The Problem of “Capital in the Twenty First Century”

March 10th, 2014  |  Published in anti-Star Trek, Political Economy  |  2 Comments

Today marks the English-language publication of Thomas Piketty’s eagerly awaited Capital in the Twenty-First Century. I haven’t read the book yet, so I can’t comment on the adequacy of its approach to the problem of capital in the twenty-first century. But I can comment on a specific problem of “Capital in the Twenty-First Century” that turns out to be illuminating.

In his review of the book, Dean Baker complains that Piketty’s account is overly deterministic, largely due to an inattention to the details of institutional structures which shape the distribution of wealth and income, and which are potentially subject to change by political means. In particular, he draws attention to one of his, and my, recurring themes: intellectual property. Using drug companies as a case in point, Baker notes that this industry makes up 2 percent of GDP and 15 percent of corporate profits, based entirely on “government granted patent monopolies”.

Drug patents may be the most egregious example, but there’s plenty more where that came from. After reading Baker’s review, I headed over to Amazon, with the thought of picking up an ebook edition of Piketty’s book. There I found that the Kindle edition retails for a whopping $27.48, for a grand total of $1.45 in savings over the physical, hardcover edition.

Only copyright law and digital copy protections make this possible, of course—copying an ebook is trivial and nearly costless. And who benefits from that? Presumably some royalties accrue to Piketty and his translator, Arthur Goldhammer. Which I can’t really begrudge, although Piketty already enjoys a comfortable faculty position at the Paris School of Economics.

But the other beneficiary is the publisher, Harvard University Press, and it’s a bit harder to see how they need the money. HUP is a division of Harvard University, which, some incidental educational operations aside, is primarily an enormous investment fund presiding over $32 billion dollars in assets. Which brings us around to another of Dean Baker’s objections, which is that the unusual success of Harvard’s investments may not simply be due to the expertise of its financial managers. He proposes insider trading as another plausible (albeit unsubstantiated) explanation: “graduates of these institutions undoubtedly could [provide] their alma maters with plenty of useful investment tips.”

All of which is to say that while I laud Piketty’s support for increased taxation of income and wealth, the peculiar case of his own book illustrates Baker’s important counterpoint. It’s a point that could equally be directed at certain Marxists and other leftists, for whom all efforts at reformist politics are doomed to fail a priori: “capitalism is far more dynamic and flexible than the way Piketty presents it”, and thus we should pay close attention to “the specifics of the institutional structure that is crucial for constructing a more egalitarian path going forward.”

Responses

  1. Squarely Rooted says:

    March 11th, 2014 at 6:46 pm (#)

    I’m only about 60 pages in, so I haven’t really gotten into the details, but thus far Piketty has seemed quite sensitive in the broader strokes to institutional, social, and ideological conventions as well as more deterministic forces. He has also discussed intellectual property in some detail at least once thus far. I have a hunch that Baker’s response is to some extent him focusing somewhat too strongly on his own issues of particular interest and criticizing Piketty for failing to write the book Baker wanted him to write. And I say that as someone who thinks IP issues are extremely important. Of course, this is all subject to revision in 500 pages or so.

    Also, too, ebook prices are wholly bogus. Especially when you consider that, for subscribers, Audible audiobooks (owned by Amazon) go for a flat $10-a-pop even though the manuscript-audiobook transition is much more capital- and labor-intensive then the manuscript-ebook transition. In this vein exceptional credit is due to, of all people, Tyler Cowen, whose modes of operations are often much more interesting then his stated ideas.

  2. Piketty’s “Capital”, Link Round-Up | A (Budding) Sociologist's Commonplace Book says:

    March 24th, 2014 at 10:31 pm (#)

    […] The Problem of “Capital in the Twenty First Century”. Peter Frase, writer for Jacobin, on his personal blog. […]

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