I have a new post on Pieria, where I finally get round to commenting on Thomas Piketty’s Capital in the 21st Century. My focus is on capital itself, how Piketty defines this and whether or not critics such as Jamie Galbraith are right to attack him for his choice of definition:
An important but perhaps under-discussed aspect of Thomas Piketty’s Capital in the 21st Century is Piketty’s definition of capital itself, and the implications this has for his thesis and its critics. Capital is a notoriously tricky to define concept, and many have taken issue with Piketty’s definition and the framework he builds around it. Typically, the implication is that a more Correct understanding of capital leads to vastly different conclusions to Piketty’s, especially with regards to his conclusions on inequality.
The verdict is that Piketty’s definition of capital is a lot more nuanced than critics make out, and typically (though not always) their critique just reflects a pet peeve of theirs, whether this is human capital, the CCCs or what have you. It’s not that Piketty’s definition is ‘correct’, or that it chimes well with other historical usages of the term (such as Marx’s); it’s merely that Piketty’s own definition is sufficient for showing what he wants to show: the dynamics of inequality under capitalism.
I’m also not really sure about Paul Krugman’s contention that Piketty “relies mainly on conventional, mainstream economics” – sure, he uses some mainstream concepts, but begrudgingly, and only as one angle of support for his broader historical, political and statistical analysis. This analysis stands or falls apart from frameworks like the production function, marginal productivity theory or the Solow Growth Model, even if some economists are eager to interpret it entirely within such frameworks. The fact is that while Piketty’s work cannot be construed as purely ‘heterodox’ or ‘mainstream’, it’s definitely far closer to how economics should look in the future: holistic, empirical, and using mathematics only when needed. Hopefully economists of all stripes can recognise this instead of focusing too much on unimportant details.