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Capital by Thomas Piketty | Macroeconomics | Khan Academy


3m read
·Nov 11, 2024

Thomas Piketty's Capital in the 21st Century has been getting a lot of attention lately because it's addressing an issue that matters a lot to a lot of folks: the issue of income inequality and wealth inequality. My goal here isn't to have a view on the book, to say the book is all right or it's all wrong, but to really use this book as a tool to give you the critical thinking tools you need to make your own judgment.

The one thing that is neat about the book is that he makes all of the charts and figures available on his website. So, all of these screenshots that I got, these are from piketty.pse.ens.fr/en/capital21c2. I encourage you to go there on your own and to browse these charts because there's a lot of interesting charts. But as you do so, always look at them with both an open and a critical eye to see how what might make sense or what might not make sense or what questions start to emerge that you would like to dig deeper on.

Let me just start with this chart right over here because this begins to lay out what might be an issue. This is wealth inequality in the United States between 1810 and 2010. The way that they're measuring wealth inequality is the share of the top decile or percentile in total wealth. Here they're saying the top 1% share of wealth—that's this line right over here—and then you have the top decile, the top 10% share in wealth, so this right over here.

This data point—let me do this in magenta—this is telling us that based on his data, in 1810, the top 1% (the wealthiest 1%) had roughly, it looks like about 25% of the wealth of the country, and the top 10% had about, looks like it's almost maybe almost 60% of the wealth of the country. Then we see how this is trending, and it was trending up as we go through the 1800s all the way until the beginning of the 20th century. So this is the 19th century right over here, beginning of the 20th century.

In particular, we have this period in the last few decades—the last two or three decades of the 19th century, the 1800s—that's often known as the Gilded Age. The Gilded Age is associated with fairly dramatic wealth inequality. One of the questions that this book raises is: Are we entering into another Gilded Age? Now, if you just look at this trend line here, it's clear that the wealth inequality isn't as severe as it was in the, I guess you could say, formal Gilded Age. But it's a question of where is this going, and is this something that people should be concerned about?

So the question is: Is this trend line going to do what it did in the last few decades of the 19th century and do something like this, essentially maybe bringing at least this chart more in line with what happened during the first Gilded Age? Or is it going to do something like this? Or is it going to do something like that? Even if it does do something like this, are we going to have the same realities that we had in the first Gilded Age, where it's maybe disproportionate power associated with that wealth or whatever else?

These are all the types of questions that we should be thinking about. What type of a reality are we going into? What is the data that is making us believe one or the other? And what are the policy decisions on things like innovation or taxation or education that might lead us one way or another? I will dig deeper into all of those ideas over the series, over the next few videos in this tutorial.

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