Thomas Piketty’s *Capital in the Twenty-First Century* is an important and valuable contribution to political economy, both empirically and philosophically. Piketty grounds his theory in vast empirical data,rather than settling for elegant mathematical models. He courageously embraces the fact that economic theory is inevitably value laden, and proposes a theory of the historical dynamics of wealth accumulation in order to offer an updated moral critique of capitalism. Grounding his prediction in the historical data and profoundly simple mathematics, Piketty projects that economic inequality is likely to increase and to favor those who own inherited capital over time. He advances the normative judgment that rising inequality is unjust and must be
contained. Although Piketty raises important concerns about the
possibility of growing wealth inequality, he fails to normatively ground
or argue for his presupposition that this inequality is unjust. Since
relative poverty can coincide with high levels of objective or
subjective well-being, this presupposition is brought into question.
However, there are causes of inequality (including wealth inequality)
that clearly can be shown to be unjust. By considering other forms and
causes of inequality and oppression, we can distinguish between those
forms of wealth inequality that are unjust and those that are
normatively benign. In this way Piketty’s concerns about growing wealth
inequality from inheritance can be partly justified, though of course
not empirically verified. Piketty’s argument for the injustice of
growing economic inequality has two parts. The first part is an
empirical, economic argument for the claim that returns from inherited
wealth will far outstrip income. This argument can be summarized as
follows. Let *r* be the rate of return on capital, and *g* be the growth
rate of the annual flow of national income.
1. If *r>g*, then (wealth) inequality will grow over time.
2. Individuals who own a greater amount of capital earn a larger *r.*
3. Growth, *g*, is likely to be slower in future.
4. If *r* is great enough and g is low enough, then there will be ever
more capital from older, inherited wealth, than from wealth saved
from income.
5. Hence, (wealth) inequality will increase, and inherited wealth will
make up the greatest amount of capital. [click to continue…]