By Eliot Marshall
On a rain-soaked 15 April—U.S. income tax day—Thomas Piketty arrived early at a think tank in Washington, D.C., with a stack of boxes containing his new book, Capital in the Twenty- First Century. The 43-year-old French
economist had come to talk about his radical
ideas. The room was packed with young policy wonks and grizzled journalists, lawyers,
political aides, and even a former U.S. representative, David Obey, who once chaired
a key spending committee in the House of
Representatives. Piketty, who sometimes
apologizes to audiences for his strong accent,
presented his data and predictions for capitalist economies and gently brushed aside
criticisms. Dressed in a rumpled jacket and
open collar, he looked a bit like a busy graduate student rather than a world-famous economics guru. By the time he was done, his
supply of books had sold out. Young and old
were lining up for an autograph.
Scenes like this played out many times
this spring as Piketty toured North America.
Amazon.com now ranks his book its number-one best-seller, and the publisher, Harvard
University Press, reports that the first-year
sales of Capital are more than for any title in
its 101-year history.
Despite Piketty’s popularity, his message
is harsh. He labels as “a fairy tale” the long-accepted idea that wealth and income will
be more evenly distributed within nations as
they develop, and suggests that even the best
run capitalist economies concentrate riches
at the top. The reason: In the long run, he
says, the return paid to owners of capital is
higher than the rate of economic growth.
These provocative conclusions are based
primarily on a huge database of tax records
that Piketty and a team of 30 researchers
around the globe have assembled from more
than 20 countries, including the United
States. From atop this mountain of data,
Piketty is able to offer a 2-century retro-
spective view of capitalism and make predic-
tions about its future. The database is, Piketty
writes, “the largest historical database con-
cerning the evolution of income inequality.”
Piketty began this project in the late 1990s,
when he dug into old tax records for a book
on the distribution of wealth in France. He
had received his Ph.D. in 1993 at age 22 from
the School for Advanced Studies in Social
Sciences (EHESS), then moved to the Massa-
chusetts Institute of Technology (MIT) as an
assistant professor of economics. But he quit
3 years later—“I did not find the work of U.S.
economists entirely convincing,” he writes
in Capital. Back home in Paris, he is now an
economics professor at EHESS and the Paris
School of Economics.
Piketty unearthed French data on wealth
going back to the 1789 French Revolution, as
well as a century’s worth of income tax data
that hadn’t been analyzed systematically.
Many such records have been ignored, he
writes: “The historical and statistical study of
tax records falls into a sort of academic no-man’s-land, too historical for economists and
too economic for historians.”
Tax man’s gloomy message:
the rich will get richer
With a massive database of income tax records, a French
superstar challenges conventional wisdom on inequality
foresees a continued
rise in inequality.