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# Global wealth inequality focus Capital/income ratio analysis Data-driven economic insights Capital in the Twenty-First Century

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> 📚 Unlock the secrets of capital and power before the world catches on!

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## Key Features

- • **Endorsed by Nobel Laureates:** Join thousands of professionals enlightened by Piketty’s rigorous, award-winning research.
- • **Global Taxation as a Solution:** Explore visionary proposals for progressive global wealth tax to combat inequality.
- • **Master the Economics of Inequality:** Dive deep into the fundamental laws shaping wealth distribution and economic growth.
- • **Essential Reading for Future Leaders:** Equip yourself with critical knowledge to navigate and influence the evolving global economy.
- • **Historical Data Meets Modern Analysis:** Leverage centuries of economic trends to understand today's financial landscape.

## Overview

Capital in the Twenty-First Century by Thomas Piketty is a landmark economic analysis that uses extensive historical data and fundamental equations to reveal how wealth concentration grows over time, driving inequality. It argues for a progressive global tax on capital to restore economic balance, making it a must-read for professionals seeking to understand and influence the future of global economic policy.

## Description

A New York Times #1 Bestseller A Wall Street Journal #1 Bestseller A USA Today Bestseller A Sunday Times Bestseller A Guardian Best Book of the 21st Century Winner of the Financial Times and McKinsey Business Book of the Year Award Winner of the British Academy Medal Finalist, National Book Critics Circle Award “It seems safe to say that Capital in the Twenty-First Century , the magnum opus of the French economist Thomas Piketty, will be the most important economics book of the year―and maybe of the decade.” ―Paul Krugman, New York Times “The book aims to revolutionize the way people think about the economic history of the past two centuries. It may well manage the feat.” ― The Economist “Piketty’s Capital in the Twenty-First Century is an intellectual tour de force, a triumph of economic history over the theoretical, mathematical modeling that has come to dominate the economics profession in recent years.” ―Steven Pearlstein, Washington Post “Piketty has written an extraordinarily important book…In its scale and sweep it brings us back to the founders of political economy.” ―Martin Wolf, Financial Times “A sweeping account of rising inequality…Piketty has written a book that nobody interested in a defining issue of our era can afford to ignore.” ―John Cassidy, New Yorker “Stands a fair chance of becoming the most influential work of economics yet published in our young century. It is the most important study of inequality in over fifty years.” ―Timothy Shenk, The Nation

