Capital in the Twenty First Century by Thomas Piketty

This is a big book, a very important book, and the book that startled everyone by becoming a phenomenon.  The subject is a dry one, economics, and the author is an academic, which happily does not adversely impact his ability to write with ease and lucidity, because for me, at least, this is not a subject that I am altogether good at. He uses examples from Jane Austen and Balzec repeatedly throughout the book to illustrate various points about return on investment.  So he is well read and a good teacher.  It is a book that has been demonized as promoting communism and lionized for highlighting the recent trends in economic distribution.

The authors have made further use of statistical techniques that make it possible to track the concentration of income and wealth deep into the past—back to the early twentieth century for America and Britain, and all the way to the late eighteenth century for France.  The beginning of the book looks at the economic wealth of nations over time and the economic return on investment that was relatively stable until the 20th century.  He makes the point that in order to make money, it helps a lot if you have money.  Everyone has seen some version of that in their life.

The book then goes into the income distribution inequality issue.  It is not something that we created in the 21st century.  It surely predates modern times.  Rousseau, in 'Discourse on the Origins of Inequality' posits that inequality began when man started living in groups, which goes back about 10,000 years.  Certainly the Sumerians described it in early cuneiform texts. The controversial part of the book (which is superb, a must read) is that Piketty and his colleagues showed that incomes of the now famous “one percent,” and of even narrower groups, the 0.01%, are actually the big story in rising inequality in our time. And this discovery came with a second revelation: talk of a second Belle Époque. In America in particular the share of national income going to the top one percent has followed a great U-shaped arc. Before World War I the one percent received around a fifth of total income in both Britain and the United States. By 1950 that share had been cut by more than half. But since 1980 the one percent has seen its income share surge again—and in the United States it’s back to what it was a century ago.  This is the key statistic in the book, and from there, Piketty talks about the consequences of such a wealth concentration.

So take some time and read this magnificent book (which my spouse assures me is the #1 book on Amazon that people bought and did not read).  I am an efficient reader and it took me several months to read, mostly because I am horribly undereducated in this arena andI read it in pieces so as to be able to digest it.  If you can't manage the whole book, then read Paul Krugman's outstanding book review: http://www.nybooks.com/articles/archives/2014/may/08/thomas-piketty-new-gilded-age/.