Capital in the 21st Century

[capital]

That's pretty much what we're all about here, right? Accumulating capital and becoming small-time rentiers? So, anyone reading the book?


Perhaps because I'm in the tech industry, I'm not quite so pessimistic about g. Which hopefully means a higher r without so much troublesome capital accumulation & inequality.

[KingCoin]

I haven't read the book, but it's gotten slowly torn to shreds after an initially enthusiastic reception.

[Leisured]

I have not read the book, taking the Mustachian option of waiting for my local municipal library to buy it. I do not see much point in having historical returns of investment and historical economic growth on the same graph. The best economic growth includes little or no population growth, as John Keynes recommended in his legendary 1930 essay The Economic Possibilities for our Grandchildren. Keynes, and science commentators after WW2 pointed out that advances in automation can – eventually - lead to a wealthy, leisured society, even if most people have limited investments.

Here is the link:

http://www.amazon.com/Capital-Twenty-First-Century-Thomas-Piketty/dp/067443000X/ref=sr_1_1?s=books&ie=UTF8&qid=1401193409&sr=1-1&keywords=capital+in+the+twenty-first+century

[capital]

I haven't read the book, but it's gotten slowly torn to shreds after an initially enthusiastic reception.

What's been torn to shreds about it? The FT published some questions about the data series that they gussied up as a refutation, but Piketty's response is very convincing, and even, say, this Manhattan Institute fellow posting on Forbes thinks the data is pretty solid:
http://www.forbes.com/sites/scottwinship/2014/05/27/laffaire-piketty/

[butchmonkey]

I haven't read the book, but it's gotten slowly torn to shreds after an initially enthusiastic reception.

What's been torn to shreds about it? The FT published some questions about the data series that they gussied up as a refutation, but Piketty's response is very convincing, and even, say, this Manhattan Institute fellow posting on Forbes thinks the data is pretty solid:
http://www.forbes.com/sites/scottwinship/2014/05/27/laffaire-piketty/

Exactly,

Nice krugman piece yesterday:

http://mobile.nytimes.com/blogs/krugman/2014/05/30/thomas-doubting-refuted/





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[butchmonkey]

And another refutation of the "ripping to shreds" angle.

http://www.vox.com/2014/5/29/5761578/thomas-pikettys-convincing-reply-to-his-critics


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[Lans Holman]

I'm also looking forward to reading it whenever I can get it from the library.  Just from reading some of the discussion around it it sounds like some interesting analysis without a whole lot of convincing ideas for change.  And yes, although I don't think that's what he was trying to say with it, it definitely makes me think, how do I get some of that sweet r?

[sol]

For anyone who hasn't heard of this book yet, the basic premise is that for the entire history of capitalism, capitalist economies have returned a higher rate on investments ("capital") than the corresponding rate of GDP growth, and that this imbalance necessarily leads to an ever-increasing concentration of wealth for the investor class.

Capitalism isn't really all that old, as economic systems go, but he's using the broadest possible data sets available to compare the rate of return on capital (typically ~5%) to GDP growth (typically ~3%).  With very few short term exceptions, the standard progress of capitalism is for people who have wealth to build more wealth, relative to the rest of their societies.  Capitalism contains no mechanism by which this concentration of wealth can be avoided.

The parts of this book that have taken the most heat from critics are primarily centered around his proposed remedies.  The historic remedies have been catastrophic economic collapses, like wars that bomb capital investments into rubble, or revolutions that appropriate private property for the state.  Both of which are really bad for GDP but even worse for capital return, resetting the balance.  If you make everyone equivalently poor, the process can start all over again.

Some people seem to oppose the book on purely ideological grounds, because it smacks of Marxism.  Marx thought that the capitalist west contained the seeds of its own destruction, and in broad strokes this book is making the same case.  Logically, though, saying you disagree with an idea because it reminds you of another idea you disagree with doesn't really count as a refutation of either idea. 

I'd be interesting to hear more opinions from this crowd.  I think this book spells out some ideas that have been widely discussed here before, and then projects out into the future the foreseeable consequences of the game we're all playing.  Those early MMM threads with titles like "what if everyone retired early?" were dealing with some of the same ideas.

[deborah]

In Australia (I think it was pretty much world wide - certainly in Britain as well) in the 1890's there was a big collapse, and everything went down in price severely. The economy didn't recover until the 1920's (or at least wages and many more things didn't). For instance one of the top private girls' schools lost 2/3 of its pupils in three weeks in 1893, and didn't have that many pupils again until 1924 - according to its 100th year book. For this extended period wages were low, and the actual value of shares was lower than before the crash. I was looking at a US economics book recently that was written in the 1930s, and the trading value of shares went down there for this period, from what I could tell (dividends were a different story).

As a result, I think that capitalism is much more robust than some books give it credit for. Admittedly, the development of the concept of communism and many alternate societies in the very late 1800s and early 1900s shows that capitalism was under considerable strain at the time.

[sol]

As a result, I think that capitalism is much more robust than some books give it credit for.

To be clear, the author isn't arguing that capitalism is destined to fail, just that it is destined to concentrate wealth in the hands of few.

[deborah]

To be clear, the author isn't arguing that capitalism is destined to fail, just that it is destined to concentrate wealth in the hands of few.

