In short, Tyler Cowen's portion of Marginal Revolution has become your one-stop-shop for anti-Piketty links and analysis.
This is interesting, because Cowen himself recently wrote a book called Average is Over, which makes predictions somewhat similar to those made by Piketty....Noahpinion
There is a difference, of course. Piketty forecasts that wealth inequality will go up because of an increase in capital's share of income, while Cowen forecasts that wealth inequality will go up because of increased inequality in labor income. But the basic future foretold by the two is the same....
So why has Tyler turned into an anti-Piketty crusader? Well, Piketty is a popular topic, and his thesis is encountering a huge amount of skepticism, so there is demand out there for a one-stop anti-Piketty shop.
But it also seems possible that Piketty has deeply frightened economists who thought that concern over inequality was a thing of the past, and that laissez-faire had basically won the battle of ideas. Piketty's immense popularity might seem, to these economists, to threaten to drag us back into a dark age when radical wealth redistribution was taken seriously, not only by large segments of the public, but by a number of prominent economists as well. Piketty might seem like the vanguard of an onrushing wave of socialist thought that could succeed in turning back the tide of neoliberalism that had been advancing for at least 40 years. So Cowen - and the numerous anti-Piketty writers he links to - may simply be scared of Piketty and what he represents.
Tyler Cowen's anti-Piketty crusadeNoah Smith | Assistant Professor of Finance, Stony Brook University
The real threat is that Piketty takes a neoclassical econometric approach —after all, he was a top modeler at MIT — complete with a historical data set, so he can't be dismissed as leftist ranting.
Others have point out that Piketty just states what's been obvious on the left for some time. However, it does it in an orthodox way. That threatens to upset the orthodox apple cart, for their story is that capitalism results in greater distributed prosperity. And when Nobelists like MIT's Robert Solow start taking the argument seriously, that's cause for alarm on the right.
7 comments:
I think the nature of the threat is pretty clear. Noah Smith touches on it but doesn't seem to grasp the point. Cowan, as Noah says, is perfectly willing to recognize and tolerate gross inequality, but wants to tell a story according to which the source of inequality lies in the differences in merit among different individuals. The whole point of Piketty's book is to refute that picture. He argues that the greatest differences in contemporary labor income depend on power and hierarchy, and the ability of top managers to set their own wages. And he also argues that the most significant source of inequality isn't due to differences in labor compensation at all, but to the tendency of capitalism to increase the flow of income going to the possessors of existing wealth purely as a reward for owning stuff. In the latter case, the income has nothing to do with any kind of reward for hard work, talent or some combination of the two, and the only "merit" that these income recipients possess is the merit of owning things.
Piketty has cut down through the intellectual fat to the real bone and re-exposed the classic moral discomfort over capitalism: that some people receive income that comes not from any labor contribution they are making, but simply as the rent they collect on the production factors they are fortunate enough to own going into the production process. And not only is this rent collection one factor in capitalist inequality, it is the dominant factor.
Dan, you should also look at the work of William Domhoff at UC Santa Cruz -Power in America
Thanks for the link Clonal.
absolutely right Dan.
I would say, "own or control." Top management and the boards do not own large corps. They control them and use this control for their own advantage, including not only rent extraction but even control fraud, as Bill Black has shown.
Yes, Tom's right. And there are other places where it is hard to tell the difference between income from labor and income from capital.
This is called "managerial capitalism" to distinguish it from the industrial capitalism where the grand acquisitors owned the companies they directed, like Carnegie, Ford, and Rockefeller. That's the exception now.
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