Keynes’s keynote book, The General Theory, is
loaded with economic theory. There are only two pages of data in that book, and
Keynes dismisses the scant data he cites as “improbable.” By contrast,
Piketty’s new book, Capital in the Twenty-first Century, is stuffed with
data. Indeed Piketty considers himself a successor to the economist whose data
Keynes dismissed, Simon Kuznets. Almost everyone admits that Piketty’s
theoretical case is weak — but, his supporters say, look at all this data. You
can’t argue with this mass of historical evidence!
Piketty’s primary argument is that wealth (which tends to
be concentrated in few hands) grows faster than the economy, so that those with
a lot of wealth keep getting richer relative to everyone else. This is supposed
to be an inescapable feature of capitalism. (If this sounds familiar, it should
be. It echoes both Marx and Keynes, although we should remember that Keynes
mocked most of what Marx said as “hocus-pocus.”)
So what then is the evidence
that wealth has grown faster than the economy?
Let’s look at the chart below,
adapted from Piketty’s book. The top line is return on capital and the bottom
line is the economic growth rate. The top line is supposed to be how the rich
are faring and the bottom line how the average person is faring. Note that the
lines on the far right are just a projection of Piketty’s, and not actual
history......To Read More...
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