I think capitalism goes in waves - we can all think of times when things were more (or less) equitable than they are at the moment. It's a bit like economics in general, the market fluctuates and is never stable.

[sol]

I think capitalism goes in waves - we can all think of times when things were more (or less) equitable than they are at the moment

Yea, he disagrees.  His central tenet is that inequality only increases unless something goes horribly wrong, like a war or a revolution or some non-capitalist intervention like taxes designed to redistribute wealth.  On its own, in its unfettered form, he says capitalism only gets less equitable over time.

Mostly he talks about the return on capital vs the rate of GDP growth.  If you buy his data on those two numbers, it's kind of hard to dispute the conclusion that the rich get richer and richer over time.

[FIPurpose]

It's also hard to say that Capitalist societies have risen the waters of all people. Where have all major innovations of the last 50 years been made? In a world of increasing automation, people will eventually need less money. If food production is automated to the point of bring prices even cheaper, if transportation costs are lowered, if technology costs are lowered. What else do people need.

We're talking about creating a Star Trek future where people no longer need to worry about needs, and capitalism is slowly making that a reality. Before long that money won't be so important to most people.

[frompa]

POSTED BY flying circle: It's also hard to say that Capitalist societies have risen the waters of all people. Where have all major innovations of the last 50 years been made? In a world of increasing automation, people will eventually need less money. If food production is automated to the point of bring prices even cheaper, if transportation costs are lowered, if technology costs are lowered. What else do people need.

We're talking about creating a Star Trek future where people no longer need to worry about needs, and capitalism is slowly making that a reality. Before long that money won't be so important to most people.

I haven't read this book yet, (on the way as we speak) but flying circle's analysis fails to distinguish between what's possible and the way our everything-for-profit world works.  Sure, food production, transportation and technology CAN all be done at lower cost due to improvements in the processes surrounding all of them, but it seems that such improvements are done with a sharp eye toward increasing control and profit.  You can argue that these are basic human rights, but bullshit, so is health care and look how that has become completely profit-driven in the USA at least -- we have commercials for cancer treatment, for god's sake.  (These strike me as the height of absurdity, but there's also the advertising for all sorts of drugs and other disease treatments.) Medical care is as essential as food, transportation, technology, yet all of them are driven and shaped by profit making.

[deborah]

Looked at my library catalogue for this book - no existing copies, 2 copies on order, and 80 people waiting!!!

This must be the latest best seller.

[FIPurpose]

POSTED BY flying circle: It's also hard to say that Capitalist societies have risen the waters of all people. Where have all major innovations of the last 50 years been made? In a world of increasing automation, people will eventually need less money. If food production is automated to the point of bring prices even cheaper, if transportation costs are lowered, if technology costs are lowered. What else do people need.

We're talking about creating a Star Trek future where people no longer need to worry about needs, and capitalism is slowly making that a reality. Before long that money won't be so important to most people.

I haven't read this book yet, (on the way as we speak) but flying circle's analysis fails to distinguish between what's possible and the way our everything-for-profit world works.  Sure, food production, transportation and technology CAN all be done at lower cost due to improvements in the processes surrounding all of them, but it seems that such improvements are done with a sharp eye toward increasing control and profit.  You can argue that these are basic human rights, but bullshit, so is health care and look how that has become completely profit-driven in the USA at least -- we have commercials for cancer treatment, for god's sake.  (These strike me as the height of absurdity, but there's also the advertising for all sorts of drugs and other disease treatments.) Medical care is as essential as food, transportation, technology, yet all of them are driven and shaped by profit making.

Thank you for making me look as though I'm against health care, or whatever else it is that you attacking me for. There are things that are government regulated that have definitely made our lives better, one for example is the fact that in the United States Electric companies are regulated, so local monopolies are designated and regulated by the government. In fact, one thing I am greatly in favor for is Solar Roadways in order to provide free/cheap electricity, possibly free transportation fuel as well. This is something that has to be done by the government, and goes a long way in helping everybody.

Cell phones are not a necessity but every agrees that they have improved our quality of life. Capitalism saw the future potential in the new technology and invested heavily in it. It's not only the investors that make this future a reality, but also the early adopters who pay way too much for it. And that's really just a fact of production costs. Eventually making enough of them drives down the cost of production per unit. Now Cell Phones are made affordable because there are 10s of companies competing and creating a consumer advantaged market place. If cell phones were government controlled, we probably wouldn't have affordable options like Republic Wireless. We'd have a one size fits all solution.

Health Care seems to be somewhere in the middle. There needs to be a different approach created, I think Obamacare solved a number of problems, but it also created a lot of other problems that didn't exist before. Healthcare hasn't been a true capitalist industry for a long time. It's been stuck somewhere in the middle like Education, and look there are the 2 biggest issues in the country. Industries that are stuck somewhere inbetween governement and free-market.

But please don't just assume my opinions are on medical care, just because I said capitalism improves certain aspects of life.

[butchmonkey]

By all reports, capital in the 21st century is not a socialist book. It doesn't argue against capitalism at all.

Piketty's prescriptions are for different taxation plans (A wealth tax) that tax wealth as opposed to taxing income.

His idea is not really to redistribute wealth towards social programs. His idea is to shift the burden of taxation towards capital holders in order to minimize taxation on everyone else.

From his point of view this would both be more fair, addressing an income inequality and it's inevitable perversion of our political system, as well as better for the economy.


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