politics for the 99%

Published on Real-World Economics Review Blog, by Peter Radford, April 18, 2014.

I will not pile on any more: the Piketty book is required reading. Enough said.
What strikes me is that his data set is so comprehensive that it ought to end many of those lingering debates within economics. I doubt it will, but it ought to.
I have a few comments I want to make because of his book and the reaction to it.

First:  

• it confirms, in my mind, my argument that economic systems cannot ever be carved out of their historical, social, and political contexts. Not, at least, if the analyst wants to be left with anything at all useful. Studying economics as some abstracted other-worldly stand alone entity is entirely pointless. Pretending that everyday people act in an economic sense without reference to a whole slew of cultural, institutional or other relationships and pressures is just nonsense. Of course they do. We all know that.
• I understand that distilling some uniquely “economic” regularities is useful. I understand that establishing certain cause and effects relationships can help us understand society, but, ultimately it is society we are understanding, not just some economic agents roaming about absent any other influences. So anything understood within the domain of economics must then be converted to, or fitted within, the larger picture before it is thought of as having any relevance. Particularly policy relevance.
• So it is not enough to build upon micro foundations unless those foundations extend across a diverse realm that includes all the elements at the base of the society being studied. To avoid such an extension is to display an extraordinary and willful narrow mindedness.
• With this in mind, I think Piketty’s book is the starting point for a thorough review of economic thought. Including much current heterodox thought which suffers from the same disease as orthodoxy: it is not comprehensive enough to have real value. All economists henceforth need to be heterodox and capable of taking an inclusive social stance before they can truly claim to be talking about an economy. Because of this I expect there to be little or no reaction from those who understand economics only within the limited confines it currently resides. His book is too broad in its social implications for orthodox economists to have much to say. He has roamed far from their field of expertise. He has rendered them obsolete.

Second:

• once again I find myself reflecting on how panglossian so much of modern economics is. It papers over the very long term effects that Piketty has drawn out in stark, and perhaps controversial, detail. In particular it sheds a harsh light on the oddity of the self-correction mechanism that sits at the heart of orthodoxy. It seems that under “normal” circumstances a free market system, in its capitalist form, simply rumbles on and on crushing all before it. There are side effects, some benign and others malign, but none fatal. All capitalism results in overwhelming inequality. This is not sufficient to cause it to collapse. Nor is the effect of competition enough to dampen its progress. Neither the Classical nor the Marxist critiques hold up. We can excuse them only because they were both articulated before capitalism came of age. They both mistook youthful exuberance for the finished article … //

… (full text).

Links:

Paul Krugman Discusses Piketty’s Capital and the Rise of Inherited Wealth on Bill Moyers, on naked capitalism, by Yves Smith, April 20, 2014;

More effective remedies for inequality than Piketty’s, on Real-World Economics Review Blog, by Geoff Davies, April 19, 2014;

Book Review: Capital in the Twenty-First Century, written by Thomas Piketty, translated by Arthur Goldhammer, Harvard University Press RRP£29.95/Belknap Press RRP$39.95, 696 pages: An economic, social and political history of the evolution of income and wealth – Published on FT.com, review written by Martin Wolf, April 15, 2014;
Find it on amazon;

Video: Capital in the Twenty-First Century, 3.48 min, uploaded by Harvard University Press, Dec 11, 2013: What are the grand dynamics that drive the accumulation and distribution of capital? Questions about the long-term evolution of inequality, the concentration of wealth, and the prospects for economic growth lie at the heart of political economy. But satisfactory answers have been hard to find for lack of adequate data and clear guiding theories. In CAPITAL IN THE TWENTY-FIRST CENTURY, economist Thomas Piketty analyzes a unique collection of data from twenty countries, ranging as far back as the eighteenth century, to uncover key economic and social patterns. His findings will transform debate and set the agenda for the next generation of thought about wealth and inequality;

Thomas Piketty on en.wikipedia (… born May 7, 1971) is a French economist who specializes in the study of economic inequality. He has remained director of studies at the École des hautes études en sciences sociales (EHESS), is now the Associate Chair at the Paris School of Economics, and the author of Capital in the Twenty-First Century (2014) …; External Links.