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Home Uncategorized The Rich Man in his Castle

The Rich Man in his Castle

Sean Byrne
Capital in the Twenty-First Century, by Thomas Piketty, transl Arthur Goldhammer, Harvard University Press, 696 pp, £29.95, ISBN: 978-0674430006 The British economic historian and political activist RH Tawney wrote in 1913 that “what thoughtful rich people call the problem of poverty, thoughtful poor people, with equal justice call a problem of riches”. Adam Smith, Ricardo, Marx, Malthus and John Stuart Mill all regarded the distribution of income and wealth as a central concern of economics. But as neo-classical economics largely displaced political economy the questions of the distribution of income and wealth were dismissed as irrelevant because it was argued that economic growth would improve the lot of everybody. Today in the USA, even raising questions about the distribution of income is regarded as subversive. Thomas Lucas, who won the Nobel Prize for his work in macroeconomics, wrote in 2004: “Of the tendencies that are harmful to sound economics the most seductive, and in my opinion the most poisonous, is to focus on questions of distribution.” Lucas’s comments indicate the huge gulf that separates economics theorists and ordinary people on what are the most important economic issues. The fact that most people consider that the distribution of wealth is a vital issue surely explains why Thomas Piketty’s Capital in the Twenty-First Century has become an unlikely bestseller. Piketty’s book consists of almost 700 pages of complex argument, illustrated by enormous quantities of data with several graphs in every chapter. It is however, engagingly written, drawing support for its arguments from such diverse sources as the novels of Jane Austen and Balzac and the US television series Damages and The West Wing. It is the most important book on economics published so far this century and the economic model it proposes has profound implications for the future of both the wealthy and the developing countries. Thomas Piketty is a prodigiously talented French economist who was appointed a professor at MIT at twenty-three. After two years, he became disillusioned with what he calls “the childish passion for Mathematics” of the leading US economists and returned to France, where he became an indefatigable researcher on income distribution. Piketty showed that studies of the distribution of income based on household surveys often fail to capture the incomes of the wealthiest and he revived the approach of using fiscal data, pioneered by Vilfredo Pareto and Simon Kuznets. He showed that in France the share of the top ten per cent…

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