Economics has a best seller. Thomas Piketty’s, “Capital in the 21st Century”. I couldn’t get a copy locally (the book is not available even at Amazon.com such is the demand) but have read a few reviews and watched a video where Piketty presents his ideas that are then analyzed by Paul Krugman, Joseph Stiglitz and Stephen Durlauf.
One can see this book becoming part of an intellectual fashion. The core thesis – that inequality is exploding, is non-new but the claim that this reflects trends in inherited wealth and “patrimonial capitalism” is distinctive. Several commentators have recognized the role of the book in synthesizing various contributions. Several too have simply acknowledged the skills of the translation from French into English. (more…)
This excellent video presented by Prof. Emmanuel Saez on US and other developed country income distribution trends for top incomes post-1913 is very worthwhile. Nothing exceptionally new is provided but it is very objective and well presented.
HT Greg Mankiw
The talk runs for 40 minutes. The article from which much of the presentation is based is Thomas Piketty & Emmanuel Saez (2003). The website referred to is the World Top Income Database – it includes Australia and is worth poking around in.
The surge in top income shares experienced in the US and UK over recent years is not universal – institutions have moderated such trends in France, Japan and Sweden.
Although the “working rich” have become an important component of the super rich (the group that earn huge salaries rather than capital income) increasing taxes on them will not force tax evasion efforts that will undo the significant revenue gains that can be enjoyed by governments. There is some direct evidence that when taxes on the rich are very low they bid up their super-sized salaries.
Of course these income distribution findings are very significant for the work I am currently doing on happiness given that relative incomes matter so much. Not only does the distribution of income become less egalitarian given recent trends because of direct net happiness losses given the declining marginal utility of income but the mass of people who see their relative impoverishment increasing experience direct utility losses on this account alone.