Review: Piketty's book intoduces a large volume of data about global income and wealth for a more rational discussion of inequality - In his introduction to this book, Piketty states, “When the rate of return on capital exceeds the rate of growth of output and income, as it did in the nineteenth century and seems quite likely to do again in the twenty-first, capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based.” He further states that “Intellectual and political debate about the distribution of wealth has long been based on an abundance of prejudice and a paucity of fact.” He then addresses this paucity with the presentation and analysis of the results the project he led to acquire an enormous volume of historical data about global income and wealth. In the introduction, he briefly reviews the contributions but also the errors of earlier debate without data. These included Malthus’s concern with overpopulation and the need to end all welfare, Ricardo’s principle of scarcity with population and production growing as land becomes increasingly scarce, and Marx’s principle of infinite accumulation with the industrial revolution leading to no limit on the accumulation of capital (which did not consider coming social democracy, technological progress, and how to organize society without private capital). The Kuznets Curve of 1955 introduced data from US tax returns and Kuznets’s own estimates of national income to conclude that inequality increased in the early phase but declined in the later phases of industrialization. Unfortunately, this curve greatly understated the roles of the World Wars and violent economic and political shocks that led to the reduction in inequality between 1914 and 1945 and failed to explain the rising inequality after 1970. Piketty seeks to contribute “to the debate about the best way to organize society…to achieve a just social order….achieved effectively under rule of law…subject to democratic debate.” He states he has “no interest in denouncing inequality or capitalism per se…as long as they are justified.” He worked briefly in the US and found the work of US economists unconvincing. “There had been no significant effort to collect historical data on the dynamics of inequality since Kuznets, yet the profession continued to churn out purely theoretical results without even knowing (the) facts.” He found that “the discipline of economics has yet to get over its childish passion for mathematics and the purely theoretical and often highly ideological speculation.” Subsequently, he returned to France and set out to collect the missing data. He gathered data in two main categories: 1) inequality in distribution of income and 2) inequality in the distribution of wealth and the relation of wealth to income. For income, he built the World Top Incomes Database (WTID), which is based on the joint work of some thirty researchers around the world. This data series begins in each country when an income tax was established (usually 1910-1920 but as early as the 1880s in Japan and Germany). For wealth his sources included estate tax returns (usually dating back to the 1920s, but in a few cases as far back as the French Revolution), the relative contributions of inherited wealth and savings, and measures of the total stock of national wealth. In collecting as complete and consistent a set of historical sources as possible, he had two advantages over previous authors—a longer historical perspective (now including data from the 2000s) and advances in computer technology. Piketty reports two major conclusions from his study. “The first is that one should be wary of any economic determinism in regard to inequalities of wealth and income (that they emerge according to immutable natural laws). The history of the distribution of wealth has always been deeply political and it cannot be reduced to purely economic mechanisms. In particular, the reduction of inequality…between 1910 and 1950 was above all a consequence of war and of policies adopted to cope with the shocks of war.” “The resurgence of inequality after 1980 is due largely to political shifts…especially in regard to taxation and finance. The history of inequality is shaped by the way…actors view what is just…as well as the relative power of those actors.” The second conclusion is “that the dynamics of wealth distribution reveal powerful mechanisms pushing alternately toward convergence (equality) and divergence (inequality)….There is no natural, spontaneous process to prevent destabilizing ineqalitarian forces from prevailing permanently.” “Over a long period of time, the main force in favor of greater equality (convergence) has been the diffusion of knowledge and skills.” Other proposed forces for greater equality, such as advanced technology creating a need for greater skills or class warfare giving way to less divisive generational warfare as the population ages, appear to be largely illusory. “No matter how potent a force the diffusion of knowledge and skills may be, it can nevertheless be thwarted and overwhelmed by powerful forces pushing…toward greater inequality (divergence).” With respect to income, the spectacular increase in inequality from labor income, particularly in the US and UK, largely reflects the recent marked separation of the top managers of large firms from the rest of the population, not because of increased productivity, but because they can set their own remuneration. This separation is amplified by marginal tax rates that actually decrease for the highest incomes. Capital income from large fortunes also contributes to income inequality but may be understated due to hidden off-shore accounts and by producing only the relatively small portion of income needed for expenses while the rest remains within the fortune. (Fig. I.1 shows income inequality in the US from 1910 to 2010.) With respect to wealth, inequality (divergence) is increased when the rate of return on capital significantly exceeds the growth rate of the economy (r > g) as it did until the nineteenth century and is likely to in the twenty-first century. “Under such conditions it is inevitable that inherited wealth will dominate wealth amassed from a lifetime’s labor by a wide margin” and lead to extreme inequality. This increasing inequality of wealth is greatly amplified by structural factors leading to higher rates of increase for the largest fortunes that are no longer related to whatever entrepreneurial activities were at the onset of their origin. (Fig. I.2 shows wealth inequality in Europe from 1870 to 2010.) This analysis also shows a major shift in the main components of wealth from land, slaves (in the US), and colonies (in Europe) to domestic capital and housing. Historically, the rate of return on capital was 4.5-5% from antiquity to 1913, fell to 1.5% by 1950, and is rising again to 4% or more by 2012 and beyond. During the same period, the global rate of growth was close to zero before the industrial revolution, rose to 1.5% by 1913 and to 3.5% in the mid to late twentieth century (due to catch-up after World War II and in the developing world), and is now falling and projected to be 1-1.5% in the twenty-first century. Thus the unusual fall of the return on capital (r) below growth (g) in the mid twentieth century was associated with a temporary reduction in the rate of increasing inequality. (Fig 10.10 shows a comparison of the return on capital [r] to growth [g] from antiquity to 2100.) This review barely scratches the surface of the core contribution of this book, which is the enormous volume of data and analysis it provides. The numerical information is presented in a very well developed series of 97 illustrations and 18 tables. This information is used as support for extensive analysis and discussion of the many aspects of historical, present, and likely future inequality that often contradict positions related to ideology and simplistic models. An excellent 22 page overview of “A Social State for the Twenty-First Century” is provided at the beginning of the fourth and final part of the book. This is followed by “Rethinking the Progressive Income Tax,” “The Question of the Public Debt,” the author’s preference for “A Global Tax on Capital,” and finally, the conclusion. The conclusion reiterates that the principal destabilizing force leading to ever-increasing inequality is a return on capital (r) significantly higher than the rate of growth of income and output (g) for long periods of time. Hence wealth accumulated in the past grows more rapidly than output and wages, and the entrepreneur inevitably tends to become a rentier no longer of use in promoting growth. A progressive annual tax on capital would be the right solution to this problem, although it would require a high level of international cooperation. Piketty objects to the expression “economic science” which implies little to do with the logic of politics or culture in conclusions about inequality. He prefers the expression “political economy” which considers economics as a sub discipline of the social sciences, alongside history, sociology, anthropology, and political science. He insists that economic and political changes are inextricably entwined and must be studied together. This review is supplemented by a relatively random selection of multiple comments and assertions from the book: “The nature of capital has changed: it once was mainly land but has become primarily housing plus industrial and financial assets.” “Capital…is always risk-oriented and entrepreneurial, at least at its inception; yet it always tends to transform itself into rents as it accumulates….” With respect to global inequality, the industrial