Piketty

Interesting:

With his book Capital in the Twenty-First Century, Thomas Piketty has lobbed a truth bomb that has blown up several decades’ worth of received opinion about the way the economy works in capitalist societies. He makes a powerful, meticulously-argued, data-driven case that inequality is a feature of capitalist economies, not a bug. Let to its own devices, wealth tends to become highly concentrated. The only events likely to prevent our society from plunging into a dystopian spiral of inequity are, on the one hand, certain rarely occurring catastrophes, such as war or depression; or, on the other, dramatic government intervention in the economy, in the form of steep taxes on the wealthy.

You can see why conservatives are going to be enraged by this book.

A conservative backlash to Piketty was inevitable; the only surprise is that it’s taken so long to develop. But in the last week or so, responses from the right have finally begun to roll in. Send in the clowns!

clowns

Do you think they read the book?
Photo by Matt Billings
Reihan Salam, inexplicably regarded as a leading light among today’s young conservative intellectuals, doesn’t appear to have read a word of the book, but took it upon himself to write about it anyway for the National Review Online. Cribbing from one of the few less-than-glowing reviews of Piketty on the left, by economist Dean Baker, Salam decides he didn’t like the book because of its “pessimism.” But he disagrees with Baker’s ideas about policies to fix inequality, and asserts that a more “open” and “entrepreneurial” economy will do the trick instead. Salam offers no policy details, but his piece does discuss many plot details of a sci-fi novel he enjoyed. (WTF?)

Salam’s piece was dumb, but things were about to get more idiotic. Earlier this week, the economist Branko Milanovic tweeted, “And the award for the stupidest review of Piketty’s book so far goes to . . . . (no surprise there) @WSJ.” The Wall Street Journal review is indeed wretched. Reviewer Daniel Shuchman describes this painstakingly careful work as “less a work of economic analysis than a bizarre ideological screed.” He also suggests that Piketty’s argument that confiscatory tax rates won’t hurt growth is a groundless “breezy” assurance. In fact, Piketty’s argument is based on his rigorous econometric analysis of fifty years of data from eighteen OECD countries. Shuchman ends his review with a classic move straight out of the red-baiting playbook: “the professor ought to read ‘Animal Farm’ and ‘Darkness at Noon,’” he wrote. Awesome point!

I didn’t think it was possible to find a more hack-stastic review of Piketty in a major publication than the one by Shuchman. Like Milanovic, I was ready to award the dunce cap to the Journal and call it a day. But then along came Megan McArdle’s column for Bloomberg View. Her piece on Piketty contains what is surely one of the most extraordinary openings of a book review I have ever read:

I apologize in advance, because I am going to talk about a book that I have not yet read. To be clear, I intend to read Thomas Piketty’s “Capital in the Twenty-First Century.” It is sitting on my (virtual) bedside with a big stack of other (digital) books that I intend to read. But it’s far down in the queue, and I’m afraid that I can’t wait to weigh in—not on the book itself, but on its topic.

Okay then! She proceeds to argue vigorously against Piketty’s policy proposal on taxes—although, to repeat, she did not read his arguments in favor of them. At this point, I strongly suggest you skip her piece and read Fredrik deBoer’s review of McArdle’s review instead. It is delightful.

Not every conservative response to Piketty has been quite as disgraceful as the ones by Salam, Shuchman, and McArdle. There have been more serious reviews as well—though all of them deserve scrutiny and pushback.

For instance, the American Enterprise Institute’s Kevin Hassett argues that the correct way to measure economic inequality is to look at consumption inequality rather than income inequality, and he claims that consumption inequality is not on the rise. Nice try, but no. The best recent research shows, in fact, that consumption inequality is soaring as well.

The Manhattan Institute’s Scott Winship claims that if Piketty had included taxes and transfers in his measure of inequality, he would have found that, even though income rose disproportionately at the top, the bottom 90 percent still experienced significant gains. He doesn’t link to his analysis, but I’m skeptical. An earlier study Winship touted that showed similar results turned out to have serious methodological flaws.