Piketty and Heterodoxy

I posted the following in the comment section over at Monetary Realism in response to an observation by beowulf.

The orthodox-heterodox dilemma is that heterodox views get no media attention even though on point. So to get the attention of the mainstream, it is necessary to enter the mainstream universe of discourse, which is loaded toward economic liberalism. Piketty only got noticed by stepping into the mainstream universe of discourse to attack the consequence of economic liberalism which is more appropriately characterized economically as monopoly capital and politically as the asymmetric power leading to privilege rather than “inequality,” which is difficult to define other than normatively.

First, heterodox economists, sociologists and political scientist have put forward more on point and trenchant analyses than Piketty’s, and this is a point that many heterodox economists have been making along with criticizing Piketty’s essentially neoclassical approach.

Secondly, Piketty’s data set was bound to lead to problems for the reasons that Piketty himself gives. It’s extremely difficult to collect good data across different countries and over historical time for a variety of reasons. Moreover, there is the underlying problem of different contexts. In addition, several commentators have pointed out that its nearly impossible to put together a large data set without some errors creeping in. The question is what difference it makes to the argument when the errors are corrected. This was bound to provide some ammunition for the opponents, who don’t really have to win the argument but only mount it to create enough FUD to muddy the waters, which is SOP in the propaganda world of the so-called news.

The good thing is that the overall economic and political universe of discourse has shifted since the publication of Piketty’s book and related work. So it’s main contribution has been as a game changer. Hopefully, the heterodox work will benefit from this shift and get wider notice. This is still in its early stages and it’s part of the working out of trend that began with the financial crisis and was amplified by Arab Spring, Indignados, and Occupy.

It also fits with Ravi Batra’s cyclical analysis of economic history and Strauss & Howe’s generational theory. There may be a Kondratieff wave here, too. So, in spite of expected kerfuffles like are going on with Piketty between the opposing forces, this trend may have a way to go before the change it is bringing, if any, shakes out. Batra is predicting the downfall of capitalism, while S & H just predict highly probable change with uncertain outcome.

As far as Piketty’s book not being worth reading, one commentator I read recently speculated that the huge sales from for a coffee table book. What Piketty has done is make the topic au courant rather than the book de rigueur reading. In fact, it seems that many commentators either didn’t read it or only skimmed it, judging from mistakes they have made about it that those who have read have pointed out. Dan Kervick at Rugged Egalitarianism has done an excellent job of this.

But as beowulf points out the issue is really labor share versus capital share, and that’s a matter of relative power. Power is political matter, and so asymmetry of power has a political cause in economic policy and also a policy solution. Equality is a political and legal matter aimed at absence of privilege, which is what liberalism was about historically. That’s the proper line of attack. The issue the rising of an aristocracy of capital to replace the landed aristocracy that the great liberal revolutions overturned.