Thomas Piketty, born in France in 1971, has become one of the most famous economists in the world and an idol to many progressives. Piketty reached the spotlight after the publishing of his book “The Capital in the 21st Century” in 2013, which mirrors the name of Karl Marx’s masterpiece “Das Kapital”.
Piketty studied Mathematics and Economics at the École Normale Supériore and finished his PhD at the young age of 22 at the London School of Economics (LSE) and École des Hautes Études en Sciences Sociales (EHESS) with a prize-awarding thesis on wealth distribution. From then onwards he has been regarded as a promising economist, having won the prize for best young economist in France in 2002 and the Yrjö Jahnsson Award, a biannual award for European economists under the age of 45, in 2013.
The French economist has taught in several universities, notably the LSE and the Massachusetts Institute of Technology (MIT), and was also head of the Paris School of Economics. His research has been focused mainly on wealth and income inequality. Consequently, his two main books revolve around this subject.
In his massive 700-page book, “The Capital in the 21st Century”, Piketty finds through empirical work that the rate of return on capital (r) exceeds the growth rate (g). For him, this results in an increasing concentration of wealth, as most of the income for richer people comes from the return on capital, i.e. dividends, rent and interest. He defends that this generalized trend for increasing inequality was only reversed between the 1920’s and the 1970’s due to a combination of wars, the Great Depression and high income taxes for the wealthy during the post-WW2 years. With the aim of reverting the trend of growing inequality of the last decades, he proposes a global wealth tax of 2% and a progressive income tax of up to 80%.
While he was received as “Rockstar Economist” by many, especially by those with left-leaning political ideologies, the feedback of his 2013 book in the academic community was far from consensual. On the one side, some such as Paul Krugman and Branko Milanovic, praised his work and considered it one of the most important works in Economics of the last years or even decades. On the other side, others such as Lawrence Summers and James Balbraith, criticized his underestimation of diminishing returns on capital, his preference of empirical analysis over theory, the solidity of his data, his lack of explanation of the problems to society that derive from inequality, and also the utopian nature of his proposals to tackle inequality.
Now, months after the publication of his new book “Capital and Ideology” in French and just a few days after its publication in English, Thomas Piketty returns to the UvA for a much-anticipated Room for Discussion interview.
In his new and exceptionally large book with over 1100 pages, Piketty returns to the subject of wealth inequality with even more ambitious plans for wealth redistribution to the excitement of some and to the discontent of others. In “Capital and Ideology”, he explores the origins and explanations for inequalities in history in a scale rarely seen in Economics and reaches the conclusion that inequality is illegitimate. He examines “inequality regimes” across the centuries and gives an account of the last 40 years that have led in his opinion to Western democracies being dominated by two rival elites: the financial elite and the educational elite. He then defends a radical and possibly naïve redistribution plan, in which he proposes an inheritance tax of up to 90% which would be redistributed to citizens at the age of 25.
Piketty’s proposals should be examined in detail by policy-makers and by all those that consider themselves to be reformists. However, they should certainly not be accepted blindly, as many of his ideas are extremely hard to be implemented. They should be a target of constructive criticism, and its pros and cons carefully weighed.
Piketty is truly an economist of and for our times. He addresses wealth inequality, one of the most pressing issues of our society, and analyses it in a rigorous and analytical way, but also looks at the structures of modern Capitalism and its weaknesses. He is not a modern-day Marx calling for the destruction of Capitalism, but a voice calling for a renovation of the current economic system that should inspire progressives and reformists.
In conclusion, Piketty is back with an even more daunting book that dwarfs his previous one, and which will certainly cause a lot of discussion among academic and political circles.
We hope to see you next Friday the 28th of February at 13h in the E-hall at Roeterseiland.