Why Piketty’s book is a bigger deal in America than in France

On The Upshot I have a new piece, co-authored with Veronique de Rugy, here is an excerpt:

…the book’s timing may be behind the state of French debate. Had it been released in the halcyon days of Mr. Hollande’s 2011 presidential campaign, when many French considered soak-the-rich talk and 75 percent marginal tax rates to be practical fiscal strategies, Mr. Piketty’s book might have made a bigger splash in France. Today, with the economy still struggling, Mr. Hollande is talking about tax cuts rather tax increases. The 75 percent rate has suffered constitutional challenges, and even celebrity backlashes, such as when Gérard Depardieu pursued and received Russian citizenship to lower his tax rate. Mr. Hollande seems to be steering France away from its traditional role as a defender of high taxes and toward some structural reforms, albeit at a slow pace. During his New Year address, Hollande even turned into a rhetorical supply-sider, making the case for cutting taxes and public spending, improving competitiveness, and creating a more investor-friendly climate. In any case, the French appetite for stiff tax increases has diminished.

…Finally, some other French economists have taken the lead in challenging Mr. Piketty’s empirical claims. One recent paper by four economists at l’Institut d’Etudes Politiques de Paris challenges Mr. Piketty’s view that inequality has increased because the return to capital has been greater than general growth in the economy. The current shorthand is “r > g.”

The paper argues that the higher growth of capital rests entirely on returns to housing, and takes technical issues with the book’s treatment of housing, too. If Mr. Piketty’s argument depends on housing, it hardly seems to match his basic story about the ongoing ascendancy of capitalists.

There is much more at the link.


Does this make him the Piers Morgan of economists?

I think it makes him the Piers Anthony of economists.

I think timing is certainly part of it. Americans are also looking around at a ruling elite that seems to face no consequences. From partisans of both parties you hear complaints about the ruling elite escaping punishment, flaunting the laws and so on. Tying that to the rather obvious wealth gap and you hit a nerve.

Largely mood affiliation. We have the best educated, more intelligent ruling elite in history.

It's not so much the ruling elite as the illuminati who pull the strings on all the world's political leaders behind the scenes. I.e. all bankers, Goldman Sachs employees, really anyone working in finance, and all Harvard graduates except for Obama and his clique. Now that we have exposed them as making their vast fortunes on the back of overdraft fees on the poor, lobbying, and otherwise being parasites, the mask is off and the people are ready for Piketty.

With your prior approval, may I suggest the Koch-funded Mercatus-affiliated patriaroligarchy as illuminati apparatchiks?

Insane rantings from the left. Talent and IQ is the story here, not secret organizations. It's simply the glory of the free market.

Rants? IQ and free market?
WOW...true believing blinds itself to lack of freedom, inequality of opportunity, and control in society.

As opposed to France's ruling elite?

>Americans are also looking around at a ruling elite that seems to face no consequences.

That has nothing to do with it. No one looks at Obama and Reid and thinks "Here is a zillionaire who is screwing me." They think "Here is a politician who is screwing me." It rarely occurs to Americans that their politicians are one-percenters.

The book is not a big deal in America. It's a big deal among American leftists elites who grasp my previous point: that "rich" equates to "CEO" for most American voters. Demonize the "rich" and you've demonized the right. The lefty zillionaires, as always, get off unscathed.

Most of the references to the book and author I've been seeing are from the right,claiming a return of Marxism,socialism, and of 100% tax rates to redistribute all the wealth to the lazy.

Of course, the TEA Taxed Enough Already crowd appeared at the point the Federal tax burden dropped below 15% of GDP thanks to the job killing tax cuts in the job killing Obama stimulus which was filled with wasteful job killing government spending on job killing tax cuts. Why no TEA party in the 90s when the Newt-Clinton standoff resulted in tax and spend of nearly 21% of GDP in taxes and down to near 19% of GDP in spending.

