Book Review: Capital In The Twenty-First Century by Thomas Piketty

I don’t usually like to post negative reviews, but this time I will.

In fairness to Thomas Piketty (Paris School of Economics, London School of Economics), the book is too long to do even my usual quick review. But in fairness to anyone who has to read it, the book is too damned long.

Piketty’s gist in that capital has been increasing its share of income relative to labor, and that this portends increasing wealth inequality and generally collapsing income mobility.

Very quickly, there are two major problems with Piketty’s thesis.

First, unless primogeniture makes a comeback, it is unlikely that family fortunes can both survive and continue to maintain top-tier wealth concentrations from a relative standpoint. It doesn’t take very many heirs to dilute the super-rich into rich and then merely well-off through a generation or two. The Sam Walton fortune is an excellent recent example, the Rothschilds a more historic one.

Secondly, unnoticed by Piketty, most of the increase in capital share has been in what is called “imputed owner-occupied rent” — which is economic jargon for the higher rent you would have paid had you not owned your own home. Not only is no cash changing hands (since it is cost savings, not income), but it is widely…