There are two major, and a few minor, problems with this thesis. The first is the United States has just three centuries of real economic growth to examine. Over much of that time, the return to capital has been below that of economic growth. The dearth and quality of data argues against grand conclusions, and Piketty’s ideas are ambitiously grand.
Second, the way capital and labor now interact to produce goods and services benefits specialized human capital. This is a very different world than the factory of 1890 where much labor was a commodity. So, much of earnings income differences are necessarily due to the way highly skilled people use capital, not the returns to capital itself. Piketty dislikes the term human capital itself, yet this is where much inequality is now rooted. That is a different issue for a different, better and ultimately more important book.
Michael J. Hicks, Ph.D., is director of the Center for Business and Economic Research and economics professor at Ball State.