Making the Most of Capital in the 21st Century
Thomas Piketty's monumental Capital in the Twenty-First Century has transported us to a higher understanding of historical movements in inequality. This essay ranks the promise of different paths that scholars can usefully follow from the point to which his book has guided us. The main path to follow is the income inequality history so well paved by Piketty and his team, supported by the book's history of twentieth-century shocks and political responses. Less promising is the book's emphasis on wealth, capital, and the rate of return. Following the income route to better inequality predictions requires merging his team's history of top income shares with the history of inequality movements within the lower 90 percent. It also invites a merger with other scholarship that has shown positive growth effects of the kind of democracy Piketty calls for.
A shorter version of this paper is submitted for publication in French in a special issue of Annales--Histoire, Sciences Sociales devoted to Capital by Thomas Piketty. The author thanks Guido Alfani, Alex Field, Branko Milanovic, Carl Mosk, Richard Sutch, Richard Sylla, Alan Taylor, and Jeffrey Williamson for helpful comments on earlier drafts. Material from this essay will also be incorporated into the author's current research under NSF grant 1227237. The usual disclaimer applies. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.