Grasping Reality on TypePad, by Brad DeLong

But I thought it would be a book for a narrow audience: me and a few others. I expected people who did not have the souls of accountants to start to snore at Piketty’s numbers, numbers, numbers and more numbers.

What we can think about is why the soil was fertile: why was there the potential for a mass-audience viral explosion of interest in Capital in the Twenty-First Century rather than our standard set of viral propagation memes – cat videos and Buzzfeed’s Twenty-Seven Things You Won’t Regret When You Are Older?

I confess that I do not know. I do have a guess. My guess is that the book-buying upper-middle class of America today is greatly distressed when it looks at the world around it, specifically at two things.

The first is that our society today is largely failing its non-migrant non-college-completing majority, in that for all of our cheap electronic toys, life is no easier than it was a generation ago in spite of an enormous explosion of technology and productivity.

The second is that they now know of a plutocracy that did not use to exist and makes us very uneasy. Last generation’s Michigan governor and American Motors president George Romney lived in a large-but-not-abnormal house and bossed a company that created lots of good jobs at good wages. This generation’s Massachusetts governor and Bain Capital CEO Mitt Romney has seven houses worth perhaps $25m in total, and bossed a company whose core business model appears to have been exploiting legal anomalies like the fact that pension funds have little control over their money after it’s invested.

And because the book-buying upper-middle class does not trust the entrenched positions of America’s ideologues, they are looking for fresh thinking – which a foreigner like Piketty, whose positions are not those of any large American political faction, provides.

Now Piketty’s grand argument may be wrong. It could be that in the future, capital will turn out to complement rather than substitute for labor, and the wealth accumulation of plutocrats will generate their self-euthanasia as a social class by pushing down the rate of profit.

It could turn out that growing fortunes will be a lot harder in the future than Piketty thinks it will. It could turn out that our plutocrats as a social class will decide to play the status game of spend-their-money-and-change-the-world rather than enrich great-grandchildren that they will never see.

My guess is that the grimmer elements of Piketty’s forecast have only a 50-50 chance of coming true even if plutocrats achieve and maintain a lock on politics for the next three generations. But that is much more than enough to worry about the scenario he paints, and figure out how to guard against it.

And a longer version:

I like Thomas Piketty's Capital in the 21st Century a lot. It follows Larry Summers's advice--which I have always thought wise--that the further ahead in time we want to forecast the further back in time we should look. It deals with a very big and important questions. It takes a broad moral-philosophical view, rather than a narrow technical-economist view. It combines history, quantitative estimation, social science theory, and a deep concern with societal welfare in a way that is too rare these days. I think it is a very good book.

But I thought it would be a book for a narrow audience: me, and a few others. I expected people focused on the present to be bored with Piketty's history. I expected (correctly!) my economist peers to be disgruntled at Piketty's refusal to fit his argument into the Procrustean bed of math-heavy theory. I expected (correctly!) the paid and professional right to be angry are at Piketty as they are angry at any work that does not pretend that the problems of controversy will solve themselves. I expected people who did not have the souls of accountants to start to snore at Piketty's numbers, numbers, numbers, and more numbers. I did not expect it to attract 10 times the audience of Carmen Reinhart and Ken Rogoff's truly excellent [This Time Is Different][2]--but then I did not expect This Time Is Different to attract one-tenth of the audience it did either.

That Piketty's book in particular would become the breakthrough mass-audience book for its topic is in large part arbitrary--the chaotic result of the particular butterfly-wing flaps that we cannot and should not see--just as why Reinhart and Rogoff became the breakthrough mass-audience book for its topic was similarly unknowable.

What we can think about is why the soil was fertile: why was there the potential for a mass-audience viral explosion of interest in Capital in the Twenty-First Century rather than our standard set of viral propagation memes--cat videos and Buzzfeed's "Twenty-Seven Things You Won't Regret When You Are Older"?

And here I confess that I do not know. I do have a guess. My guess is that the book-buying upper-middle class of America today is greatly distressed when it looks at the world around it at two things: (1) that our society today is largely failing its non-immigrant non-college-completing majority, in that for all of our cheap electronic toys life is no easier than it was a generation ago in spite of an enormous explosion of technology and productivity; and (2) that they now know and know of a plutocracy that did not use to exist and makes us very uneasy--last generation's Michigan governor and American Motors president George Romney lived in a large-but-not-unnormal house and bossed a company that created lots of good jobs at good wages, while this generation's Massachusetts governor and Bain Capital CEO has seven houses worth perhaps $25 million in total, and bossed a company whose core business model appears to have been exploiting legal anomalies like the fact that pension funds have cash-flow rights but not control rights.

And because the book-buying upper-middle class does not trust the entrenched positions of America's ideologues, they are looking for fresh thinking--which a foreigner like Piketty, whose positions are not those of any large American political faction, provides. It is a well-written book that meets a strong demand for advice from a fresh point of view on an urgent and important problem--and the chaotic butterfly-wing flap does the rest.

Now Piketty's grand argument may be wrong. It could be that in the future capital will turn out to complement rather than substitute for labor, and the wealth accumulation of plutocrats will generate their self-euthanasia as a social class by pushing down the rate of profit. (John Maynard Keynes back in the 1930s thought that was our destiny, and it was Marx's insistence that capital did not complement but substituted for labor that was his biggest mistake of all in analyzing the 1850s.) It could turn out that growing fortunes will be a lot harder in the future than Piketty thinks it will. It could turn out that our plutocrats as a social class will decide to play the status game of spend their money and change the world rather than enrich great-grandchildren that they will never see. My guess is that the grimmer elements of Piketty's forecast have only a 50-50 chance of coming true even if plutocrats achieve and maintain a lock on politics for the next three generations.

But that is much more than enough to worry about the scenario he paints, and figure out how to guard against it.

[2]: http://www.amazon.com/gp/product/0691152640/ref=as_li_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=0691152640&linkCode=as2&tag=brde-20 Reinhart and Rogoff Amazon link