Capital in the Twenty-First Century, Thomas Piketty’s #1 best seller about the economics of inequality, was in one sense a bit of a dud. Supposedly, the main point of Piketty’s book was the following dry equation: When r, the rate of return on capital, is greater than g, the rate of economic growth, inequality of wealth increases.
For the most part, economists were not impressed. Specifically, they were not impressed by the r > g thing; even Paul Krugman, definitely a Picketty fan in general, calls the book’s central thesis an “intellectual sleight of hand.” If you’ve paid attention to nerdy online debates about Piketty, you’re probably familiar with the following irony: Piketty’s book about inequality was a runaway success because the 1% have been getting richer and people are upset about that; however, even Piketty himself admits that the r > g isn’t the reason the 1% are doing so well; r > g tells us the rich are getting richer because they’re accumulating ever-greater returns from capital, but in recent decades, what’s actually happened is that CEOs are pulling astronomical salaries.
If you’re not familiar with that debate, don’t worry; we’re moving right past that stuff. The book was not a best seller because of r > g; the book was a best seller because it’s a comprehensive, data-driven, and engaging economic history of inequality in the United States and Europe during the past hundred and fifty or so years, and a warning that inequality is likely to keep increasing unless we do something about it.