This article on the WSJ is another critique of Piketty's book.
"Whether or not one is convinced by Mr. Piketty's data—and there are reasons for skepticism, given the author's own caveats and the fact that many early statistics are based on extremely limited samples of estate tax records and dubious extrapolation—is ultimately of little consequence. For this book is less a work of economic analysis than a bizarre ideological screed."
"Soaring pay for corporate "supermanagers" has been the largest source of increased inequality, according to Mr. Piketty, and these executives can only have attained their rewards through luck or flaws in corporate governance. It requires only an occasional glance at this newspaper to confirm that this can be the case. But the author believes that no CEO could ever justify his or her pay based on performance. He doesn't say whether any occupation—athletes? physicians? economics professors who sell zero-marginal-cost e-books for $21.99 a copy?—is entitled to higher earnings because he does not wish to "indulge in constructing a moral hierarchy of wealth.""
The most interesting point in this article to me was this part when the author discussed Piketty's tax solution, and suggested a possible alternative if maximizing equality of opportunity.
"Mr. Piketty urges an 80% tax rate on incomes starting at "$500,000 or $1 million." This is not to raise money for education or to increase unemployment benefits [...] its purpose is simply "to put an end to such incomes." [...] He breezily assures us that none of this would reduce economic growth, productivity, entrepreneurship or innovation.
Not that enhancing growth is much on Mr. Piketty's mind, either as an economic matter or as a means to greater distributive justice. He assumes that the economy is static and zero-sum; if the income of one population group increases, another one must necessarily have been impoverished. He views equality of outcome as the ultimate end and solely for its own sake. Alternative objectives—such as maximizing the overall wealth of society or increasing economic liberty or seeking the greatest possible equality of opportunity or even, as in the philosophy of John Rawls, ensuring that the welfare of the least well-off is maximized—are scarcely mentioned."
I'm not really sure about Piketty's suggestion of 80% tax rate on the highest income. Because part of me is still confused with such high tax rate, and agrees with the fact that some people do earn such income out of "performance". But personally, I also think the author's tone is pretty harsh, as he criticized a lot of the smaller things in Piketty's work (i.e. Jane Austen and Balzac references), but he didn't even touch on the most important point (when r > g, inequality will rise).
What about you guys?
Another interesting critique and I agree with you Hang that it harsh at points, and it hits on some good things but ignores some major points, such as the r >g argument. I also see how the suggestion of the 80% tax rate is too far out for me; I cannot justify an income of $500k being taxed at 80%. While I understand Piketty's argument and what he wants done with the policy, it is too extreme for me. I think that tax rate is too high and I also think, like Hang stated, some people do earn that income out of "performance". But, I also agree conceptually with Piketty in regards to the problem at hand and the need for policy to intervene.
ReplyDeleteI thought this critique was interesting and I think it highlights the differences between the way Europeans view capitalism and the way in which Americans often view capitalism. The title of the article "Thomas Piketty Revives Marx for the 21st Century" demonstrates from the beginning the authors bias towards the book. I also think it is important to note that the author is writing the critique in the Wall Street Journal, which is generally considered more conservative, and is a funds manager in New York. The author points out that he believes a tax rate of 80% on an income of $500K is much too high. Piketty stated in an interview we watched in class that he does not believe a tax has to be on incomes of $500K but that he intended the policy suggestion to create a conversation about what income level would be appropriate and the potential need for a global wealth tax. I think it is important to read differing perspectives on Piketty's book, however, the fact that the author criticizes such minute points make me skeptical of his opinions overall.
ReplyDeleteI agree with what Bronte and Cam said. This author, like other opponents of Piketty, is pretty biased from the beginning and shows his displeasure with Piketty's statements. I agree that such lengthy examinations of old literature doesn't seem to be the best/strongest part of Piketty's book, but I certainly see why he included it and why such an examination has merit. This author seems to just want to demonize Piketty (as Bronte pointed out) because he's likely to be one of the people taxed by Piketty's suggestion. Again, I think it's important that Picketty's book and his arguments are getting so much attention and discussion, it's certainly going to help facilitate better discussion about inequality.
ReplyDeleteIf this was from the New York Times I'd be more convinced, but alas, it's from the Journal which has a fairly large tendency to lean politically right, especially with regard to contributing writers (such as Daniel Shuchman) rather than seasoned financial journalists. Although Shuchman may have a point with the large 80% tax rate, his political polarization is apparent and I think his critique should be taken with a grain of salt.
ReplyDeleteI agree with everyone else that the bias present in the article detracts from the message. While I agree that 80% is much too high, a change in percentage or level of income would be much more feasible. I think that it is important to see different sides of the argument so that a greater picture can emerge.
ReplyDeleteI think this writer's views are definitely interesting to consider. After seeing so many critiques of Piketty's data I wonder how legitimate it actually is. I hope that there will be more books written on the subject of inequality so that there can be a larger range of perspectives available. I think that Piketty's ideas can be a bit extreme, so I would like to see a more moderate solution.
ReplyDeleteI have to agree with everyone else that this was a very interesting critique in this article. It is nice to always see a different perspective on the information that Piketty presents. In addition, I have to agree that 80% is too high, that a change in percentage level of income would help to make things more feasible.
ReplyDeleteI agree with all the above comments that stated that the critique in the article is interesting but it tends to ignore some more important points. Also, I have to agree with the author of the article that a tax rate of 80% on an income of $500k is just absurd.
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