Continuing Conversation... Thomas Piketty on Inequality and Capital in the 21st Century
By Amy Willis
EconTalk host Russ Roberts talked with Thomas Piketty, author of the controversial and best-selling tome, Capital in the 21st Century.
Check Your Knowledge:
1. Piketty asserts that the theory of marginal productivity of labor is naive. What does he mean by this, and to what extent do you agree?
2. Piketty calls his now famous identity, r > g, the “central contradiction of capitalism.” What does this identity purport to tell us, and what is the basis of Roberts’ skepticism regarding its validity?
3. In his “Piketty Fever” column this spring, Pedro Schwartz critiques Piketty’s r > g law. What is the basis of Schwartz’s critique, and how does it compare to Roberts’s?
4. Roberts and Piketty may agree that the share of income at the top of the distribution is growing at a faster pace than the rest. But Roberts, contrary to Piketty, argues that the share of net income the top 1% received is not relevant. Rather, he argues, we should focus on the level of well-being of all those in the distribution. In fact, the growth rate in the income of the top 1% reflects entrepreneurs’ ability to reach more customers using technology in an increasingly globalized world. To what extent is Roberts correct that the growth rate of the top 1% reflects consumers being better off? To what extent does the increasing income of the top 1% reflect the returns to past investments and inheritance as Piketty emphasizes?
5. Toward the end of the episode, Piketty says, “…at the end of the day, the main policy to reduce inequality is not progressive taxation, is not the minimum wage. It’s really education.” What does Piketty mean, and to what extent would you agree? This seems to be a claim with which both Piketty and Roberts can agree. To what extent do they, and why?
6. Piketty argues that a middle class with stable access to wealth is critical for both democracy and economic growth, and that current trends suggest this class is disappearing. Contrast Piketty’s claim with the work of Richard Burkhauser. What evidence is there that the middle class is in danger, and how will this affect politics and economics?