Morning Must-Read: Evan Soltas: Wage Discrimination
Morning Must-Read: Ryan Avent Is Very Unhappy with Clive Crook's Review of Piketty's "Capital in the Twenty-First Century"

Bonus Monday Smackdown Watch: Ryan Avent vs. Clive Crook on Thomas Piketty's "Capital in the Twenty-First Century"

Ryan Avent: Inequality: "Capital" and Its Discontents | The Economist: "Mr Piketty's magnum opus is certainly not without its weaknesses...

...but the quality of the criticism it has attracted provides a sense of the strength of the argument he makes. Consider Clive Crook....

There's a persistent tension between the limits of the data he presents and the grandiosity of the conclusions he draws.

The line doubles as a pleasingly apt description of Mr Crook's review. He is unhappy.... Why... doesn't Mr Piketty say that r must be significantly above g to generate the expected divergence, Mr Crook complains.... You don't even have to read hundreds of pages to get the qualification Mr Crook wants; you can start with the page on which r>g is first mentioned:

If, moreover, the rate of return on capital remains significantly above the growth rate for an extended period of time (which is more likely when the growth rate is low, though not automatic), then the risk of divergence in the distribution of wealth is very high....

If you only read the book's conclusion you could miss these details, but who would do that? Mr Crook then goes on to present his evidence:

The trouble is, he also shows that capital-to-output ratios in Britain and France in the 18th and 19th centuries, when r exceeded g by very wide margins, were stable, not rising inexorably....

Mr Piketty is not arguing that r>g means that rising inequality is inevitable. Indeed, that is close to the precise opposite of his argument, which is that r>g is a force for divergence.... If charts of stable capital-income ratios in the 19th century provided a devastating rebuttal to his story, Mr Piketty would not have included them so prominently.... I think he must have imagined that readers would look at the text around them as well....

Mr Crook rather uncharitably questions the motivations of those more taken with the book. He writes:

As I worked through the book, I became preoccupied with another gap: the one between the findings Piketty explains cautiously and statements such as, "The consequences for the long-term dynamics of the wealth distribution are potentially terrifying." Piketty's terror at rising inequality is an important data point for the reader. It has perhaps influenced his judgment and his tendentious reading of his own evidence. It could also explain why the book has been greeted with such erotic intensity....

It seems to me that Mr Crook has revealed more about his own priors than those of Mr Piketty's fans. "Terrifying" seems to me to be an accurate description of a society in which the top 10% of individuals own 90% of the wealth. Mr Crook scoffs.... That brings us to the most important of Mr Crook's criticisms: that it is living standards which actually matter.... Even if the book had nothing to say about growth, this would be an odd criticism.... What Mr Crook seems not to understand is that we also care about it because we care about living standards... high levels and concentrations of capital have not been a necessary or sufficient condition for rapid growth... have often sowed the seeds for political backlash... detrimental to long-run growth. His argument is that the living standards of many people around the rich world are now unnecessarily low, because of the nonchalance with which elites have approached distributional issues.... His argument is that economic growth that concentrates benefits on a small group of people will probably not be tolerated as fair, even if living standards among the masses are not completely stagnant.

It is an argument that is powerful and well-supported by the data—and extremely relevant today, whether or not one thinks inequality qualifies as the defining issue of the era. That, it seems to me, is why the book has been received as it has.

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