Wednesday, August 13, 2014

Capital in the 21st Century: Conclusion

Instead of recapping the recap, which you can read on any Capital in the 21st Century review, I’m going to quote a few lines from the conclusion because they seem significant and summarize a lot of reading to me. 

“The inequality r > g implies that wealth accumulated in the past grows more rapidly than output and wage.”  This sentence basically means, imagine that you started saving for retirement 50 years before you were born, you would be rich when you get to retirement. That is basically what an inheritance amounts to. This is the reality that we are facing in the world today. As r = 4g or r = 3g, we run into more issues than if r = 1.5g or r = g. 

“The problem is enormous, and there is no simple solution.” Thus a 577 page book when many times the author suggests that an open democratic debate within parliaments, and involving more international governance and cooperation, is the practical solution, which we all know would take a painfully long time.

“The right solution is a progressive annual tax on capital.” Obviously that’s kind of the point of this book. While I will say that is his opinion and not necessarily a fact, after reading the book and the history he discusses, I agree with him.

“I dislike the expression “economic science,” which strikes me as terribly arrogant because it suggests that economics has attained a higher scientific status than the other social sciences.” People often get scared away from economics because it has numbers. I guess most people don’t find math fun and interesting. Yet the truth is, economists are even worse than weathermen at predicting or understanding their field. In other words, while we like to think of economics as similar to engineering, it might be closer to art history.

Finally Piketty ends the book with these sentences on page 577. “Yet it seems to me that all social scientists, all journalists, and especially all citizens should take a serious interest in money, its measurement, and the facts surrounding it, and its history. Those who have a lot of it never fail to defend their interests. Refusing to deal with numbers rarely serves the interests of the least well-off.” That is basically what this book boils down to, the interests of the least well-off. The number of people that told me to work harder in 2010 when I could not find an engineering job (or for a time any job!) both infuriate me and make me laugh at their ignorance. The least well-off often can’t “just work harder” to get to the middle ground. Oh hard work is critical and a big component of having a fulfilling (and financially rewarding) career. However, hard work is not the only aspect of having a successful career.  Along the way someone has to take a chance on you, often multiple people multiple times. 

This book is in large part about inequality. Traveling the world, and perhaps to some small extent my own upbringing, I have seen the poor. They have no voice. I have this blog, which I pay only $11 a year to own, but also access from my iPhone over 3G and 4G, at coffee shops and other sources of Internet. Just having access to the full Internet is a huge privilege in the world. I read recently that Carlos Slim was the most wealthy person that ever lived. Ever. More than the kings of countries past, the barrons of the past, or anyone you have ever heard about in history. We can talk about Bill Gates being a self made man, but we must remember that he had unlimited access to a computer at his private high school when most colleges did not have a computer. It’s not hard to be one of the ten best programmers in the world when there are only 100 programmers in the world. 

This book is probably the most thorough, and most readable to a layman like me, history of income and wealth anyone has ever researched and written. To disregard the lessons of history is to be doomed to repeat history's failures. 

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