Tuesday, March 11, 2014

Its Time For Economists to Read Thomas Piketty's New Book

James Kwak describes one of the old problems that economists are fond of fighting about. That is, the relationship between income redistribution programs and economic growth.  He does not say anything about that issue that I have not previously posted.  Consequently, I have posted a quote from the last paragraph in his article which makes an important point that most economists have ignored.

"Indeed, there’s a strong argument to be made that a capitalist society needs systematic redistribution to survive. Thomas Piketty’s new book—which I plan to read the next time I have time to read a 700-page economics book—free markets generally produce higher returns on capital than on labor, which means, to a first approximation, that people with capital will get richer faster than people with only labor. In a world where the political system is open to money, this means that the capitalists will also accumulate a disproportionate share of political power, leading to the type of extractive society described by Acemoglu and Robinson in Why Nations Fail. Which is not a world that most of us would want to live in."
I hope that Kwak and the rest of the profession take the time to read Piketty's book.  It goes well beyond the usual debates between conservatives and liberals.  It also goes well beyond the stale debate between Marxists and liberal economists. Piketty's book represents a real challenge to the economics profession.  It must return to the concept of political economy which it abandoned many years ago in favor of its bad imitation of physics.

No comments:

Post a Comment