It’s hard to fath­om, but some­how Thomas Piket­ty’s 696-page book Cap­i­tal in the Twen­ty-First Cen­tu­ry is No. 1 on the Ama­zon best­seller list. It’s a seri­ous eco­nom­ics book that takes a long, hard look at the dynam­ics affect­ing the dis­tri­b­u­tion of cap­i­tal, the con­cen­tra­tion of wealth, and the long-term evo­lu­tion of inequal­i­ty in advanced economies. Not exact­ly light read­ing. And yet it’s out­selling Michael Lewis’ Flash Boys: A Wall Street Revolt (a lighter, more col­or­ful study of the inequal­i­ties in the finan­cial sys­tem); Don­na Tart­t’s The Goldfinch (the new­ly-named win­ner of the Pulitzer Prize in Fic­tion); and even The Lit­tle Gold­en Book ver­sion of Dis­ney’s Frozen.

So what’s the book all about? One way to answer that ques­tion is to read the intro­duc­tion to Cap­i­tal, which you can find on the Har­vard Uni­ver­si­ty Press web­site. There Piket­ty, a pro­fes­sor at the Paris School of Eco­nom­ics, gets right into the heart of the ques­tions he’s  try­ing to answer in Cap­i­tal:

The dis­tri­b­u­tion of wealth is one of today’s most wide­ly dis­cussed and con­tro­ver­sial issues. But what do we real­ly know about its evo­lu­tion over the long term? Do the dynam­ics of pri­vate cap­i­tal accu­mu­la­tion inevitably lead to the con­cen­tra­tion of wealth in ever few­er hands, as Karl Marx believed in the nine­teenth cen­tu­ry? Or do the bal­anc­ing forces of growth, com­pe­ti­tion, and tech­no­log­i­cal progress lead in lat­er stages of devel­op­ment to reduced inequal­i­ty and greater har­mo­ny among the class­es, as Simon Kuznets thought in the twen­ti­eth cen­tu­ry? What do we real­ly know about how wealth and income have evolved since the eigh­teenth cen­tu­ry, and what lessons can we derive from that knowl­edge for the cen­tu­ry now under way?

As for the answers, those are pret­ty well explained in a digest by the Har­vard Busi­ness Review. Sum­ma­riz­ing the book’s argu­ment, HBR writes:

Cap­i­tal (which by Piketty’s def­i­n­i­tion is pret­ty much the same thing as wealth) has tend­ed over time to grow faster than the over­all econ­o­my. Income from cap­i­tal is invari­ably much less even­ly dis­trib­uted than labor income. Togeth­er these amount to a pow­er­ful force for increas­ing inequal­i­ty. Piket­ty doesn’t take things as far as Marx, who saw capital’s growth even­tu­al­ly stran­gling the econ­o­my and bring­ing on its own col­lapse, and he’s with­er­ing­ly dis­dain­ful of Marx’s data-col­lec­tion tech­niques. But his real beef is with the main­stream eco­nom­ic teach­ings that more cap­i­tal and low­er tax­es on cap­i­tal bring faster growth and high­er wages, and that eco­nom­ic dynamism will auto­mat­i­cal­ly keep inequal­i­ty at bay. Over the two-plus cen­turies for which good records exist, the only major decline in capital’s eco­nom­ic share and in eco­nom­ic inequal­i­ty was the result of World Wars I and II, which destroyed lots of cap­i­tal and brought much high­er tax­es in the U.S. and Europe. This peri­od of cap­i­tal destruc­tion was fol­lowed by a spec­tac­u­lar run of eco­nom­ic growth. Now, after decades of peace, slow­ing growth, and declin­ing tax rates, cap­i­tal and inequal­i­ty are on the rise all over the devel­oped world, and it’s not clear what if any­thing will alter that tra­jec­to­ry in the decades to come.

As for how this impacts life in the U.S., HBR sum­ma­rizes Piket­ty’s argu­ment as fol­lows:

On this side of the Atlantic, wealth and income were less con­cen­trat­ed in the 19th cen­tu­ry than in Europe. After a spike in top incomes that topped out in the late 1920s, the income dis­tri­b­u­tion flat­tened out here again, albeit in less dra­mat­ic fash­ion than in Europe. Since the 1970s, though, the U.S. has seen a sharp and unpar­al­leled increase in the per­cent­age of income going to the top 1% and espe­cial­ly 0.1%. This has not been dri­ven by the cap­i­tal and inher­i­tance dynam­ics at the heart of Piketty’s sto­ry. He attrib­ut­es it instead to the rise of what he calls “super­man­agers.” Piket­ty cites recent research that shows man­agers and finan­cial pro­fes­sion­als mak­ing up 60% of the top 0.1% of the income dis­tri­b­u­tion in the U.S., and pro­pos­es that their sky­rock­et­ing pay is main­ly the prod­uct of sharp declines in top mar­gin­al tax rates that made it worth man­agers’ while to bar­gain hard­er for rais­es. This isn’t the only expla­na­tion avail­able, and Piketty’s dis­cus­sion of U.S. inequal­i­ty doesn’t car­ry the same his­tor­i­cal author­i­ty as oth­er parts of the book. But it sure­ly is inter­est­ing that, as he and sev­er­al co-authors report in a new arti­cle in the Amer­i­can Eco­nom­ic Jour­nal: Eco­nom­ic Pol­i­cy, the rise in the top-per­centile income share in 13 coun­tries was almost per­fect­ly cor­re­lat­ed with declines in top mar­gin­al tax rates in those coun­tries. It’s also inter­est­ing that this huge rise in rel­a­tive income inequal­i­ty has brought no dis­cernible eco­nom­ic ben­e­fit. Yes, the U.S. econ­o­my has grown a bit faster than those of oth­er devel­oped economies, but that’s pure­ly because of pop­u­la­tion growth. Per-capi­ta eco­nom­ic growth has been almost iden­ti­cal in the U.S. and West­ern Europe since 1980, and because of the skew towards the top here, U.S. medi­an income has actu­al­ly lost ground rel­a­tive to oth­er nations.

But why let HBR give you insight into Piket­ty’s think­ing when Piket­ty can do it him­self. Below we have a talk he gave at the Eco­nom­ic Pol­i­cy Insti­tute ear­li­er this month. He starts speak­ing at the 5:30 mark.

And final­ly Paul Krug­man’s review in the New York Review of Books — “We’re in a New Gild­ed Age” — is worth a read.

 Relat­ed Con­tent:

Free Eco­nom­ics Cours­es Online

Read­ing Marx’s Cap­i­tal with David Har­vey (Free Online Course)

The His­to­ry of Eco­nom­ics & Eco­nom­ic The­o­ry Explained with Comics, Start­ing with Adam Smith

60-Sec­ond Adven­tures in Eco­nom­ics: An Ani­mat­ed Intro to The Invis­i­ble Hand and Oth­er Eco­nom­ic Ideas