revolution led to growth of Europe and America’s share of global output to two to three times their share of population. This share is now rapidly decreasing due to higher growth in developing economies in the “catch-up” phase than in mature economies. Europe and America’s share of global production of goods and services rose from about 30-35% in 1700 to 70-80% from 1900 to 1980, fell to 50% by 2010, and may go as low as 20-30% later in the twenty-first century. European and American national inequality rose to record heights in 1910, decreased markedly by the 1940s due to the world wars and Great Depression, then began a rapid return to high levels after the 1970s, particularly in the US. The share of national income for the top 10% in Europe was over 45% in 1910, under 25% in 1970, and about 30% in 2010. In the US it was over 40% in 1910, under 30% in 1970, and nearly 50% in 2010. “Numerous studies mention a significant increase in the share of national income in the rich countries going to profits and capital after 1970, along with the concomitant decrease in the share going to wages and labor.” In the past several decades, the share of national income for the top 0.1% increased from 2 to 10% in the US, from 1.5 to 2.5% in France and Japan, and from 1 to 2% in Sweden. “It is important to note the considerable transfer of US national income—on the order of 15 points—from the poorest 90% to the richest 10% since 1980”— 5 to 7 times greater than the 2 to 3 points in Europe and Japan. “The vast majority (60 to 70%)…of the top 0.1% of the income hierarchy in 2000-2010 consists of top managers. By comparison, athletes, actors, and artists of all kinds make up less than 5% of this group.” “At the very highest levels salaries are set by the executives themselves or by corporate compensation committees whose members usually earn comparable salaries….” “It is when sales and profits increase for external reasons that executive pay rises most rapidly. This is particularly clear in the case of US corporations…pay for luck.” Global inequality of wealth in the early 2010s is comparable to that of Europe in 1900-1919. The top 0.1% own nearly 20%, the top 1% about 50%, the top 10% between 80 and 90%, and the bottom half less than 5%. The share of national wealth ownership in Europe for the top 10% and top 1% was 90% and over 50% in 1910, 60% and 20% in 1970, and about 63% and 24% in 2010. During this time, the share for the 50th to the 90th percentile increased from 5% to 40%, creating a middle class, but the share for the bottom 50% remained at 5%. In the US, shares for the top 10% and top 1% were about 80% and 45% in 1910, 64% and 30% in 1970, and about 70% and 34% in 2010—with a much more rapid increase after 1970 than in Europe, reaching 70% and 34% versus 63% and 24% by 2010 (while the bottom half claim just 2%). Inherited wealth is estimated to account for 60-70% of the largest fortunes worldwide. This figure is lower than the 80-90% reached during the belle Epoque, but trending strongly toward a return to that level. Forbes magazine divides billionaires into three groups—pure heirs, heirs who subsequently grow their wealth, and pure entrepreneurs, with each of these groups representing about a third of the total. Due to increased life expectancy, the average age of heirs at the age of inheritance has increased from thirty in the nineteenth century to fifty in the twenty-first century, although with larger inheritances. Today, transmission of capital by gift is nearly as important as transmission by inheritance. This change counters increased life expectancy and accounts for almost half of the present inheritance flows. “No matter how justified inequalities of wealth may be initially, fortunes can grow and perpetuate themselves beyond all reasonable limits and beyond any possible rational justification in terms of social utility.” Large fortunes experience increasing rates of growth related to size alone independent of their origins— 10% from $15-30 billion, about 9% from $1-15 billion, about 8% from$500 million to $1 billion, about 7% from $100-500 million, and about 6% below $100 million for university endowments. From 1990 to 2010, the fortune of Bill Gates, the Microsoft genius, grew from $4 billion to $50 billion, while that of Liliane Bettencourt, a cosmetics heiress who never worked a day in her life, grew at a similar rate from $2 billion to $25 billion. In 2013, sovereign wealth funds were worth $5.3 trillion ($3.2 trillion from petroleum exporting states and 2.1 trillion from nonpetroleum states like China, Hong Kong, and Singapore), similar to the total of $5.4 trillion for Forbes billionaires. Together, these sources account for 3% of global wealth. Large amounts of unreported financial assets are held in tax havens—approximately 10% according to the negative global balance of payments (more money leaves countries than enters them). In the US, parents’ income has become an almost perfect predictor of university access—average income of parents of Harvard students is currently about $450,000. “Broadly speaking, the US and British policies of economic liberalization (after 1980)…neither increased growth nor decreased it.” The US economy was much more innovative in 1950-1970 than in 1990-2010….Productivity growth was nearly twice as high in the former period as in the latter. In most countries taxes have (or will soon) become regressive at the top of the income hierarchy.” The optimal tax rate in the developed countries is probably above 80%. One of the most important reforms (is) to establish a unified retirement scheme based on individual accounts with equal rights for everyone, no matter how complex one’s career path. Debt often becomes a backhanded form of redistribution of wealth from the poor to the rich (who as a general rule ought to be paying taxes rather than lending). Inflation is at best a very imperfect substitute for a progressive tax on capital. It is hard to control, and much of the desired effect disappears once it becomes embedded in expectations. Defining the meaning of inequality and justifying the position of the winners is a matter of vital importance, and one can expect to see all sorts of misrepresentations of the facts in service of the cause. No hypocrisy is too great when economic and financial elites are obliged to defend their interests—and that includes economists, who currently occupy an enviable place the US income hierarchy. “Modern meritocratic society, especially in the United States, is much harder on the losers, because it seeks to justify domination on the grounds of justice, virtue, and merit, to say nothing of the insufficient productivity of those at the bottom.” The history of the progressive tax over the course of the twentieth century suggests that the risk of a drift toward oligarchy is real and gives little reason for optimism about where the United States is headed.
Review: indepth view of the distribution of profits to labour and capital through time with focus on France and US - First off I'd like to state that the data that the author has compiled is very impressive and provides the reader with a new way to look at both the stock and flow of wealth of society and its distribution. It is unique and comprehensive and for this aspect of the book it is landmark and hopefully will improve and refine our thinking about capital and inequality going forward. The conclusions of the author i think are very suspect and not nearly as insightful as the analysis, but they are where the author's politics come out and are a relatively smaller portion of the book. The need to move beyond looking at crude measures of inequality like the Gini coefficient and distribution of profits between labour and capital was much needed and the author was able to, through meticulous analysis look at the entire distribution of wealth through society by looking at the bottom 50%, top 10% top 1% and top .1% when possible both from a labour and capital perspective. The dataset is not global, though the author was able to partially reconstruct a broad range of countries, but includes the US, France, UK, Germany aspects of Japan and the Scandinavian countries with a focus on the US and France. The book is split into 4 part. The first three parts are both an introduction to the economics as well the accompanying economic analysis of the accompanying datasets. The first part - income and capital start out by defining the basics of what the author will discuss throughout the book namely income, capital and how the output of society is distributed and how that has changed over time. National accounting is discussed, the capital stock and its properties are introduced as well as some key identities that will be used throughout regarding the share of income going to capital which is determined by the return of capital and the size of the capital stock relative to annual output. The author also discusses growth over time documenting global growth rates over time and introduces to the unfamiliar reader the consequences of how small changes in growth compounded can lead to large cumulative changes. The author discusses demographic trends globally through time and some of the dynamics of them (which are largely unpredictable). The author also discusses how growth and demographics can influence the capital intensity of the economy. The author also discusses how the sectors of the economy and output have changed over time with agriculture and its share of both labour and capital much lower but the service sector replacing it and how manufacturing intensity and capital replaced agricultural through the industrial revolution as well. He also