My skimming of the commentary has convinced me it can't possibly get any idea of what the book is about without spending $25, but given that's four hours at minimum wage after taxes, that's a lot of sacrifice which is what a book titled capital should be about.

But if he's really talking about capital, why not call it labor, unless his point is that capital is no longer a product of labor, but instead about pillage and plunder and pump and dump depreciating asset price inflation. It is only by pillage and plunder and pump and dump depreciating asset price inflation that r > g is possible.

I doubt timing is more important than the fact that the top 1/10 of 1% had 2% share of the income in France and 6.9% in the US.

So last week the problem was that Piketty doesn't talk enough about how much "risk" the daring capitalists take on to get their r returns. This week it's that there are no capitalists, just homeowners. Next week?

Today's paper said that French house prices have started to decline.

That could have been a JAMC comment.

[No offence intended, deariemie.]

...Both are correct to some extent? Risk being tied to r is so incredibly fundamental to an educated understanding of finance that Piketty's failure to mention it is absolutely nuts. It's at the core of basically everything published and taught in academic finance over the past 40+ years.

French people are more used to French intellectuals. They know how to ignore them. Americans take things too seriously.

Well frankly I'm a little offended at the idea of you accusing Americans of taking intellectuals seriously

It is an unusual claim, I will admit. But I think the evidence is strong. Europeans, especially of a Catholic persuasion, seem to believe that all public life is a fraud. They think everyone is really cheating, but pretending to be respectable in front of others. This is why they keep voting for Berlusconi. And why they don't want Roman Polanski to face charges. As Polanski said, doesn't everyone want to sleep with 12 year old girls?

So they go on ignoring people like Derrida. It is only the painfully earnest Northern Protestants who actually believe things. I am sure Picketty himself, like Pol Pot's teachers in Paris, would be appalled if anyone actually took him seriously and followed his advice. Just as Chomsky avails himself of off-shore trust funds to make sure his children don't actually pay any tax and so remain in the 1%.

That sounds interesting. Where can I find out about off-shore trust funds?

Try the back pages of "The Economist".

I basically agree, Americans are terribly earnest and our elites have always suffered from colonial inferiority. Add that no one reads French anymore and it all becomes so terribly exciting. I think protestantism plays a big role in this as well with its privileging of text over everything else.

As to Catholic Europe, I think you are confusing Southern Europe with Catholicism, there are other factors. The Irish, Belgians, Poles, Catholic Germans, etc... are quite different in this than the Mediterraneans. As to Polanski, France is a weird hybrid.

I think there is room to argue over how far north the influence goes, but if you think this does not affect Northern Catholics, please let me introduce you to Charles Haughey. Or Teddy Kennedy if it comes to that.

What, you fancy the Irish have a take on public life similar to the Italians or that the careers of Haughey and Kennedy demonstrate they should?

I don't know if one can really compare Piketty's students to Pol Pot. The horrors of the Khmer Rouge are absolutely nothing compared to what the effects of a progressive tax on capital would be. Speaking of horrors, the current restrictions on immigration are truly a modern day crulty.

'French people are more used to French intellectuals.'

Quite true - 'Previously, de Rugy has been a resident fellow at the American Enterprise Institute, a policy analyst at the Cato Institute, and a research fellow at the Atlas Economic Research Foundation. Before moving to the United States, she oversaw academic programs in France for the Institute for Humane Studies Europe.

She received her MA in economics from the Paris Dauphine University and her PhD in economics from the Pantheon-Sorbonne University.' http://mercatus.org/veronique-de-rugy

'They know how to ignore them.'

Well, maybe her boss told her to get involved? After all, his name is also atttached to the article. Or maybe now, as an immigrant apparently with American citizenship, she is full of fervor to prevent Americans from experiencing the horrors of French life.

tldr; mood affiliation. Piketty doesn't understand the magical power of the invisible hand. Open borders. The end.

Your troll act is getting really tiresome. Either make your points or GTFO.

This guy has only posted a couple of times. If you are mistaking him for me, well that's an error on your part.

