Institute for Research in Economic and Fiscal issues

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Anti-Piketty
Capital for the 21st Century

The English translation of “Anti-Piketty”, a collection of essays by renowned international economists and historians, critical of Thomas Piketty’s volume, Capital in the 21st Century has been recently published by Cato.

Should one write a book opposing the ideas of another? It would be preferable, and more positive, to set out one’s own vision of society and the economy and let history deliver its verdict on Thomas Piketty’s, Capital in the 21st Century, a book that made the news and opened a broad debate. However, the book did garner numerous criticisms. The Editors of “Anti-Piketty” thought it essential to permit readers who are interested to access those criticisms—which were growing, but in a dispersed fashion.

The book was edited by Jean-Philippe Delsol, Nicolas Lecaussin and Emmanuel Martin. Among the contributors, authors comprise economists Daron Acemoglu and James Robinson, Donald Boudreaux, James Dorn, Martin Feldstein, Salim Furth and Malin Sahlen, Randall Holcombe, Henri Lepage, Lucas Léger, Phillip Magness and Robert Murphy, Juan Ramon Rallo, Hans-Werner Sinn, Michael Tanner, Alvaro Vargas Llosa, and Bernard Zimmern.

The book dissects how the one-dimensional explanation given by Piketty of the evolution of capitalism towards a “potentially terrifying” inequality is actually flawed. “Anti-Piketty” follows three major lines of criticism.

First, following a long line of doomsday sayers, Piketty’s apocalyptic “vision” is that of a pessimist who totally dismisses the reality of the reduction of many types of inequality - from access to consumption or access to education, to longevity, to poverty levels among countries. The French economist sees the rich only as “rentiers”. In an ideological rich-bashing mode, he simply forgets that most of them are entrepreneurs who are making the world a better place – and yes, earning a good deal of money in exchange for that. The book is supposedly about capital, but “human capital” – a central element of development - plays no role in it.

Second, whilst Piketty’s Capital was sold on the pretention of its data, some authors actually challenge its empirical content. And it might well be that the data is flawed. From data cherry-picking to “series-picking”, from ignoring many aspects of income evaluation such as the evolution of households’ size to the evolution of tax rules - which matter significantly when one uses tax returns as a reference-, to the inclusion of the communist world to grasp the evolution of “capitalism”, the “clear” data of Piketty’s simple message seem, in the end, quite obscure. And obviously, the fact that Piketty does not even test his grand theory against data is rather problematic. Especially as those tests – provided by economists Acemoglu and Robinson - actually show nothing of the – apocalyptic - sort that Piketty “interprets” from “his” data.

Third, the theory is not without problems. Of course, simple formula can make good theories. But sometimes they just don’t. Economics is complex. It’s about human creativity, incentives and responses to different legal environments. Trying to encapsulate the evolution of capitalism in one simplistic “macro” formula is actually a sign of a misunderstanding of how complex “institutions” shape our societies and economies.

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