discusses modern concerns about growth by discussing Robert Gordon's recent paper on the end of growth and whether techonological innovation has run much of its course, he is relatively optimistic but nonetheless foresees growth following a bell curve for which we are at a peak which will decline but to much higher levels than centuries in the past. The author also discusses inflation and monetary policy and how it has changed over time. The second part of the book is called the dynamiocs of the capital/income ratio. It is about precisely that with the author starting out by using novels to introduce the reader to society in the past. In particular the author refers repeatedly to Balzac and at times to Jane Austen to remind the reader what society was like in the 19th century. The core of the data set starts to become apparant in the second section with the author documenting the capital/income ratio over time in Britain peaking at 7x in 1700 falling to 2x post the first world war. The author includes the same information for france as well. The author discusses how foreign capital was important in the 19th and early 20th centuries during the colonial period and discusses the role of government debt and how it does not change national wealth just the distribution of wealth within the population. The author includes the value of national wealth through time by showing both public assets and public debt over time. The author discusses economic theory and how Ricardian equivalence is strictly only true of economies have a representative agent, which they do not hence the principal should be considered suspect. The author discusses the capital stock through the world wars and how it changed dramatically during the 20th century, though the capital stock has had a recent resurgence as economic policy has drifted back toward free market capitalism. The author then moves to look at the New World and in particular the US and repeats the analysis there as well (though the author starts with Germany as well). In the US the capital stock was more stable (it wasnt a colonial power which was a large part of the capital stock of the UK and to a lesse extent France). Canada is also analyzed as another data point. The author also discusses regional differences by including the differences between the South and the North and the repurcussions of Slavery to the capital/income ratio. The south had a much higher capital/income ratio as much of its human capital was effectively consdered part of the capital stock. The author shows the distribution of capital over time in the US from 1770 to today as well as spot distribution of wealth data points for UK and France. The author starts to discuss the dynamics of the capital/income ratio through his second law of capitalism, namely the ratio is equal to savings/growth. This is the result of the differentiam equation that leads to steady state rather than an identity which holds true at any given point of time. The author then moves into discussing the capital stock over the last 40 years and how its been on a resurgent trend that has been catalyzed by the s/g relationship as well as privatizations. The author discusses the components of savings, the resurgence of the value of capital and where the capital/income ratio is going. The author moves on to the Capital/labor split and its evolution through the 21st century. In particular with the resurgence of growth in the capital stock the trend towards growing labor share in the 20th century has reversed itself and we are heading towards the 19th century. There are regional differences with countries like the US being counterexamples with the rise of the supermanager. The third part of the book is The structure of inequality. This is where the value of the books data set gets particularly apparant. The author discusses how the labor share of income has changed over time for the various portions of the population, in particular for the top 10 and top 1%. He discusses how the ownership of the capital stock has become less concentrated and there has been an emerging middle class of owners of capital. The author discusses how different countries have had different evolutions between there ownerships of capital and how the labour share of income is divided with the US having a more distributed capital base but a much more concentrated labour share distribution. The author discusses the "merit" of the distribution of labor income and how there is a conflict of interest now for supermanagers and the growth in the supermanager has coincided with the decline in the progressivity of the income tax. The author discusses the flow of income through inheritance and analyses the dynamics of this flow based on the ownership of the capital stock by age group and mortality rates. This form of analysis is definitely an important addition and goes against conventional wisdom of aging populations spending their savings on lifestyle maintenance. I would be very interested to know how this process is evolving in Japan and Italy for example. The author also discusses inequality at the global level and how there are increasing returns to scale in capital (this is definitely not a fact and much evidence is to the contrary but an empirical observation made by the author on a few examples). The author also looks at the growing share of wealth of the top centile and billionaires in particular. He discusses how Bill Gates and the Bettencourt family have had the same return on their capital over time despite one being self made and the other inherited reinforcing his thesis that growing capital has its own momentum based on the fact that if the return on capital is greather than the growth rate capital continues to accumulate to those who have it- a central point throughout the book. The 4th part is Regulating Capital in the 21st century. It is the authors partial solutions to the growing inequality that we see that is due to inherint dynamics and unrelated to the merits of an individuals labour contribution or the foresight of those investing in the future capital stock. It discusses ideas like rethinking progressive tax, increasing the top income bracket to 80% to diffuse the rent seeking behaviour of the super manager. It includes ideas on taxing capital, in particular a graduating tax on capital to both make sure people are using the capital stock efficiently as well as counteracting the benefits of the economies of scale the author has been pointing out. Lastly the author focuses on the pressing problem of public debt with a focus on Europe. The data the author has compiled has allowed him to look at the distribution of wealth in much of the Western world through a more refined lense. It is full of important insight and a true developement that takes us to a level with much more granular detail than what typically is focused on. For that reason the book is a must read and is definitely a 5* book. The policy recommendations i put far less value on. The author is focused on the distribution of wealth and the solutions he proposes are designed to get those more in line with politically what he believes is a more fair distribution, thus they are focused on optimizing a distributional outcome. Recommending confiscating capital to pay down national debt is an example of a solution to a problem without considering the consequences of the action on the future dynamics of the economic system. Though the solution might seem fair, it is also insane as funding the flow of capital stock would totally change. Discussing a policy that could have better dealt with preventing the ex ante buildup of national debt is better than discussing one that ex post unwinds it far more dramatically. In addition ideas like just taxing capital at higher rates depending on one's capital base is highly questionable. Imagine each year if an entrepreneur has to give up 5-10% of his equity of his company (as capital has migrated from land to financial capital this is precisely what will be required) then the world would be very different and I am a skeptic it would be a more utopian society. Generation transfer is far more dangerous than capital accumulation through a lifetime and the author's policy perscriptions are political and one gets a sense he is stepping outside his comfort zone of impacting wealth inequality and into impacting economic growth, which is another big factor in decreasing economic inequality. There are many things that are scary- in the UK the top 5 families own more than the bottom 20% with 2 of those 5 are ancestors of those who owned the fields which London was built on. Between the 2 facts above I worry far more about the fact that 2 are from ancient landowning families, a form of capital stock that does not depreciate than the former, which is worrisome, but a more granular analysis of the asset base and its properties would be required. Achieving better distribution of wealth is not about just taxing capital more (though that should be a part of it). We need better policies, this is a start in how to look at the problem more clearly. The solutions are food for thought, but at this stage only that- as the author states, economics is not a science it is a social science and democratic deliberation is necessary to help us decide what policies society believes in. This helps provide better tools to answer some of the questions we have to ask ourselves about why the asset base is owned as it is and how does that fit with our beliefs in how society should be organized considering all dimensions like individual merit, equality of opportunity, sanctity of contract for providing the right base incentives etc...

