Piketty Notes and Quotes, 5: Inequality Language Games

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Here’s another post on Piketty that isn’t really about Piketty per se, but about the sorts of conversations one finds oneself in when talking about him.  Over the past week and a half, I have been struck by a curious tendency I have encountered in a number of Christians when the subject of inequality comes up.

“So are you saying inequality is a problem, inequality is bad?”

“Well, yeah, I do think that, at least beyond a certain point, it’s a problem.”

“So why is it bad?”

“Well, it tends to create all these negative consequences, you see: social unrest, unhealthy concentrations of political power, oppression, etc.”

“So the problem then isn’t inequality, but people being envious, or people being power-hungry and corrupt, or people being oppressive, right?”

“Well, yeah, but high inequality tends to create those problems.  What’s your point?”

“Ah, but see you’re admitting now that inequality is not bad in itself.  It’s people who are bad, and these sins are just as much sins whether or not I have the same as you or a million times as much as you.”

“Um . . . ok.  But my point is that inequality is still a problem for our society.”

“But you’ve just admitted that inequality in itself isn’t the problem.”

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“Frozen” and the Limits of Narrative

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If you’ve spent much time around me the last few months, you’ll know that I’m a bit obsessed with Disney’s Frozen.  I am something of a self-anointed apostle of the film, telling anyone who’ll listen that if they haven’t seen it before, they need to betake themselves to the cinema or the video store forthwith.  I usually get a few raised eyebrows.  Sure, Pixar may have removed the stigma of “kids’ movies” and made it OK for adults to get excited about them too, but Disney?  C’mon.  Well, with 2009’s Tangled, Disney substantially closed the quality gap between their own animated fare and that of their recent acquisition Pixar.  With Pixar having clearly lost their way in recent years with universally-maligned Cars 2 and mediocre Brave and Monsters University, those of us who had enthusiastically embraced the idea that “kids’ movies” could be a medium of thoughtful and beautiful film were left casting about for a successor.  With Frozen, Disney Animation rose to the occasion, producing what is surely its finest film since 1991’s Beauty and the Beast, and one which easily could hold its own against the creations of Pixar’s golden age (2001-2010)—indeed, in terms of sheer visual beauty, it far surpasses them.  Perhaps most remarkably, Disney succeeded in re-invigorating the form of the children’s animated musical, a form that had long since been left for dead in the brave new world of computer animation, producing a mixture of fun comic relief songs, heartfelt arias, and impressively-crafted duets, which, far from marking mere musical interludes within a film that didn’t really need them, played crucial roles in moving the plot forward. Read More

Piketty Notes and Quotes, 4: The Nub of the Problem

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It would be a mistake to attempt, as many bloggers, pundits, and commentators have done, to summarize such a vast collation of history and data as we find in Piketty’s Capital into a single simple argument, which can then be discredited by one fell swoop of counter-evidence.  It is a sprawling work composed of dozens of theses and sub-theses, supported by many different sources and types of data.  However, the basic gist is fairly straightforward and intuitive, and worth grasping for those who don’t have time to read the whole book.  It is best stated in his own words:

“When the rate of return on capital significantly exceeds the growth rate of the economy (as it did through much of history until the nineteenth century and is likely to be the case again in the twenty-first century), then it logically follows that inherited wealth grows faster than output and income.  People with inherited wealth need save only a portion of their income from capital to see that capital grow more quickly than the economy as a whole.  Under such conditions, it is almost inevitable that inherited wealth will dominate wealth amassed from a lifetime’s labor by a wide margin, and the concentration of capital will attain extremely high levels—levels potentially incompatible with meritocratic values and principles of social justice fundamental to modern democratic societies.

What is more, this basic force for divergence can be reinforced by other mechanisms.  For instance, the savings rate may increase sharply with wealth.  Or, even more important, the average effective rate of return on capital may be higher when the individual’s initial capital endowment is higher (as appears to be increasingly common).  The fact that the return on capital is unpredictable and arbitrary, so that wealth can be enhanced in a variety of ways, also poses a challenge to the meritocratic model. . . .

To sum up what has been said thus far: the process by which wealth is accumulated and distributed contains powerful forces pushing toward divergence, or at any rate toward an extremely high level of inequality.  Forces of convergence also exist, and in certain countries at certain times, these may prevail, but the forces of divergence can at any point regain the upper hand, as seems to be happening now, at the beginning of the twenty-first century.  The likely decrease in the rate of growth of both the population and the economy in coming decades makes this trend all the more worrisome.

My conclusions are less apocalyptic than those implied by Marx’s principle of infinite accumulation and perpetual divergence (since Marx’s theory implicitly relies on a strict assumption of zero productivity growth over the long run).  In the model I propose, divergence is not perpetual and is only one of several possible future directions for the distribution of wealth.  But the possibilities are not heartening.  Specifically, it is important to note that the fundamental r > g [return on capital is greater than the economic growth rate] inequality, the main force of divergence in my theory, has nothing to do with any market imperfection.  Quite the contrary: the more perfect the capital market (in the economists’ sense), the more likely r is to be greater than g.  It is possible to imagine public institutions and policies that would counter the effects of this implacable logic: for instance, a progressive global tax on capital.  But establishing such institutions and policies would require a considerable degree of international coordination.  It is unfortunately likely that actual responses to the problem—including various nationalist responses—will in practice be far more modest and less effective.

