Beyond 'Capital'

After Piketty

The Agenda for Economics and Inequality

Edited by Heather Boushey, J Bradford Delong & Marshall Steinbaum Routledge

Harvard University Press

678 pages; Rs 1,099

In the three eventful years since Thomas Piketty’s Capital in the Twenty-First Century — abbreviated in the book under review as C21 — was published, responses to his work have been of four kinds. There is, first, the rapturous: Suggesting that C21 has somehow broken the mould for economics, and forced it to concentrate on questions of inequality. Second, there is the dismayed: That C21 is path-breaking, but it has been ignored. Third, there is the outraged: That Mr Piketty is a communist, and a French one at that. And fourth, there is the modestly hopeful: That C21 is but one reflection of academic economics slowly turning to confront some of the central political issues of our time. 

After Piketty, a collection of essays and papers on C21’s central principles edited by three progressive American economists, falls squarely within the fourth of the above schools of reaction. In their introductory essay, the editors do not minimise the impact of C21; and they correctly note that far too much criticism of the book has been unstructured or content free. But they also clearly note the degree to which C21 leaves issues unresolved, how many things the book leaves out, and the number of ways in which Mr Piketty’s complicated argument is open to being questioned and is empirically suspect. 

Most importantly, the editors insist that economics should care about inequality per se, and not about poverty reduction. This argument is worth making, but in their introduction is absurdly US-centric — which will only reinforce criticism from those who believe that economics’ turn to investigation of domestic inequality in the West just as global inequality and absolute poverty decreases is another manifestation of the power of Western academia to distort narratives and incentives in economics overall. 

The editors describe the aim of the collection as “effective, useful critique that contributes to the advance of knowledge”. There are 21 papers in this book, aside from the introduction from the editors and the concluding response from Mr Piketty himself. Unusually for such a large and varied collection, almost all the papers are worth reading. They repeat themselves rarely; they examine multiple different perspectives; and most of them are well and conservatively argued. 

Naturally, this review cannot address or even summarise all the papers in the book. They have been broadly organised, however, into four parts, beginning with orientating essays written by Paul Krugman, Robert Solow, and Mr Piketty’s translator Art Goldhammer. Mr Goldhammer’s essay, which focuses on the nature of the reaction to the book, repeats the editors’ mistake in looking too strongly at the Western reaction to a book that was a global phenomenon; if this book is translated, local publishers should insist on adding an essay that avoids this error. 

The remainder of the book addresses, one by one, Mr Piketty’s fundamental points: That returns to capital grow excessively, leading to an explosion of inequality that in turn has deep political implications. 

The second part deconstructs Mr Piketty’s somewhat nebulous notion of “capital”. This includes a crucial essay by Devesh Raval that summarises one major response to Mr Piketty’s famous model of inequality: That it can be disproved. In particular, one crucial testable implication of his model, about the ease with which capital can be substituted for labour, does not correspond with reality. This does not invalidate other parts of Mr Piketty’s book; but it does mean that we should look at much of it with caution. In his response at the end, Mr Piketty notes this himself, saying that identities (including the famous r>g) he introduced in C21should be seen as “ways of organising the data” rather than as the “laws” he had originally labelled them. 

The third section does for the notion of “inequality” what the second did for “capital”. It contains an essay by Christoph Lakner that makes the basic point about the relationship between globalisation and the reduction of global inequality; it also does a lot of heavy lifting in a few short pages, in attempting a brief survey of development strategies and their impact on inequality. Not to beat a dead horse, but there should have been multiple essays on aspects of this subject. Two chapters in this section, by Mark Zandi and Salvatore Morelli, return to an older critique of capital than Mr Piketty’s by focusing on the links between inequality and macroeconomic stability. 

Finally, the fourth section looks at the “political implications” — as well as the hidden political assumptions in Mr Piketty’s own analysis. This section is the most hit-and-miss; Elisabeth Jacob’s essay on where precisely political power is in C21 — “everywhere and nowhere” — is particularly striking, as is Ellora Derenoncourt on comparative institutions and the international distribution of wealth. Others, like David Grewal on capitalism as a legal system, seem less on-the-nose. Mr Piketty’s own concluding essay concedes some points, such as on the applicability of his model; but it also defends others, such as his attention to nature of power dynamics underlying capitalism. More than anyone else in the volume, he highlights the need to have a non-Western view of inequality, and explains why C21 did not. But most importantly, it is written with great attention to criticism and humility about his conclusions. In it, Mr Piketty insists that C21’s purpose was to start a conversation. By the evidence of his concluding essay, and the book in general, that conversation is well underway.