## Features

- Capitalism, Economics

## Technical Specifications

| Specification | Value |
|---------------|-------|
| Best Sellers Rank | #19,353 in Books ( See Top 100 in Books ) #11 in International Economics (Books) #18 in Theory of Economics #32 in Economic History (Books) |
| Customer Reviews | 4.5 out of 5 stars 5,741 Reviews |

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## Customer Reviews

### ⭐⭐⭐⭐⭐ Piketty's book intoduces a large volume of data about global income and wealth for a more rational discussion of inequality
*by F***H on August 24, 2017*

In his introduction to this book, Piketty states, “When the rate of return on capital exceeds the rate of growth of output and income, as it did in the nineteenth century and seems quite likely to do again in the twenty-first, capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based.” He further states that “Intellectual and political debate about the distribution of wealth has long been based on an abundance of prejudice and a paucity of fact.” He then addresses this paucity with the presentation and analysis of the results the project he led to acquire an enormous volume of historical data about global income and wealth. In the introduction, he briefly reviews the contributions but also the errors of earlier debate without data. These included Malthus’s concern with overpopulation and the need to end all welfare, Ricardo’s principle of scarcity with population and production growing as land becomes increasingly scarce, and Marx’s principle of infinite accumulation with the industrial revolution leading to no limit on the accumulation of capital (which did not consider coming social democracy, technological progress, and how to organize society without private capital). The Kuznets Curve of 1955 introduced data from US tax returns and Kuznets’s own estimates of national income to conclude that inequality increased in the early phase but declined in the later phases of industrialization. Unfortunately, this curve greatly understated the roles of the World Wars and violent economic and political shocks that led to the reduction in inequality between 1914 and 1945 and failed to explain the rising inequality after 1970. Piketty seeks to contribute “to the debate about the best way to organize society…to achieve a just social order….achieved effectively under rule of law…subject to democratic debate.” He states he has “no interest in denouncing inequality or capitalism per se…as long as they are justified.” He worked briefly in the US and found the work of US economists unconvincing. “There had been no significant effort to collect historical data on the dynamics of inequality since Kuznets, yet the profession continued to churn out purely theoretical results without even knowing (the) facts.” He found that “the discipline of economics has yet to get over its childish passion for mathematics and the purely theoretical and often highly ideological speculation.” Subsequently, he returned to France and set out to collect the missing data. He gathered data in two main categories: 1) inequality in distribution of income and 2) inequality in the distribution of wealth and the relation of wealth to income. For income, he built the World Top Incomes Database (WTID), which is based on the joint work of some thirty researchers around the world. This data series begins in each country when an income tax was established (usually 1910-1920 but as early as the 1880s in Japan and Germany). For wealth his sources included estate tax returns (usually dating back to the 1920s, but in a few cases as far back as the French Revolution), the relative contributions of inherited wealth and savings, and measures of the total stock of national wealth. In collecting as complete and consistent a set of historical sources as possible, he had two advantages over previous authors—a longer historical perspective (now including data from the 2000s) and advances in computer technology. Piketty reports two major conclusions from his study. “The first is that one should be wary of any economic determinism in regard to inequalities of wealth and income (that they emerge according to immutable natural laws). The history of the distribution of wealth has always been deeply political and it cannot be reduced to purely economic mechanisms. In particular, the reduction of inequality…between 1910 and 1950 was above all a consequence of war and of policies adopted to cope with the shocks of war.” “The resurgence of inequality after 1980 is due largely to political shifts…especially in regard to taxation and finance. The history of inequality is shaped by the way…actors view what is just…as well as the relative power of those actors.” The second conclusion is “that the dynamics of wealth distribution reveal powerful mechanisms pushing alternately toward convergence (equality) and divergence (inequality)….There is no natural, spontaneous process to prevent destabilizing ineqalitarian forces from prevailing permanently.” “Over a long period of time, the main force in favor of greater equality (convergence) has been the diffusion of knowledge and skills.” Other proposed forces for greater equality, such as advanced technology creating a need for greater skills or class warfare giving way to less divisive generational warfare as the population ages, appear to be largely illusory. “No matter how potent a force the diffusion of knowledge and skills may be, it can nevertheless be thwarted and overwhelmed by powerful forces pushing…toward greater inequality (divergence).” With respect to income, the spectacular increase in inequality from labor income, particularly in the US and UK, largely reflects the recent marked separation of the top managers of large firms from the rest of the population, not because of increased productivity, but because they can set their own remuneration. This separation is amplified by marginal tax rates that actually decrease for the highest incomes. Capital income from large fortunes also contributes to income inequality but may be understated due to hidden off-shore accounts and by producing only the relatively small portion of income needed for expenses while the rest remains within the fortune. (Fig. I.1 shows income inequality in the US from 1910 to 2010.) With respect to wealth, inequality (divergence) is increased when the rate of return on capital significantly exceeds the growth rate of the economy (r > g) as it did until the nineteenth century and is likely to in the twenty-first century. “Under such conditions it is inevitable that inherited wealth will dominate wealth amassed from a lifetime’s labor by a wide margin” and lead to extreme inequality. This increasing inequality of wealth is greatly amplified by structural factors leading to higher rates of increase for the largest fortunes that are no longer related to whatever entrepreneurial activities were at the onset of their origin. (Fig. I.2 shows wealth inequality in Europe from 1870 to 2010.) This analysis also shows a major shift in the main components of wealth from land, slaves (in the US), and colonies (in Europe) to domestic capital and housing. Historically, the rate of return on capital was 4.5-5% from antiquity to 1913, fell to 1.5% by 1950, and is rising again to 4% or more by 2012 and beyond. During the same period, the global rate of growth was close to zero before the industrial revolution, rose to 1.5% by 1913 and to 3.5% in the mid to late twentieth century (due to catch-up after World War II and in the developing world), and is now falling and projected to be 1-1.5% in the twenty-first century. Thus the unusual fall of the return on capital (r) below growth (g) in the mid twentieth century was associated with a temporary reduction in the rate of increasing inequality. (Fig 10.10 shows a comparison of the return on capital [r] to growth [g] from antiquity to 2100.) This review barely scratches the surface of the core contribution of this book, which is the enormous volume of data and analysis it provides. The numerical information is presented in a very well developed series of 97 illustrations and 18 tables. This information is used as support for extensive analysis and discussion of the many aspects of historical, present, and likely future inequality that often contradict positions related to ideology and simplistic models. An excellent 22 page overview of “A Social State for the Twenty-First Century” is provided at the beginning of the fourth and final part of the