Arguments this weak actually increase the likelihood of people believing your opponent.

Timing, yes. Europe is quicker to turn changes in popular opinion into changes in policy. Parliamentary systems tend to do this. America's system seems designed to inhibit this--a design I happen to cherish. But it does put us behind the curve. We get European elitist fashions two seasons too late--at least! For enterprising intellectuals, I suggest writing books on European obsessions, keeping in mind it will be topical in America by the time you're finished.

In short, Europe goes from action to regret while America is still putting on her boots. Her two-seasons-out-of-fashion boots.

We can be fairly certain that r > g if your capital is invested entirely in land. The value of the land will grow as fast as g; in fact one of the best ways to measure growth is to measure land values. So far, r = g. But if we add the rents on the land, then clearly r > g.

There, that didn't need 600 pages.

And in Georgist society where taxes (t) = rent (r) for land, we get back to r=g.

The problem with land prices are questions like:

What if the land is in Butte?

Or Detroit?

The logic still applies, but g is local growth, not national or international. Also, Detroit's heavy property tax impacts on rents.

r = (capital growth + interest/rent/dividends - taxes)

For Detroit, g is negative, land values are falling, so the part of r derived from capital growth is negative. The part of r derived from rents will be low but probably non-zero.

Unfortunately, Detroit also has a heavy property tax burden. When property taxes exceed rents, the city enters a death spiral: investment returns are guaranteed to be negative. What's worse, the city keeps raising taxes to make up for the taxes being lost, accelerating its own decline.

Mark Twain allegedly said "Buy land, they're not making it anymore." We can improve this to "Buy land in well-governed places with a low property tax burden."

Not everywhere is Butte or Detroit. At least, not yet.

That is the Risk component.

Me and my family got into the 1% well over 15 years ago investing in DC real estate. Nuff said. Real estate, as the economist George said over 100 years ago, is rent seeking, literally, and it pays well.

Dude, who care's about Piketty … we have more important things to worry about … like racist NBA owners

Actually there are so many issues involved in this case it is hard to know where to start.

1. It looks like the Girlfriend was trying to do a Oksana - provoking a bigoted response in order to extort more cash and prizes in the Courts. To what extent should the Courts encourage this sort of destructive tactic? Did she have a lawyer advise her to do it? Is one little comment taken out of context all that relevant?

2. To what extent is an NBL franchise an actual piece of property? He owns it but he doesn't really as he can be forced to give it up in a fire sale. Can he sell it to his wife for one dollar?

3. What is the legal basis for forcing him to sell?

4. This was an illegally taped private conversation. Should it have been broadcast? Should there be a basic right to privacy here? I doubt the French would have allowed it.

5. To what extent do private thoughts matter? In his public life he does not seem to have brought problems to his franchise. His housing is another matter. If a private opinion does not affect someone's work, should it matter?

6. Did he buy off the NAACP? He gave them lots of cash. They overlooked his past history of racism and gave him prizes. Are they really that cheap?

This is starting to look a lot like a return to McCarthyism. Except being a Communist was dangerous in a way that being an elderly racist property developer is not. How long before we have a House Committee asking if someone was ever a buyer of a Jared Taylor book, or demanding they name names at Steve Sailor's conferences?

Some years ago they hired as their executive director a man of genuine accomplishment, a retired Verizon executive. He had the idea of reconfiguring the institutional mission of the NAACP into something more like the Urban League - an aegis for social work, &c. attempting to address practical problems. He lasted two years 'ere resigning and intimating that life was too short for him to squander any more time and patience in the presence of Julian Bond. They hire as a replacement a vocational ngo functionary and the board adopt a redoubled priority: lobbying for a federal hate crimes bill. We've 16,000 homicides in this country of which about 260 are white-on-black homicides of which a fraction are committed by skin-head types of which a fraction might be aided in their resolution by federal legislation. Skill development among blacks? Who cares?

