Nit-Picking Piketty

The Masters of the Universe have assembled in Boston – over 3,000 economists at the annual meeting of the American Economic Association. Plenty of panels with titles like “Instrumental Variables and Control Function Methods” and “Econometrics of Randomized Experiments.” Plus a convention hall lined with rows and rows of booths selling academic books and economic forecasting services.

Several sessions here have centered around the sensation of French economist Thomas Piketty and his ground-breaking book on inequality, Capital in the Twenty-First Century.

I attended a panel convened by right-wing Harvard economist Greg Mankiw that should have been entitled “Nit-Picking Piketty.”  Three neoclassical economist critics, assembled by Mankiw, embarrassed themselves by quibbling with the incontrovertible evidence of growing concentrations of wealth and surging plutocratic trends.

As an outsider to academic economics, I was struck by just how compartmentalized and smug the field appears. At one point, Mankiw even put up a slide, “Is Wealth Inequality a Problem?” Any economist who ventures across the disciplinary ramparts will, of course, find a veritable genre of research on the dangerous impacts of extreme inequality.

We now have over two decades of powerful evidence that details how these inequalities are making us sick, undermining our democracy, slowing traditional measures of economic growth, and turning our political system into a plutocracy.

Mankiw, at another point in his presentation, had still more embarrassing comments to make. Piketty, he intoned, must “hate the rich.” Piketty’s financial success with his best-selling book, Mankiw added, just might lead to self-loathing.

These clearly well-rehearsed quips, aimed at knee-capping the humble French economist, fell flat. Mankiw’s presentation, entitled “R > G, so what?,” came across as little more than an apologia for concentrated wealth.

Piketty, meanwhile, came across at the AEA convention as his usual disarming self, apologizing for the length of the book (700 pages) and the inadequacy of the data sets that economists are working with. Piketty observed that he has nothing against the rich and said he believes that capital has a useful role to play. He would like to see more of our wealth, he explained, reside with the middle class and the poor.

Piketty’s one poke back at the nitpickers came in response to their unanimous support for a progressive consumption tax as an alternative to any other progressive income or wealth tax.

“We know something about billionaire consumption,” Piketty observed, “but it is hard to measure some of it. Some billionaires are consuming politicians, others consume reporters, and some consume academics.”

And therein lies the point: Too many in the economics profession are ideologues masquerading as mathematicians. They are hired guns for the privileged classes. They are a living example of how concentrated wealth subverts the free exchange of ideas.

I personally don’t hate the rich. I love some people in the 1 percent. But I also love the reality of a healthy middle class and fundamental social safety net for people in the bottom fifth of our society. I believe this “win-win” leads to stability and a sustainable and healthy economy.

What is troubling is “extreme inequality,” the accelerating concentration of wealth and power that reflects less a function of differences in effort and more a function of rigging the rules of the economy.

Thanks to Thomas Piketty and all the economists who propose a different path than accelerating wealth disparity.

Chuck Collins directs the Institute for Policy Studies Program on Inequality and the Common Good.