Deirdre McCloskey On Piketty

Via Cafe Hayek.

"from page 35 of the manuscript of Deirdre McCloskey‘s new, extensive, and brilliant review of Thomas Piketty’s Capital in the Twenty-First Century; (quoted here with Deirdre’s kind permission):

It is important in thinking about the issues Piketty so energetically raises to keep straight what exactly is unequal.  Physical capital and the paper claims to it are unequally owned, of course, although pension funds and the like do compensate to some degree.  The yield on such portions of the nation’s capital stock is the income of the rich, especially the rich-by-inheritance whom Piketty worries most about.  But if capital is more comprehensively measured, to include increasingly important human capital such as engineering degrees and increasingly important commonly-owned capital such as public parks and modern knowledge (think: the internet), the income yield on the capital is less unequally owned, I have noted, than are paper claims to physical capital.

Earlier in her review, Deirdre quite rightly criticizes Piketty for excluding the value of human capital from his [Piketty's] measure of nations’ capital stocks.  Such an exclusion is akin to, say, the decision of a scholar whose goal is to measure the number of automobiles owned by Americans to exclude SUVs and pick-up trucks from the class of vehicles classified as “automobiles.”"