Supposedly the ngo functionary was a wicked fund-raiser, however. You wonder if he just knows how to push the buttons of the affluent donor class amongst blacks (so we get cr*p like advertisements narrated by James Byrd's daughter).

So, not cheap. Somewhere in the grey are between 'cretin' and 'mountebank'.

Except being a Communist was dangerous in a way that being an elderly racist property developer is not.

Yeah, the classified ads manager fired Jessica Mitford when he found out about her former extracurriculars.

The end of the Cold War and opening of KGB files pretty much vindicated McCarthy. If anything, the infiltration and threat were worse than he ever imagined.

I could feel satisfied about the punishment for Sterling if I expected that non-white players and managers would get the same punishment. I don't.

I don't feel sorry for Sterling as much as I think the punishment was excessive, without any thoughtful proportionality, and political grandstanding.

Sterling and Silver. There's a book title.

I think I would just fire her for being a Mitford. I am not an attorney, would that sort of racial hatred toward Mitfordz be a civil rights violation?

We do have people mining the lists of people who have contributed to propositions reversing recent state court decisions finding that the citizens don't have a right to decide whether their state shall have gay marriage, and arranging to pressure their employers into firing them.

To me that looks like the best argument for anonymity in campaign donations.


You ask, I answer.

1) true, and rumor has it, despite her denials, she is friends with Magic Johnson who has been trying to buy the LA Clippers for ages, to no success. Now he has a chance

2) No. NBA owners are governed by contract, like a Homeowners Association contract

3) Yes, see 2)

4) Yes, an illegally taped contract is a violation of CA and Fed law. It cannot be used for evidence in any civil or criminal case. But--this is key--the NBA did its own evaluation and concluded the tape was legitimate, despite his denials, and, that the owner did not repudiate what was said, so this separate investigation is the grounds for kicking out the racist owner. Hence the NBA is punishing the owner for his thoughts, which is legal since the NBA owners contract allows for anybody to be kicked out of the owners club for any reason, if there's a sufficient vote. In theory the racist NBA owner can sue the girlfriend in federal or state court for violating his privacy.

5) see 4). The First Amendment does not hold for employer-employee or contractual relationships it has been held. Only for public speech.

6) Doubtful.

You ask, I answer. Because I can.

So the tl;dr version - yes, Picketty is an irrelevance. A shooting star who will fade once people look at the data. But racist NBA owners are part of the on-going Cold Civil War that is getting nastier and nastier.

So it is much more important.

And it's just an incredible coincidence that the smoking-gun Benghazi emails were "leaked" on the exact same day as this sure-to-be-six-week spectacle.

Yep. Your President let 4 Americans die and blamed it on a Youtube video just to escape blame. But hey, look, an 80-year-old racist!

Well done Other Jim.

That was right up there with Just Another MR Commentor's finest work.

Should have stopped at "Well done Other Jim."

For the exact same reason Cinco de Mayo is a bigger deal in the US than Mexico.

Piketty cooked his book, at least some of the data included in it.


Three French economists criticised Piketty three or four years ago.

Cooked his book? I'm assuming a French Socialist book is served with Socialist President Holland(aise) sauce.

Piketty was actually against the 75% tax, he thinks such a high tax doesn't suit well a small country like France where tax exile is easy and that it should only be applied to bigger areas such as the US or the european union.

A simpler reason is that french people are genuinely not interested in economics and therefore an economics book could never become a best-seller there, unless it is a book criticizing mainstream economics. Quite depressing when you know that the best selling political book of 2014 on french amazon is an antisemitic rant written by Alain Soral, the mentor of Dieudonné. It has ten times more reviews than Piketty's book...

Another thing is that there were tax upheavals in France last year which brought back into the spotlight his previous book about fiscal policy that he wrote 3 years ago with Emmanuel Saez and Camille Landais to put pressure on the socialist candidate to accomplish a big tax reform (Hollande did none of it of course). In the end, I think the media talked more about this previous book than Capital.

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