Mankiw On Piketty

See First Thoughts on Piketty. Excerpts"

The book has three main elements:

1. A history of inequality and wealth.
2. A forecast of how things will evolve over the next century
3. Policy recommendations, such as a global tax on wealth.

Point 1 is a significant contribution. I like this part of the book a lot.

Point 2 is highly conjectural. Economists are really bad at such things. In particular, the leap from r>g to the conclusion of a growing role of inheritance in society seems too large to me. Many capital owners consume much of the return on their capital, so wealth does not grow at rate r. This consumption ranges from fancy cars and luxurious vacations to generous charitable giving. In addition, unless mating is perfectly assortative, or we return to an era of primogeniture, wealth per family shrinks as it is split among children.  So, from my perspective, Pikettty tries to draw way too much from r>g. 

Point 3 is as much about Piketty’s personal political philosophy as it is about his economics. As we all know, you can’t get “ought” from “is.” Like President Obama and others on the left, Piketty wants to spread the wealth around. Another philosophical viewpoint is that it is the government’s job to enforce rules such as contracts and property rights and promote opportunity rather than to achieve a particular distribution of economic outcomes. No amount of economic history will tell you that John Rawls (and Thomas Piketty) offers a better political philosophy than Robert Nozick (and Milton Friedman).