The Piketty Phenomenon*


Much has been written about Capital in the 21st Century, Thomas Piketty’s 2014 celebrated economics best-seller.  The quality and range of his data compilation and analysis have been widely praised and justly so, as far as one can tell without having to replicate his vast work. The clarity and eloquence of his presentation bought him appeal to a broad readership. A Financial Times detractor who quarreled with him about the rigor of his analysis left the one-round fight with a shiner. Pro forma protests against Piketty’s adherence to “neoclassical” economics and, hence, his failure to adopt the Sraffian and post-Keynesian doctrines of value, distribution, and growth were registered publicly, and then allowed to drop out of view without having dimmed the book’s scholarly prestige and popularity. Ways in which Piketty’s work intersects, or not, with Marx’s radical takedown of capitalism have been remarked (and parodied), but it is only natural that Science & Society allow one of its editors to add his proverbial two cents ‒‒ as much as possible in a short note.

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Memo to Tim Geithner: You are no hero

You cannot blame “the system” for the premature bout of austerity that frustrated a bigger fiscal stimulus package and allowed high unemployment to persist, unnecessarily, at an enormous human cost.

You were an active part of that “system,” very active, you were pushing things in that very direction, against a larger stimulus package, pandering to the deficit- and debt-mongers, and ignoring the plight of the unemployed and of those who were being foreclosed on and kicked out of their homes.

You had enormous power and you chose to spend it to help the banksters. You are trying to eat the cake and have it, to emerge as a hero in the story. You are not a hero, you were and are part of the problem.

Piketty and Marx

In a recent interview to Isaac Chotiner from the New Republic, Thomas Piketty makes interesting remarks about the relation between his work and Marx’s writings, Capital in particular:

TP: I never managed really to read it. I mean I don’t know if you’ve tried to read it. Have you tried?

IC: Some of his essays, but not the economics work.

TP: The Communist Manifesto of 1848 is a short and strong piece. Das Kapital, I think, is very difficult to read and for me it was not very influential.

IC: Because your book, obviously with the title, it seemed like you were tipping your hat to him in some ways.

TP: No not at all, not at all! The big difference is that my book is a book about the history of capital. In the books of Marx there’s no data.

I did wonder about the title, “Capital,” phrases that echo Marx’s famous “le mort saisit le vif” (quoted by him in French in his German original), “The tradition of all dead generations weighs like a nightmare on the brains of the living” (in Marx’s pamphlet on the French 18th Brumaire), the allusion (though in an entirely different context and with a different conceptual meaning) to the “metamorphosis of capital,” etc. So, apparently, all that came to Piketty indirectly, since he just couldn’t get over the difficulties of reading Marx’s radical critique of political economy.

Oh well, in all fairness, Marx did warn readers that his Capital was no easy read, “no royal road to science,” “if the essence of things coincided with their appearance, science would be superfluous,” etc. But I am taking Piketty’s answers as off-the-cuff remarks by a guy overwhelmed by sudden attention, not necessarily undeserved. Piketty’s work has much merit, and the timing is just right, so his apparent disregard for Marx’s massively important work cannot take this away. But, said with all due respect, Piketty is no Marx.

In fact, lack of data was common to political economy and economics works at least until Piketty’s heroe Simon Kuznets’ work. We can say the same or worse about Smith or Ricardo or Mill or the founders of the “marginal” school. The data Kuznets, Mitchell, Burns, etc. developed, and even the “large” databases we now have (including Piketty’s and collaborators) are still almost entirely “observational” (let alone self- reported) data that does not speak for itself.

Almost heroic structure has to be imposed on “observational” (as opposed to “experimental”) data to torture and make it confess, and that structure is a hypothetical edifice with serious limitations, if you pause and reflect about the underpinnings of probability theory and inferential statistics. I am tempted, at this point, to respond to Piketty’s dissing (in his Capital) of theoretical models seemingly without direct empirical reference, but I will keep that for latter.