book. This is followed by “Rethinking the Progressive Income Tax,” “The Question of the Public Debt,” the author’s preference for “A Global Tax on Capital,” and finally, the conclusion. The conclusion reiterates that the principal destabilizing force leading to ever-increasing inequality is a return on capital (r) significantly higher than the rate of growth of income and output (g) for long periods of time. Hence wealth accumulated in the past grows more rapidly than output and wages, and the entrepreneur inevitably tends to become a rentier no longer of use in promoting growth. A progressive annual tax on capital would be the right solution to this problem, although it would require a high level of international cooperation. Piketty objects to the expression “economic science” which implies little to do with the logic of politics or culture in conclusions about inequality. He prefers the expression “political economy” which considers economics as a sub discipline of the social sciences, alongside history, sociology, anthropology, and political science. He insists that economic and political changes are inextricably entwined and must be studied together. This review is supplemented by a relatively random selection of multiple comments and assertions from the book: “The nature of capital has changed: it once was mainly land but has become primarily housing plus industrial and financial assets.” “Capital…is always risk-oriented and entrepreneurial, at least at its inception; yet it always tends to transform itself into rents as it accumulates….” With respect to global inequality, the industrial revolution led to growth of Europe and America’s share of global output to two to three times their share of population. This share is now rapidly decreasing due to higher growth in developing economies in the “catch-up” phase than in mature economies. Europe and America’s share of global production of goods and services rose from about 30-35% in 1700 to 70-80% from 1900 to 1980, fell to 50% by 2010, and may go as low as 20-30% later in the twenty-first century. European and American national inequality rose to record heights in 1910, decreased markedly by the 1940s due to the world wars and Great Depression, then began a rapid return to high levels after the 1970s, particularly in the US. The share of national income for the top 10% in Europe was over 45% in 1910, under 25% in 1970, and about 30% in 2010. In the US it was over 40% in 1910, under 30% in 1970, and nearly 50% in 2010. “Numerous studies mention a significant increase in the share of national income in the rich countries going to profits and capital after 1970, along with the concomitant decrease in the share going to wages and labor.” In the past several decades, the share of national income for the top 0.1% increased from 2 to 10% in the US, from 1.5 to 2.5% in France and Japan, and from 1 to 2% in Sweden. “It is important to note the considerable transfer of US national income—on the order of 15 points—from the poorest 90% to the richest 10% since 1980”— 5 to 7 times greater than the 2 to 3 points in Europe and Japan. “The vast majority (60 to 70%)…of the top 0.1% of the income hierarchy in 2000-2010 consists of top managers. By comparison, athletes, actors, and artists of all kinds make up less than 5% of this group.” “At the very highest levels salaries are set by the executives themselves or by corporate compensation committees whose members usually earn comparable salaries….” “It is when sales and profits increase for external reasons that executive pay rises most rapidly. This is particularly clear in the case of US corporations…pay for luck.” Global inequality of wealth in the early 2010s is comparable to that of Europe in 1900-1919. The top 0.1% own nearly 20%, the top 1% about 50%, the top 10% between 80 and 90%, and the bottom half less than 5%. The share of national wealth ownership in Europe for the top 10% and top 1% was 90% and over 50% in 1910, 60% and 20% in 1970, and about 63% and 24% in 2010. During this time, the share for the 50th to the 90th percentile increased from 5% to 40%, creating a middle class, but the share for the bottom 50% remained at 5%. In the US, shares for the top 10% and top 1% were about 80% and 45% in 1910, 64% and 30% in 1970, and about 70% and 34% in 2010—with a much more rapid increase after 1970 than in Europe, reaching 70% and 34% versus 63% and 24% by 2010 (while the bottom half claim just 2%). Inherited wealth is estimated to account for 60-70% of the largest fortunes worldwide. This figure is lower than the 80-90% reached during the belle Epoque, but trending strongly toward a return to that level. Forbes magazine divides billionaires into three groups—pure heirs, heirs who subsequently grow their wealth, and pure entrepreneurs, with each of these groups representing about a third of the total. Due to increased life expectancy, the average age of heirs at the age of inheritance has increased from thirty in the nineteenth century to fifty in the twenty-first century, although with larger inheritances. Today, transmission of capital by gift is nearly as important as transmission by inheritance. This change counters increased life expectancy and accounts for almost half of the present inheritance flows. “No matter how justified inequalities of wealth may be initially, fortunes can grow and perpetuate themselves beyond all reasonable limits and beyond any possible rational justification in terms of social utility.” Large fortunes experience increasing rates of growth related to size alone independent of their origins— 10% from $15-30 billion, about 9% from $1-15 billion, about 8% from$500 million to $1 billion, about 7% from $100-500 million, and about 6% below $100 million for university endowments. From 1990 to 2010, the fortune of Bill Gates, the Microsoft genius, grew from $4 billion to $50 billion, while that of Liliane Bettencourt, a cosmetics heiress who never worked a day in her life, grew at a similar rate from $2 billion to $25 billion. In 2013, sovereign wealth funds were worth $5.3 trillion ($3.2 trillion from petroleum exporting states and 2.1 trillion from nonpetroleum states like China, Hong Kong, and Singapore), similar to the total of $5.4 trillion for Forbes billionaires. Together, these sources account for 3% of global wealth. Large amounts of unreported financial assets are held in tax havens—approximately 10% according to the negative global balance of payments (more money leaves countries than enters them). In the US, parents’ income has become an almost perfect predictor of university access—average income of parents of Harvard students is currently about $450,000. “Broadly speaking, the US and British policies of economic liberalization (after 1980)…neither increased growth nor decreased it.” The US economy was much more innovative in 1950-1970 than in 1990-2010….Productivity growth was nearly twice as high in the former period as in the latter. In most countries taxes have (or will soon) become regressive at the top of the income hierarchy.” The optimal tax rate in the developed countries is probably above 80%. One of the most important reforms (is) to establish a unified retirement scheme based on individual accounts with equal rights for everyone, no matter how complex one’s career path. Debt often becomes a backhanded form of redistribution of wealth from the poor to the rich (who as a general rule ought to be paying taxes rather than lending). Inflation is at best a very imperfect substitute for a progressive tax on capital. It is hard to control, and much of the desired effect disappears once it becomes embedded in expectations. Defining the meaning of inequality and justifying the position of the winners is a matter of vital importance, and one can expect to see all sorts of misrepresentations of the facts in service of the cause. No hypocrisy is too great when economic and financial elites are obliged to defend their interests—and that includes economists, who currently occupy an enviable place the US income hierarchy. “Modern meritocratic society, especially in the United States, is much harder on the losers, because it seeks to justify domination on the grounds of justice, virtue, and merit, to say nothing of the insufficient productivity of those at the bottom.” The history of the progressive tax over the course of the twentieth century suggests that the risk of a drift toward oligarchy is real and gives little reason for optimism about where the United States is headed.

