12. Two of the best sources on concentration of wealth are direct responses to Henry George's exposes of the high concentration of landownership. One is the 1894 Report of the Illinois Bureau of Labor Statistics (rpt 1896) under Governor J.P. Altgeld and Editor Louis F. Post, publishing Lorenz data on the ownership of land in The Loop of Chicago. The other is the U.S. Census of Agriculture, with Lorenz data on the size distribution of farm real estate. From 1900-40 it even reports separate valuations for land and improvements. I label these as "Lorenz" data because that is how they are generally known today, but Lorenz did not publish his curve until 1906, while Henry George expounded the basic concept much earlier in embarrassing Francis Walker for his simplistic views on how to measure farm concentration.
13. Piketty calls his hunches or opinions "laws", when they have not risen to the dignity even of hypotheses, much less theories, much less "laws". Economists and their journalist camp-followers love to call relationships "laws" or "curves" or "functions", however superficial or transient they may be. Engler's "Law" has better stood the tests of time, but it evolved into Keynes' "consumption function", even though Keynes' version was based on nothing more solid than a statistical fallacy, the "Regression Fallacy". Using the same fallacy, Piketty assumes that consumption as a function of income rises slower, even though many (including this writer) have shown that housing and recreational spending rise faster than income
C. Probable causes of the popularity and impact of P.'s work
1. He has a model, expressable in the simplest algebraic terms. Economists love a model; many feel lost at sea without one. Other intellectuals are impressed by them without feeling a need to understand them. This model uses just 3 terms at a time; anyone can see the point Piketty is making. The terms are ill-defined and slippery, but that lets readers of different backgrounds and ideologies fit them into their familiar doctrines, carrying whatever baggage that gives them comfort, without having to think much. A frequent way to incorporate slippery terms into one's discourse is to belittle definitions as quibbling over "mere semantics", urging impatient readers to forge ahead using the writer's preferred baggage.
2. What is new about Piketty's new model? Probably it is his emphasizing the unsustainability of capital formation. Piketty does acknowledge that Marx said it first, although with frequent reservations that irritate Marxists. Piketty is certainly right to fault today's most prominent economists for promoting more and more "growth" via policies that favor property over labor, and in this sense his work is "new".
It is too bad, though, he did not go further back to acknowledge historical pessimists like Augustus "Gloomy Gus" Spengler. Even Henry George, with all his optimism, catered to pessimism with his chapter on "How modern civilization may decline". Volumes have been written about the decline and fall of the glory that was Greece and the grandeur that was Rome, and several other ancient civilizations and hegemons from Mongolia to Peru. The theme was so widespread that Shelley, Goldsmith, Byron, and other English poets penned verses about it, still memorized by students of English literature. One might even argue that the archaeological wonders left to us by failed empires of the past were the products of "infinite accumulation", malinvested so as to drain their economies of needed working or "circulating" capital. Cynical economists today routinely mock modern white elephants as "pyramids".
3. Piketty's model is that when the rate of return on capital exceeds the rate of growth of output and income then "capitalism" "automatically generates inequalities". The word "automatically" is another invitation to accept without thinking. That compact statement is so naïve, so brimming with hidden false assumptions, it is hard to take seriously, except that the world does, at least temporarily, so to be topical we devote Section D, below, to dissecting it.
4. Piketty bolsters his model with Himalayan ranges of data from 20 nations over long time periods. Thus he speaks to historians and abstract modelers, both. That by itself is a positive and needed integration, but on the minus side, It takes patience to show that the data are flawed and/or do not fit the model, so the first reaction of an importunate reader or a journalist making a deadline is to bypass the "mere semantics" as nitpicking. "50 million Frenchmen can't be wrong", nor can one Frenchman citing several million data points, is the thinking.
5. The model involves a geometric progression (exponential growth), alleged to have no stopping point short of societal collapse. Thus it goes far back in history to forecast far ahead, giving an impression of a secular perspective in time. Doom forecasts have always boosted media sales.
6. Piketty couples #5 with allusions to unstoppable global warming, etc., although this must be muted by his conflating land with capital. For if land is capital, and accumulation means capital formation, then there are no limits to nature, the environment, natural resources, or other such land categories.
7. Piketty's doom forecast incorporates Marxist elements, although not as much as Marxists would approve. He says we are approaching the "Marxist Apocalypse". "Marx's analysis" (undefined) "remains relevant". This alludes to a "principle of infinite accumulation", which is "a key insight". Not always clear if this refers to accumulation of given wealth by the 1%, or aggregate result of oversaving fortified by unequal distribution - Piketty treats them interchangeably. Piketty avers that the high ratio of private (sic) wealth to national income confirms Marx -- even though the "accumulation" cannot be infinite, as in Marx, it is still just as bad.
Isaiah is easier to understand: "Woe be unto them that " lay field to field, until there be no place, that they may be alone in the midst of the earth". Millenia of scientific and intellectual progress since Isaiah seem to have led us backwards from the obvious to the mystical.
Many besides Marx have warned against high ratios of private asset values to income. Turgot was one, but he called it le denier. In London it is the "Years purchase". On Wall St. it is the P/e ratio. In Case-Shiller it is "irrational expectations". So why the emphasis on Marx? I would speculate that his intellectual aura shines brighter in Piketty's Parisian circles than in the U.S.A. Some Americans have also been steeped in Marx. One of them, Michael Hudson, might even be said to have scooped Piketty with this kind of thinking, except that he also credits Marx.
8. Piketty writes that Marx's Apocalypse is more important now than "Ricardo's Principle of Scarcity". Since Ricardo wrote of land scarcity, and distinguished land from capital, Piketty's contrast is mixed and confusing.
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