savings rate of 12% and a growth rate of 2% give a capital/income ratio of 600%. This is simply untrue. A simple spreadsheet taking 100 units of GDP growing in row 1 at 2%/year, showing 12% saving of that GDP in row 2, cumulating that in row 3 and dividing the result by row 1 to give Picketty’s capital/income ratio in row 4, shows that it becomes 600% only in year 199. Not only does this ‘fundamental law’ take so long to be true, as Picketty admits, but it is only true in that year and thereafter continues to grow, contrary to his claim that it reaches a long term equilibrium. His third equation is his claim that r>g drives capital accumulation. r and g are however measures in different units, r is a scalar ratio, whereas g is a first differential over time. Equations and inequalities require variables on each side to be in the same units. Picketty’s comparison of the return to capital and the growth rate are like comparing one person’s height to another person’s weight. His model is bogus.

He then conflates capital and wealth (‘I use the words ‘capital’ and ‘wealth’ interchangeably’ (p47)). This obscures more than it elucidates. Capital traditionally defined in economics is the means of production. It is an input to the economic process. Wealth by contrast is an output. We might very well care differently about how much capital and wealth we have, and who owns them. More effective capital may drive up output, whilst more wealth has no creative function and attracts a moral question. Picketty is wrong, analytically and morally, to confuse the two in one measure.

Picketty is disparaging in very short measure of Marx (p227-230), Keynes (p220), mathematical economics (p32), and economists generally (p296, 437, 514, 573, 574). Only Picketty has it right (p232). He quotes Jane Austen and Honoré de Balzac, more than he does either Marx or Keynes. His book is unnecessarily long and a tedious read, due to its rambling repetitive style. It could have been far more concise.

His main point is however well taken. Ownership of wealth has become increasingly unequal. His remedy is a global progressive tax on capital. By this he means all capital. But he doesn’t say what effect a progressive tax on each form of capital would have, how it would be paid, and what should be done with the payment. Would companies owning productive assets have to hand factories to the state? Or to the poor? Would house owners have to sell their houses, or shareholders their shares, in which case would their price be sustained? Or is he assuming asset owners also have income to pay the capital tax, in which case it becomes an income tax? And what’s the point? The purpose Picketty tells us on page 518 is ‘to regulate capitalism’ and thereby to ‘avoid crises’. But he doesn’t tell us how capitalism would be thereby made more acceptable or how crises would be avoided. He also admits it will never happen!

Whilst I agree with Picketty that extremes of income and wealth are morally repugnant, my complaint is that i) he should do more to investigate and attack the processes which allow this outcome, for example regulating the software market more effectively to avoid Bill Gates becoming obscenely wealthy based on Microsoft’s extreme and unjustified monopoly rate of profit, whilst also regulating natural resource markets to avoid billionaire build up there, ii) this is not in fact the major issue facing capitalism today. Far more important is the lack of effective macroeconomic demand and the fall in real wages caused by the high productivity of automation technology. For this a citizen’s income funded by QE (ie without being added to government debt) is the only and the urgently needed solution. Maybe we could compromise and use the proceeds of Picketty’s capital tax to fund a world citizen income. He clearly has a very good PR machine promoting his book – see the low votes attached to any critical review on Amazon, a fate very likely to meet this review!

Geoff Crocker
Author ‘A Managerial Philosophy of Technology : Technology and Humanity in Symbiosis’
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on 13 July 2014
Piketty describes the development of the relation between capital and income over the last three hundred years. Is there a trend or is it constant over time? This fact is one of many the growth theory wants to explain. Hence it follows that the inequality between capital and labor has changed. Is is true or not? He begins with the classical authors of this theme, Malthus, Marx and Kuznets. Many chapters consisting of the population, production and capital. The influence on the ratio between saving and income. He turns to the inequality and what we can do against it. His result ends up in taxation on capital. You need a long breath for the book. In my opinion, it is a mix of growth and distribution theory, but the theory is left in the classical books. You can read it as a normal reader without any economic background.
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