Thomas Piketty's Capital in the Twenty-First Century has commandeered our intellectual conversation in a way no other book has in recent years. You're probably thinking everyone has weighed in on it. Wrong.
Today, we're posting a sneak preview of our Summer issue -- our review of Piketty, by Lawrence H. Summers. The former Treasury secretary, one of our most distinguished economists, offers a comprehensive take on Piketty's arguments. While he has "serious reservations" about Piketty's theories as a guide to understanding inequality, he believes that his study of the phenomenon amounts to a "Nobel Prize-worthy contribution."
Our Summer issue hits newsstands in June. You can look forward to new essays from Gen. Stanley McChrystal, former Sen. Harris Wofford, E.J. Dionne Jr., Cristina Rodríguez, Paul Starr, Todd Gitlin, and Rachel Kleinfeld. As always, thank you for reading."
Democracy: A Journal of Ideas
Dear Michael Tomasky,
I'm not sure how "comprehensive" Lawrence Summers's take on Piketty's arguments is. Inequality has "microfoundations" to use the "dry technocratic prose of most contemporary academic economists." And those microfoundations have been both concealed by the technocratic prose and reinforced by the resulting policy advice of academic economists, prominently including Dr. Summers.
Nearly a century ago, Thorstein Veblen offered insights into one important mechanism underlying the concentration of wealth that he termed "industrial sabotage" or the "conscientious withdrawal of efficiency" by business. The basic idea is that the pursuit of maximum pecuniary gain is not the same thing as maximizing output of product. Veblen's intuition is compatible with the neoclassical analysis of imperfect competition, but, as Warren Samuels noted twenty years ago, the dry technocratic academic economists who developed theories about efficiency wages and equilibrium unemployment didn't seem to care that the "shirking" they contemplated was entirely one-sided. Lawrence Summers was among those self-styled "New Keynesians."
There is much, much more to say about these "microfoundations." I have explored them in a series of blog posts at EconoSpeak titled "Microfoundations of Inequality and Sabotage."