Before you finish packing for your vacation to the cottage, the beach, the backyard or the balcony, I thought you would appreciate some suggestions for your summer reading. (If you live in Australia, New Zealand, India, or anywhere else south of the equator, I hope you will read for the sheer pleasure, at work if you must!)
The first book on your holiday reading list is, without doubt, …
… Thomas Piketty‘s Capital in the Twenty-First Century. This book was originally published in French in 2013, and if you had not pre-ordered a copy of the English version before it was released in March of 2014, you were out of luck trying to get it, the publisher’s initial print run not anticipating that a book written by an economist would top the best seller list. But it’s in all the bookstores now, and you have no excuse, except for the thought of lugging 696 pages to the beach.
I certainly hope this does not become one of those books everyone buys, and no one reads. Don’t be deterred by its length, or intimidated by the subject.
But you may well appreciate a primer, so read one of the best, of many, reviews: if you are an economist choose Branko Milanovic‘s, which is published in the June 2014 issue of the Journal of Economic Literature, but everyone will benefit from Robert Solow‘s review in the New Republic. Also watch Professor Solow at an event in Washington, that hosted Piketty and other panelists to discuss his book.
Piketty argues that capitalist economies, when left to their own—that is, no major wars that destroy a large chunk of the capital stock—will generate increasing inequality because the rate of return to capital (r) tends to exceed the overall growth rate (g). In our times growth occurs at a relatively low rate (basically the rate of population growth), and with r steadily greater than g (or, just in case you see it on a t-shirt somewhere, r > g ) we are witnessing an ongoing concentration of wealth, driving us to return to the era of Jane Austen, an era of “patrimonial capitalism.”
The May 24th weekend edition of the Financial Times led with a screaming headline: “Piketty did his sums wrong in bestseller that tapped into the inequality zeitgeist.” But pay no regard to this silliness, which amounts to the journalists—no doubt after hours and hours of digging—finding a few rows in one of Piketty’s spreadsheets transposed with no real consequence for his conclusions. This is the kind of stuff that merits a polite note to the author, who would then make the correction, and post a new version of his technical appendix.
The real concern the economics profession will have with the book is whether Piketty’s measure of capital is really what we think of as the productive element that figures into models of economic growth, and also the clarification of the technology that he has in mind. Just what sustains r > g, as a factor of production—presumably characterized by diminishing marginal productivity—accumulates? But this is for another day, not for the beach nor the balcony, as you mull through the provocative policy discussion in the last section of the book.
It is interesting that the loudest applause Piketty gets in his hilarious interview on The Colbert Report occurs when he mentions the corrosive effect growing inequality can have on economic mobility and equality of opportunity, a theme the book does not address in great detail. So your summer reading has to be supplemented with the thought-provoking book by Joseph Fishkin, Bottlenecks: A New Theory of Equal Opportunity.
Professor Fishkin is, at heart, a philosopher, so this book should be paired with a nice bottle of red wine … or maybe not. Every paragraph has to be read twice to fully capture the clarity and the logic of the argument. Fishkin is a young, confident academic, who pulls his pony tail tight on the occasions he has to wear a suit, and he has admirably advanced how we should think about equality of opportunity.
You can get a quick sense of the book by reading the online discussion between the author and a number of commentators that was hosted by The Brookings Institution, and to get a sense of the state of this literature before his book came along—after all the subtitle suggests you need to know that!—read the forthcoming review (again in the Journal of Economic Literature) by John Roemer and Alain Trannoy.
(Here is a link to a draft that is not yet finalized, but be forewarned, this is not for the faint of heart.)
Fishkin makes the case that complete equality of opportunity is not possible. But the bulk of the book is about “bottlenecks,” and how we can structure public policy to minimize their consequences, or help people to get around them.
On the Brookings website he states:
The fact that equal opportunity is impossible does not mean we should pack up and go home. First we need to identify the key bottlenecks influencing life chances. These are narrow places through which people must pass if they hope to reach a wide range of opportunities that fan out on the other side. College education; developmental opportunities in early childhood; enough money to navigate a society where almost everything requires money—all these are examples of potential bottlenecks (which will be addressed in later posts in this series).
The next pair of books help make this a bit more concrete. Read Nicholas Lemann‘s The Big Test: The Secret History of the American Meritocracy, which was originally published in 1999, and tells the story of how testing came to be all-pervasive in the American education system, and in the concerns of many, many families. This is a sad story of how a bottleneck was constructed in the name of selection for elite positions on the basis of merit—the SAT— and how it came to define a narrow sense of what success means, and how it is to be attained.
