“Capital in the 21st Century”

by panglott

I haven’t read much of Capital in the 21st Century except this short guide and this review. But I think it may be positive than an AEI economist would liken it to Tyler Cowan’s analysis of the aftermath of the “Great Stagnation”.

Here’s Milanovic’s summary of an important argument from the book:

Using very effectively literary examples from Jane Austen and Honoré de Balzac, Piketty shows that in capital-rich societies with high returns on capital as was Europe then, it often made no sense to work but to concentrate rather on finding a rich spouse or otherwise inheriting property . The trade-off between a brilliant career, based on study and work, and a much more lavish life style that could be afforded if one married a heiress is presented with unmatched clarity and brutality to the young Rastignac by the world-savvy Vautrin in Balzac’s Le père Goriot. This trade-off, called the Rastignac dilemma by Piketty (does it pay to work hard when one can inherit much more by marrying well?) , is all well known to the readers of English and French literatures of the 19th century. So obvious was the answer that the Rastignac dilemma is not even posed in most cases. No reader of Jane Austen is left in doubt that education is a pleasant activity mostly useful to enhance marriage prospects of young ladies and gentlemen (we are far from human capital here!), work is never to be undertaken (unless characters really get into serious trouble), and everybody’s social position is measured by the annual rent he (mostly he) commands.

This certainly reminds me of the growing attack on the humanities as fields of study, an attack that casts the humanities as a useless luxury for the unemployable. Or also, of the gig economy Sarah Kessler describes in Pixel & Dimed, in which such work is in fact costly, draining, scarce, while paying well below minimum wage: perhaps epitomized in the name of Amazon’s Mechanical Turk. The most amusing such freelance job I saw advertised recently was writing online dating profiles for sex workers.

The economy of the 21st century can’t be like the economy of the 19th century, of course, but the nature of the information economy don’t necessarily point to it being more egalitarian. If the railroad barons of the 21st century are racing to capture attention rather than transportation infrastructure, they’re still operating in an environment where network effects, as much as capital intensity, drive corporations to natural monopoly positions.