. . .

In the late nineteenth century, conservative French economists such as Paul Leroy-Beaulieu often used this argument to explain why republican France, a nation of ‘small property owners’ made egalitarian by the Revolution, had no need of a progressive or confiscatory income tax or estate tax, in contrast to aristocratic and monarchical Britain.  The data show, however, that the concentration of wealth was as large at that time in France as in Britain, which clearly demonstrates that equality of rights in the marketplace cannot ensure equality of rights tout court. [italics mine]  Here again, the French experience is quite relevant to today’s world, where many commentators continue to believe, as Leroy-Beaulieu did a little more than a century ago, that ever more fully guaranteed property rights, ever freer markets, and ever ‘purer and more perfect’ competition are enough to ensure a just, prosperous, and harmonious society.  Unfortunately, the task is more complex.” (pp. 26-27, 30)

How *Not* to Do Historical Theology

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I have been known to be in various times and places a fan of John Williamson Nevin, but re-reading his articles on “Cyprian” last night, I was a bit shocked and disappointed at his duplicity.  He sketches in the starkest terms the contrast between “Cyprianic Christianity” (which he takes to be normative for the early church as a whole” and Protestantism, always in terms flattering to the former and disparaging to the latter, and then constantly pulls back and says, “Hey, I’m not passing any judgments, man!  Just settin’ some historical facts on the table for your consideration.”  This shiftiness reaches proportions that can only be described as despicable at the conclusion of the fourth and final article, at which point, having ostentatiously declared the fundamental incompatibility of Protestantism with the early church, he says,

“If it be asked now, what precise construction we propose to apply to the subject, we have only to say that we have none to offer whatever.  That has been no part of our plan.  If we even had a theory in our thoughts that might be perfectly satisfactory to our own mind, we would not choose to bring it forward in the present connect; lest it might seem that the subject was identified in some way, with any such scheme of explanation.  What we have wished, is to present the subject in its own separate and naked form, not entangled with any theory; that it may speak for itself; that it may provoke thought; that it may lead to some earnest and honest contemplation of the truth for its own sake.  The importance of the subject, the nature of the facts in question, is not changed by any theory that may be brought forward for their right adjustment with the cause of Protestantism.  This or that solution may be found unsatisfactory; but still the facts remain just what they were before.  There they are, challenging our most solemn regard; and it is much if we can only be brought to see that they are there, and to look them steadily in the face.  We have had no theory to assert or uphold.  We offer no speculation.  Our concern has been simply to give a true picture of facts.  The difficulty of the whole subject is of course clearly before our mind.  We feel it deeply, and not without anxiety and alarm.  But we are not bound to solve it, and have no more interest in doing so than others.  We have not made the difficulty in any way.  We are not responsible for it, and we have no mind or care at present to charge ourselves with the burden of its explanation.  There it stands before the whole world.  It is of age too, we may say, full formed and full grown; let it speak then for itself.”

Reminiscent of “contraceptive historiography” at its worst, one has to say.

Piketty Notes and Quotes, 3: A Childish Passion for Mathematics

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From the Introduction, one of my favorite passages in the book, and one that really sets the methodological basis for the whole argument:

“I should perhaps add that I experienced the American dream at the age of twenty-two, when I was hired by a university near Boston just after finishing my doctorate.  This experience proved to be decisive in more ways than one.  It was the first time I had set foot in the United States, and it felt good to have my work recognized so quickly.  Here was a country that knew how to attract immigrants when it wanted to!  Yet I also realized quite soon that I wanted to return to France and Europe, which I did when I was twenty-five.  Since then, I have not left Paris, except for a few brief trips.  One important reason for my choice has a direct bearing on this book: I did not find the work of US economists entirely convincing.  To be sure, they were all very intelligent, and I still have many friends from that period of my life.  But something strange happened: I was only too aware of the fact that I knew nothing at all about the world’s economic problems.  My thesis consisted of several relatively abstract mathematical theorems.  Yet the profession liked my work.  I quickly realized that there had been no significant effort to collect historical data on the dynamics of inequality since Kuznets, yet the profession continued to churn out purely theoretical results without even knowing what facts needed to be explained.  And it expected me to do the same.  When I returned to France, I set out to collect the missing data.

To put it bluntly, the discipline of economics has yet to get over its childish passion for mathematics and for purely theoretical and often highly ideological speculation, at the expense of historical research and collaboration with the other social sciences.  Economists are all too often preoccupied with petty mathematical problems of interest only to themselves.  This obsession with mathematics is an easy way of acquiring the appearance of scientificity without having to answer the far more complex questions posed by the world we live in.  There is one great advantage to being an academic economist in France: here, economists are not highly respected in the academic and intellectual world or by political and financial elites.  Here they must set aside their contempt for other disciplines and their absurd claim to greater scientific legitimacy, despite the fact that they know almost nothing about anything.”

 

It is a testimony to the incorrigibility of the economics profession in America that the most substantial critique of Piketty’s work to emerge from that quarter is that “Unless I’m missing something, the formal [mathematical] apparatus in Piketty’s book simply is not capable of generating the results he touts.”  In other words, “Sure he’s demonstrated that something actually happened historically, but he hasn’t proven mathematically that it’s capable of happening!”