### ⭐⭐⭐⭐⭐ indepth view of the distribution of profits to labour and capital through time with focus on France and US
*by A***N on April 22, 2014*

First off I'd like to state that the data that the author has compiled is very impressive and provides the reader with a new way to look at both the stock and flow of wealth of society and its distribution. It is unique and comprehensive and for this aspect of the book it is landmark and hopefully will improve and refine our thinking about capital and inequality going forward. The conclusions of the author i think are very suspect and not nearly as insightful as the analysis, but they are where the author's politics come out and are a relatively smaller portion of the book. The need to move beyond looking at crude measures of inequality like the Gini coefficient and distribution of profits between labour and capital was much needed and the author was able to, through meticulous analysis look at the entire distribution of wealth through society by looking at the bottom 50%, top 10% top 1% and top .1% when possible both from a labour and capital perspective. The dataset is not global, though the author was able to partially reconstruct a broad range of countries, but includes the US, France, UK, Germany aspects of Japan and the Scandinavian countries with a focus on the US and France. The book is split into 4 part. The first three parts are both an introduction to the economics as well the accompanying economic analysis of the accompanying datasets. The first part - income and capital start out by defining the basics of what the author will discuss throughout the book namely income, capital and how the output of society is distributed and how that has changed over time. National accounting is discussed, the capital stock and its properties are introduced as well as some key identities that will be used throughout regarding the share of income going to capital which is determined by the return of capital and the size of the capital stock relative to annual output. The author also discusses growth over time documenting global growth rates over time and introduces to the unfamiliar reader the consequences of how small changes in growth compounded can lead to large cumulative changes. The author discusses demographic trends globally through time and some of the dynamics of them (which are largely unpredictable). The author also discusses how growth and demographics can influence the capital intensity of the economy. The author also discusses how the sectors of the economy and output have changed over time with agriculture and its share of both labour and capital much lower but the service sector replacing it and how manufacturing intensity and capital replaced agricultural through the industrial revolution as well. He also discusses modern concerns about growth by discussing Robert Gordon's recent paper on the end of growth and whether techonological innovation has run much of its course, he is relatively optimistic but nonetheless foresees growth following a bell curve for which we are at a peak which will decline but to much higher levels than centuries in the past. The author also discusses inflation and monetary policy and how it has changed over time. The second part of the book is called the dynamiocs of the capital/income ratio. It is about precisely that with the author starting out by using novels to introduce the reader to society in the past. In particular the author refers repeatedly to Balzac and at times to Jane Austen to remind the reader what society was like in the 19th century. The core of the data set starts to become apparant in the second section with the author documenting the capital/income ratio over time in Britain peaking at 7x in 1700 falling to 2x post the first world war. The author includes the same information for france as well. The author discusses how foreign capital was important in the 19th and early 20th centuries during the colonial period and discusses the role of government debt and how it does not change national wealth just the distribution of wealth within the population. The author includes the value of national wealth through time by showing both public assets and public debt over time. The author discusses economic theory and how Ricardian equivalence is strictly only true of economies have a representative agent, which they do not hence the principal should be considered suspect. The author discusses the capital stock through the world wars and how it changed dramatically during the 20th century, though the capital stock has had a recent resurgence as economic policy has drifted back toward free market capitalism. The author then moves to look at the New World and in particular the US and repeats the analysis there as well (though the author starts with Germany as well). In the US the capital stock was more stable (it wasnt a colonial power which was a large part of the capital stock of the UK and to a lesse extent France). Canada is also analyzed as another data point. The author also discusses regional differences by including the differences between the South and the North and the repurcussions of Slavery to the capital/income ratio. The south had a much higher capital/income ratio as much of its human capital was effectively consdered part of the capital stock. The author shows the distribution of capital over time in the US from 1770 to today as well as spot distribution of wealth data points for UK and France. The author starts to discuss the dynamics of the capital/income ratio through his second law of capitalism, namely the ratio is equal to savings/growth. This is the result of the differentiam equation that leads to steady state rather than an identity which holds true at any given point of time. The author then moves into discussing the capital stock over the last 40 years and how its been on a resurgent trend that has been catalyzed by the s/g relationship as well as privatizations. The author discusses the components of savings, the resurgence of the value of capital and where the capital/income ratio is going. The author moves on to the Capital/labor split and its evolution through the 21st century. In particular with the resurgence of growth in the capital stock the trend towards growing labor share in the 20th century has reversed itself and we are heading towards the 19th century. There are regional differences with countries like the US being counterexamples with the rise of the supermanager. The third part of the book is The structure of inequality. This is where the value of the books data set gets particularly apparant. The author discusses how the labor share of income has changed over time for the various portions of the population, in particular for the top 10 and top 1%. He discusses how the ownership of the capital stock has become less concentrated and there has been an emerging middle class of owners of capital. The author discusses how different countries have had different evolutions between there ownerships of capital and how the labour share of income is divided with the US having a more distributed capital base but a much more concentrated labour share distribution. The author discusses the "merit" of the distribution of labor income and how there is a conflict of interest now for supermanagers and the growth in the supermanager has coincided with the decline in the progressivity of the income tax. The author discusses the flow of income through inheritance and analyses the dynamics of this flow based on the ownership of the capital stock by age group and mortality rates. This form of analysis is definitely an important addition and goes against conventional wisdom of aging populations spending their savings on lifestyle maintenance. I would be very interested to know how this process is evolving in Japan and Italy for example. The author also discusses inequality at the global level and how there are increasing returns to scale in capital (this is definitely not a fact and much evidence is to the contrary but an empirical observation made by the author on a few examples). The author also looks at the growing share of wealth of the top centile and billionaires in particular. He discusses how Bill Gates and the Bettencourt family have had the same return on their capital over time despite one being self made and the other inherited reinforcing his thesis that growing capital has its own momentum based on the fact that if the return on capital is greather than the growth rate capital continues to accumulate to those who have it- a central point throughout the book. The 4th part is Regulating Capital in the 21st century. It is the authors partial solutions to the growing inequality that we see that is due to inherint dynamics and unrelated to the merits of an individuals labour contribution or the foresight of those investing in the future capital stock. It discusses ideas like rethinking progressive tax, increasing the top income bracket to 80% to diffuse the rent seeking behaviour of the super manager. It includes ideas on taxing capital, in particular a graduating tax on capital to both make sure people are using the capital stock efficiently as well as counteracting the benefits of the economies of scale the author has been pointing out. Lastly the author focuses on the pressing problem of public debt with a focus on Europe. The data the author has compiled has allowed him to look at the distribution of wealth in much of the Western world through a more refined lense. It is full of important insight and a true developement that takes us to a level with much more granular detail than what typically is focused on. For that reason the book is a must read and is definitely a 5* book. The policy recommendations i put far less value on. The author is focused on the distribution of wealth and the solutions he proposes are designed to get those more in line with politically what he believes is a more fair distribution, thus they are focused on optimizing a distributional outcome. Recommending confiscating capital to pay down national debt is an example of a solution to a problem without considering the consequences of the action on the future dynamics of the economic system. Though the solution might seem fair, it is also insane as funding the flow of capital stock would totally change. Discussing a policy that could have better dealt with preventing the ex ante buildup of national debt is better than discussing one that ex post unwinds it far more dramatically. In addition ideas like just taxing capital at higher rates depending on one's capital base is highly questionable. Imagine each year if an entrepreneur has to give up 5-10% of his equity of his company (as capital has migrated from land to financial capital this is precisely what will be required) then the world would be very different and I am a skeptic it would be a more utopian society. Generation transfer is far more dangerous than capital accumulation through a lifetime and the author's policy perscriptions are political and one gets a sense he is stepping outside his comfort zone of impacting wealth inequality and into impacting economic growth, which is another big factor in decreasing economic inequality. There are many things that are scary- in the UK the top 5 families own more than the bottom 20% with 2 of those 5 are ancestors of those who owned the fields which London was built on. Between the 2 facts above I worry far more about the fact that 2 are from ancient landowning families, a form of capital stock that does not depreciate than the former, which is worrisome, but a more granular analysis of the asset base and its properties would be required. Achieving better distribution of wealth is not about just taxing capital more (though that should be a part of it). We need better policies, this is a start in how to look at the problem more clearly. The solutions are food for thought, but at this stage only that- as the author states, economics is not a science it is a social science and democratic deliberation is necessary to help us decide what policies society believes in. This helps provide better tools to answer some of the questions we have to ask ourselves about why the asset base is owned as it is and how does that fit with our beliefs in how society should be organized considering all dimensions like individual merit, equality of opportunity, sanctity of contract for providing the right base incentives etc...

