Roine breaks down much of the maths and the operational assumptions of Tomas Piketty’s Capital. Roine simplifies and sums up the historical data that Piketty used as well as much of the argument that Piketty makes. Furthermore, by focusing on the differences between Capital developed between France/UK and the States, one sees some trends that are generally obscured in the texts. The first major trend that Piketty (as well as Roine) point out that stood out to me is that income inequality increased in both the social democratic influenced capitalist countries of Europe as well as in the States, but in the States the differences came largely from income and wealth accumulation whereas in the Europe the differences stated from investment in capital and wealth accumulation. Furthermore, Piketty points out that wage stickiness applies at all ends of the spectrum and that this would have some real implications for wealth accumulation. Surprisingly, given Piketty’s general resistance to Marx (despite what some of his critics claim) some of his models from historical data do mirror developments in Marx’s Kapital. For example, the investment on capital declines when capital is steady and only becomes highly “profitable” after periods of capital destruction like war. However, wealth value as well as wage levels remain relatively static in their percentages. Piketty also notices that while Feudalism was no-growth economic situation in the mean, early capitalism had two hundred years for fairly steady low growth (around 1%) whereas after the industrial revolution this increases dramatically at first and then drops slowly over time towards a norm. This, again, mirrors classical and Marxist assumptions more than one would expect. However, Piketty makes the argument that most of the accumulation of wealth in the states is a result of policies that accelerated it in the 1980s with changes in policy. Unlike most economists (even some leftist ones) neither Piketty or Roine see this as a removal of non-capitalist element on the markets, but just a change in policy. Roine does not discuss exactly why this policy shift happen, and Piketty in the book did not explore that Reagan’s liberalization of the market were actually began under Carter and just accelerated under Reagan, as the political elements of political economy are largely outside of the realm of Roine’s and Piketty’s study. Lastly, in political discussions, Roine summarizes the two options that Piketty sees as possible answers: 1) being the global tax structure, and 2) being extremely high levels of protectionism and internalization of the economy to nation states. Piketty, however, points out (and Roine emphases) that the first option is highly unlikely and the second option would severely slow economic growth. Many economists I respect both economic left (Andrew Kliman) and economic right (Deirdre McCloskey) have implied or frankly stated where utopian. The suggestion is Utopian, but Roine points out that Piketty realizes that is extremely unlikely to happen, but without it, capital flight would undo the action of any one nation state and would be an external pressure on any nation state’s action.
Unlike a few of the critics of Piketty, be they Marxist or Austrian economics or even other Keynesians, this book is mostly a sympathetic guide, and that stands to reason as Roine was a source of research for the book. It is not hagiographic. While Roine is favorable to Piketty, he does point out that some of Piketty’s future predictions have some assumptions built into the maths that could limit have bad the severity is. Furthermore, Roine does seem to imply that more work would be done on more politically plausible answers.
Roine’s 80ish pages are helpful. Piketty’s Capital resembles Marx’s Kapital in one key way: the variety of kinds of arguments it uses, and the patience it requires to go through those arguments. Piketty makes historical references, uses long-term data for trends, does comparative economics between countries, and tries to define capital itself in terms of axiomatic (and mathematical) laws. It can start hitting one like waves unless one is reading very slowly, and that makes a such a long book more work than most are willing to give. Roine should NOT be a substitute for actually reading Piketty (and then other critiques and defenses of Piketty as well as some of the cited research), but it does make it less daunting for the non-specialist.
Symptomatic Commentary 