Publications

In his new Capital in the 21st century, as forbidding as his previous work on High Wages in France in the 20th century, Thomas Piketty presents a mass of data on asset growth in several European countries and the United States. This information improves the knowledge of our society’s relationship to capital and the divide between the richest and the poorest. Except that the author abuses these data, following 19th century scientific materialism.

Like Marxist authors, he endeavours to transform his discourse into a scientific demonstration. He wants not only to convince, but to hit home his own truth, supposedly grounded in the mathematical formula that he presents. Granted, he states that “we should be wary of any economic determinism in this matter” (p. 47), but he uses econometrics to announce the expected wealth distribution in the 21st century, as if there were little or no risk of making mistakes.

And his claim is that the divide between rich and poor will inevitably widen, although he admits that the opposite took place during the 20th century. He extrapolates trends, as did Malthus in the 18th century or the Rome Club in the 1970s to predict that the world would die of starvation. He questions Kuznets’s inequality bell curve, sketching trends that ignore human action. He notes that “Marx totally ignored the possibility of technical progress and continuous productivity growth” (p. 28) in his theory of infinite capital accumulation killing off capitalism, but on the other hand he reproduces a theory of constant wealth growth.

Abstract:

– Thomas Piketty presents statistical graphs in the manner of Malthus in the 19th century or the Rome Club in the 1970s

– Piketty’s theory of boundless wealth accumulation does not withstand factual analysis

– There is first confusion between capital (productive, financial and real estate) and negotiable assets

– Thomas Piketty claims that for the past 20 centuries, the asset rate of return is 4 percentage points above the rate of economic growth

– But how could he possibly obtain such data for the past 2,000 years? This is absolutely impossible

– Further, and contrary to what he claims, the average asset rate of return of households cannot be higher than the rate of economic growth

– If Piketty’s calculations were accurate, then the wealthiest 1 per cent would own all available assets by 2016!

– Piketty’s calculations are wrong because he ignores reality: the economy is not a zero sum game, capital is saved, reinvested or even wasted; social mobility is extremely important and inequalities are not set in stone

Three fundamental questions have emerged, but clear answers still have not:
Free floating for the hryvnia?
New bureaucrats in Brussels?
New rules for high-frequency trading?

Nobody likes poverty. But how do we end it? Suppose we give everyone some money. This will automatically include the poor, we don’t have to identify them, problem solved. Is it doable? Will anyone still work, create new ideas, write poetry, love?

The answer depends largely on how basic the basic income is, as we show.

The latest Scorsese blockbuster is still making the headlines for its novel artistic work with timelines. Does the Wolf, however, have anything whatsoever to say about Wall Street? Very little, and it may actually work to strengthen and entrench any bad practices that remain in the financial world!

European elections are upon us. In a series of articles, IREF is helping to inform voters’ decision. Last week we analysed attendance rates by voters at elections and reasoned that European elections may be bad for democracy. It’s now time to turn the tables and consider attendance rates of parliamentarians at the EP. What does the record reveal about their attitude to work?

Recovery has started, according to some data. Is it sustainable? Or is it based on asset prices inflated by easy monetary policies? Inside this newsletter:
* Bond markets and the real economy * Central Banking – The Illusion of Tapering * The Return of Bubbles?

Following lacklustre performance at local elections, the French President has appointed a new Prime Minister. Is it a good tactic, and will it change anything?

In his new book Capital in the 21st century (Belknap Press, April 2014), French economist Thomas Piketty presents a mass of data on asset growth in several European countries and the United States. This information improves the knowledge of our society’s relationship to capital and the divide between the richest and the poorest. Except that the author abuses these data, following 19th century scientific materialism

“Nothing to see here, move on.” So goes the “apology” for low turnout rates in European elections as penned by many European analysts and commentators. “The US have them just as low at mid-term elections, so why worry?” Closer analysis of individual country data by the IREF, however, reveals that the “European turnout deficit” is actually worryingly high in many places, adding to existing concerns over EU’s democratic deficit.

European nations’ fiscal authorities must be doing an excellent job if people are willing to pay hundreds of thousands of euros for the privilege to pay taxes to them… Or is there something else behind the new market for EU citizenship?