### ⭐⭐⭐⭐ A solid, well-researched work destined to become a classic of our time.
*by S***M on April 28, 2014*

I have been moved to review this book here partly to counter the embarrassingly ignorant, ideologically-motivated comments of many of the other reviewers on this page, who appear to be acting as trolls and astro-turfers, and to support the comments and recommendations made by the more thoughtful reviewers. First of all, contrary to the rants of those who wish to denounce any criticism of capitalism, Thomas Piketty is not a Marxist of any kind; a fact that ought to be obvious to anyone who has any background in Marx or who has read the author's own introduction. Piketty has no intrinsic issue with capitalism per se, nor even with inequality. In fact, personally, as someone who is more fundamentally opposed to both capitalism and inequality on principle, I regard Piketty's qualified acceptance of capitalism and inequality as constituting a theoretical weakness, in that his proposed remedies seem not only too modest but, lacking a system of democratic global governance, actually politically unfeasible. In terms of analysis however, Piketty's moderate social-liberalism actually imbues the work with an invaluable sense of objectivity that a similar work by a committed socialist would not be perceived to have. Quite simply, Piketty has no axe to grind and this work is the result of rigorous, thorough, methodologically-sound research based on a quite staggering wealth of data. This is, therefore, a very important work, certainly destined to be as referenced and quoted in the social sciences as John Rawls' "A Theory of Justice". The sheer scope of the work, its clear, methodical presentation and clearly explained methodology make this work very user-friendly and an absolute treasure as a reference work for social scientists. Capital in the 21st Century is an excellent book and deserves as wide an audience as possible. I have given it 4 stars because I am unsatisfied with Piketty's rather weak policy recommendations for the reasons I state above. Nonetheless, as a source of data and as a guide to interpreting capitalism in the 21st Century, this work is quite simply phenomenal. Arguably, this may well be the most important work on capitalism since Karl Polanyi's "The Great Transformation" (1944). My advice; don't hesitate- buy it, read it, discuss it. Anyone without a pig-headed flat-earther's insistence on believing in capitalist fairy-tales is bound to find serious food for thought here.

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