But Fishkin also warns us that bottlenecks can start early, parenting and child development can also be an important bottleneck, though certainly aggravated by an over emphasis on testing in the schooling system. How to parent in a society of high inequality when there are only a few stairways to success? Becoming a “Tiger Mom” is certainly a tendency. This is what made Amy Chua’s Battle Hymn of the Tiger Mom such a controversial book when it was released in 2011.
But I am not recommending it for your summer reading. Rather, chill, and read the antidote written by Dalton Conley, Parentology: Everything You Wanted to Know about the Science of Raising Children but Were Too Exhausted to Ask. Conley is the New York University sociology professor who decided to give his daughter the shortest possible name—E—and his son the longest he could imagine (with a good multi-ethnic twist)—Yo Xing Heyno Augustus Eisner Alexander Weiser Knuckles Jeremijenko-Conley—so long in fact that it turned out set a New York City record.
Why? The research told the good professor—who is extremely well-versed in the methods labour economics use to discern causal relationships—that children with peculiar names tend to develop a higher degree of impulse control, which beats IQ in determining ultimate success in life.
But don’t dismiss this book. There’s a serious subtext. Conley wants to introduce you to a critical way of thinking, one that relies on the idea of experiments, and a clear requirement to imagine a counterfactual, to appreciate what really works and what is confounding, not just in parenting but in all aspects of the social sciences. In the end he reaches lovely and sensible conclusions.
In the face of the unexpected challenges that each unique child brings, scientific objectivity is no match for the torrent of parental affection and protectiveness that I could not have anticipated feeling and which almost every parent recognizes.
… rather than try to tap into parental guilt and worry through providing a hard-to-follow formula (like three hours of violin practice a day), I aim to assuage those same feelings by telling parents that there are many roads to Carnegie Hall. And, more important, most roads to a happy, decent, caring, well-adjusted, independent adult don’t necessarily lead through Carnegie Hall or MIT.
r > g? Bottlenecks? Big Test? Fuhgeddaboudit. Chill, and enjoy the sun, sand, and surf.
And what more appropriately titled book to round out your summer pleasure than: The Great Escape. Angus Deaton’s book—the full title being The Great Escape: health, wealth, and the origins of inequality—is a decidedly optimistic examination of inequality between nations, which has in fact fallen significantly, as opposed to just about inequality within nations, which in many countries has risen substantially.
The book begins with this paragraph:
Life is better now than at almost any time in history. More people are richer and fewer people live in dire poverty. Lives are longer and parents no longer routinely watch a quarter of their children die. Yet millions still experience the horrors of destitution and of premature death. The world is hugely unequal.
Tell me, how can you stop reading? Professor Deaton, whose authority and sharp intellect instill fear into the heart of any speaker lucky enough to have him walk into the seminar room, argues that inequality is the consequence of progress, and that it can also influence progress.
This is a grand history of the world that focuses on developments in health and well-being, and on financial security, beginning with “Life and Death: From Prehistory to 1945.” And goodness, if you ever wanted a clear, intuitive explanation of “Purchasing Power Parity,” well, it offers that as well.
If you are familiar with Deaton’s work you will no doubt notice a good deal of sparring in these lines with critics, as Dr. Deaton of Princeton settles disputes and pronounces on issues such as the appropriate way to measure the relationship between income per capita and happiness across the countries of the world, and, most importantly, whether foreign aid is effective in reducing poverty (it is not).
This is a very optimistic book about inequality, opportunity, and the future of our planet, offering a great counterpoint to Piketty, and a great way to finish your reading as the summer sun comes eventually to set on your very own great escape.
Economics for public policy 
I’m a mechanical engineer and not an economist, so I find all this to be extremely interesting and valuable. I found a website where I was able to download Thomas Piketty’s book for free. As we know, there has also been a lot of expert commentary about the book – starting with someone from the Financial Times of London, U.K., who questioned some of the figures and graphs in the book. But I was encouraged by the openness shown by author Thomas Piketty in his response to the Financial Times’ criticisms. In a case like this, in my view the comments from other experts are as important as the book itself because there is the important question of whether the criticisms, all taken together, constitute a significant / major debunking of the book’s overall argument. In this instance that did not appear to me to be the case, and I am further encouraged to read it by Professor Corak’s comments and the other references that he cites. Thank you, Professor Corak!
Capital in the Twenty-First Century for free! Lucky you.