Capital in the Twenty-First Century.

• Author: Mulligan, Casey B.
• Position: Book review

* Capital in the Twenty-First Century

By Thomas Piketty (Translated by Arthur Goldhammer)

Cambridge, Mass.: Harvard University Press, 2014.

Pp. viii, 685. $39.95 hard cover.

Revealed preference speaks volumes. Admittedly, my hardcover version of Capital in the Twenty-First Century was delivered "for free" by the publisher of this periodical, but the opportunity cost of retaining it was extraordinary last spring when its publisher and distributors remarkably ran out of stock and the market for used copies was surging. I did more than retain it: I also purchased the electronic version so that I could search its contents readily and accurately and fit the 685-pager in a coat pocket.

More significantly, I read it, in some places carefully enough to dig into the appendices of its online appendices. The University of Chicago--my alma mater and employer--offered Thomas Piketty a faculty position in 1993, and to our disappointment he turned us down. For several years, Piketty's (and Emmanuel Saez's) inequality estimates have been used for teaching public economics at Chicago, and I have personally benefitted from his tutoring regarding the details therein. The students are hungry for data on inequality and its trends, and it is my privilege to help with the grocery shopping.

Capital discusses both national aggregate wealth (parts I and II) and the household distribution or "inequality" of income and wealth (parts III and IV as well as the introductory and concluding chapters). This review focuses on the latter.

Consider first a summary of Capital's inequality analysis in (the official English translation of) Piketty's own words. He begins by asserting that inequality is "widely discussed" and "of interest to everyone." The key question, he says, "is to decide whether it is justified, whether there are reasons for it." Otherwise, inequality is an "enemy of democracy" (pp. 1, 2, 19, 422).

Scholars were, before Piketty came along, having an inequality debate "without data" and had made no "significant effort to collect historical data on the dynamics of inequality since Kuznets [in 1955]" (p. 31). Instead, economists were "churn[ing] out purely theoretical results without even knowing what facts needed to be explained" (p. 31). To the detriment of the "least well-off," scholars have been "refusing to deal with numbers" (p. 577).

Although Piketty is glad to have multicountry data, he believes that the reader should first consider the French data rather than the American because the "French Revolution--the 'bourgeois' revolution par excellence--quickly established an ideal of legal equality in relation to the market" (p. 30). "The United States is more inegalitarian than Europe and... many Americans are proud of the fact" (p. 348). As a result, French policymaking tends to be wiser and "ahead of its time"--for example, its internationally high minimum wage in contrast to the U.S. nominal minimum wages, which get "stuck" and "frozen" (pp. 533, 309, 309) during excessively long periods of White House occupancy by Republican presidents.

"In every country the history of inequality is political--and chaotic" (p. 286). The evolution of inequality is "very difficult to explain solely in terms of the supply of and demand for various skills" (p. 308). But one lesson comes from all cuts of the data: "income...