In spite of the limitations Marx faced in his time, he did scrutinize every statistical table that ever got in his hands, squeezed the English official “blue books” with copious details on factory life, as well as technical and accounting data his friend Engels collected on his own factory. Marx admired greatly William Petty and any other predecessor who compiled useful statistics, and made use of mathematics for empirical or theoretical purposes, and — isn’t it obvious? — the man was capable of extracting more information from small samples and casual observations (yes, including the works of the great classics and the “fiction” writers of his time, something that also made me suspect of Karl’s influence on Thomas’ work) than any Google data-mining algorithm ever known. All this is, of course, of biographical importance, but not very relevant to our understanding of capital before and after. In the latter inquiry, Marx and Piketty should be viewed as “complementary” (not “substitute”) goods.

I have much more to say about Piketty’s Capital, its merits and demerits, but I will reserve that for a future entry.

UPDATE: John Judis (from the New Republic) says that Piketty has, of course, read Marx.  He’s just pulling the leg of naive Americans who get scared at the casual mention of Marx.  Who knows?  But Piketty doesn’t strike me as the sarcastic type. I’d discount things this way if they came from, say, Robert Solow, who famously quipped: “Everything reminds Milton Friedman of the money supply.  Everything reminds me of sex, but I try to keep it out of my papers.” But it is not impossible that Piketty is joking.

On Gary Becker: A True Believer


Gary Becker has died. Here’s John Cassidy “postscript.” And here’s the NYT’s obit.

Personally, I liked the frankness of his approach as encapsulated in the articles he compiled in The Economic Approach to Human Behavior.  My personal favorites were “A Theory of Social Interaction” and “Time and Household Production,” which are as close to Marx’s historical materialism and labor theory of value as economists can get without even knowing it.  He was absolutely correct in implying that, in our society, the size of the actions that individuals take — to produce, consume, trade, vote, abstain, help others, elicit help from others, struggle politically, and accept things passively — is the measure of how much we truly appreciate life, humanity, freedom, and all that.  He didn’t care much for the fact that not all individuals are endowed by prior history with equal powers, wealth, or privilege.  Inequality, in all its most horrendous manifestations, didn’t faze him a bit.  But his views were not cynical.  They were rather the naive, but honest, vindication (by a true believer in the virtues of inequality, markets, and exploitation) of the formidable ability of this capitalist society of ours to negate our humanity.

When my students would ask me in class, “Why do economists seem to hang a price tag, a dollar sign on the most precious and intimate aspects of our lives?  Why is it that economists reduce all human actions to a calculus of monetary costs and benefits?” they were referring to the kind of views that Gary Becker most lucidly articulated.  My answer, of course, was that the economists do not have that kind of power.  They don’t.  The tail doesn’t wag the dog.  It isn’t the economists, but capitalism that does all that, and then worse.  The economists (and nobody better than Becker and the other Chicago Boys) are only registering the facts of life established by capitalism and stating them in the clearest possible terms.

The “costs of running the economic system” keep increasing …

My essay, “The Increasing ‘Costs of Running the Economic System': Productive Power, Nonrivalry, and Exclusion Costs,” is here:

This essay argues that there is a direct link between wealth nonrivalry and the social costs of exclusion. In the mainstream literature, nonrivalry and high costs of exclusion are viewed jointly as the defining characteristics of public goods, but each of them—nonrivalry and exclusion costs—is viewed as a separate and independent attribute of goods; the presence of one need not imply (or preclude) the presence of the other. However, the expansion of society’s productive power implies, necessarily, the increased nonrivalry (or shareability) of wealth. A sparse simulation model with simple numerical values helps to show that society’s expanded productive potential and wealth nonrivalry tilt the material ground on which social interactions take place and stable social structures form. The tilting of their material ground induced by a greater wealth nonrivalry stresses the social structures in the direction of greater equity in the appropriation and ultimate use or consumption of wealth. The practical realization of these possibilities for social restructuring depends on the convergence of multiple historical factors.
All comments are welcome.