Piketty: the gist

I’m reading Thomas Piketty’s Capital in the Twenty-First Century, which is unlike any other economics book I’ve read in the last twenty years.

It reminds one that his subject was once known as political economy for the very good reason that economics and politics really belong together. As Bertrand Russell once observed, “economics is the study of how people make choices while sociology is the study of how they don’t have any choices to make”, and since the absence of choices (aka inequality) is a political matter then writing about economics also involves writing about (small-p) politics.

Another distinctive thing about Piketty’s book is that it’s intensely readable and has lots of cultural references. In that sense, he’s more like Keynes than he is like, say, Kenneth Arrow. He knows the films of Tarantino, and has read Balzac and Jane Austen. He talks about our societies reverting to “the Downton Abbey world” of a century ago.

The book is a 577-page doorstep but, strangely, its central core is easy to summarise. Here’s how the Guardian‘s Economics Editor, Larry Elliott, puts it:

The gist of Piketty’s book is simple. Returns to capital are rising faster than economies are growing. The wealthy are getting wealthier while everybody else is struggling. Inequality will widen to the point where it becomes unsustainable – both politically and economically – unless action is taken to redistribute income and wealth. Piketty favours a graduated wealth tax and 80% income tax for those on the highest salaries.

Or, to put it even more simply: the capitalism we’ve got is unsustainable, and we need to do something about it.

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