Inequality, revisited

There have been a few essay collections recently responding to the splash created by Thomas Piketty’s Capital in the 21st Century.

I reviewed one, After Piketty, edited by Heather Boushey and Brad DeLong, for The Chronicle Review. It was generally sympathetic. Anti-Piketty, edited by Jean-Philippe Delsol, Nicolas Lecaussin, Emmanuel Martin, was generally not.

Recently I’ve been dipping into The Contradictions of Capital in the 21st Century: The Piketty Opportunity, edited by Pat Hudson and Keith Tribe. I think it’s fair to say there is a reasonable consensus among the contributors to these various collections that Piketty’s theorising is flawed (in particular depending on an empirically invalid assumption about the substitution between capital and labour), that his application of a theory about productive capital to the data including housing wealth and financial capital is troubling, and that his call for a global wealth tax is (as Avner Offer puts it in his essay in this book) ‘utopian’. Equally, pretty much all would agree that Piketty, with co-authors, has done a terrific service in putting together the database, and in getting inequality on the agenda of both economists and policymakers.

Pat Hudson labels that here as ‘the Piketty opportunity’.  Her challenge to Capital in the 21st Century is its omission of globalisation and technology as drivers of inequality – if one is thinking about policies to mitigate inequality, r>g isn’t much help. She pinpoints financial markets, and regulatory and political beliefs, as key points of intervention – in other words, the specifics Piketty ignores in his generalisations. Avner Offer focuses on housing, and limiting its tendency to make wealth more unequal through credit controls.

The main sections of the book aim to particularise the analysis of inequality by looking at the trends, institutions and politics of different countries – one section on western economies, one on major economies elsewhere. As Luis Bértola points out here, Piketty is very Eurocentric.

Having these different national perspectives is a useful contribution to what is turning out to be quite an extensive new literature on inequality. While there was a substantial body of research on inequality before Piketty’s book was published in 2014, it was based on micro datasets, and focussed on individual questions such as benefit regimes or educational drivers of income. What we have now is a growing macro literature, and this includes global perspectives such as Branko Milanovic’s Global Inequality and François Bourguignon’s The Globalization of Inequality.

What’s needed now is for these two perspectives, the big picture and the individual outcomes, to get joined up. I think the late and much-missed Tony Atkinson came closest in his Inequality, and as a result had a set of eminently practical policies to propose.

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