Marshall Steinbaum — Piketty’s Theory of Inequality and its Critics: A White Paper

In "Capital in the 21st Century," Thomas Piketty of the Paris School of Economics proposes an economic theory of rising inequality over time thanks to the growing prevalence of capital over labor. That theory's analysis of recent trends and its prediction about future inequality—and the capital-centered channel that he specifies for it to play out—have been subjected to criticism from economists, most pointedly from some who conduct research in macroeconomic theory. There are substantial differences between the theory Piketty uses and some of the economics profession's received wisdom. This short paper examines how his theory relates to key ideas in macroeconomics, and, where they are not consistent with Piketty's empirically-based analysis and conclusions, why Piketty's assumptions, reasoning, and predictions are more likely to be correct than those of his critics.

WCEG
Piketty’s Theory of Inequality and its Critics: A White Paper
Marshall Steinbaum | Research Economist at the Washington Center for Equitable Growth
(ht Brad DeLong)