After the crash, we need a revolution in the way we teach economics

Students who claim that economics courses fail to explain the 2008 crash are gaining support from British business. Here, two Cambridge academics agree it's time for a change
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• • Ha-Joon Chang and Jonathan Aldred
  • The Observer, Sunday 11 May 2014
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Economics graduates at Manchester University who joined the protests at what they felt was teaching that did not fit them for real-life challenges. Photograph: Jon Super for the Observer

All academics think their own subjects are unique – distinctively difficult, unusually useful, exceptionally elegant, and what have you. But the two of us think our subject – economics – is truly unique.
We do not take pride in saying this. On the contrary, we are ashamed. Because what makes economics so unique is the fact that it is the only academic discipline in which a significant and increasing number of students are in an open revolt against the content of their degree courses.
The discontent has been brewing since the outbreak of the 2008 financial crisis, when students found out that their professors have little to offer in terms of explanation of the biggest financial crisis in three generations, not to speak of some of them having been cheerleaders of reckless financial expansion.
But recently student economists in many UK universities – including Manchester, Cambridge, University College London, Essex, the London School of Economics, the School of Oriental and African Studies – have begun organised protest against the content of their degree courses. They argue that their degrees are not fit for purpose, whether that purpose is preparing students for their future careers in the "real world", or more broadly, equipping them with a good understanding of real world economies.
This phenomenon is not unique to the UK. Similar movements are springing up in the United States, Germany, France, Brazil, Chile, India and other countries. Now there is even a global alliance between these student groups, under the banner of the International Student Initiative for Pluralist Economics.
Complaints about the content of economics degrees do not just come from students, whose youthful arrogance and idealism might make them see every theory as wanting, and every economic policy a manifestation of some conspiracy. The students are increasingly being joined in this protest by leading employers of economics graduates, from the Bank of England, the civil service and the City.
Employers complain that recent economics graduates, while being technically proficient, know very little about the real world. Lacking knowledge about the historical backgrounds, institutional details and political idioms of real-world economies, they end up being idiot savants – they can manipulate most complicated mathematical models but cannot translate their insights into business strategies and economic policies in the real world.
Another complaint is that, when graduate economists do have something to say about the real-world economy, their advice is incomprehensible to noneconomists – and noneconomists make up almost all their audience. And, finally, there is the nagging doubt that the advice may simply be incorrect.
It is no coincidence that employers of economists, who had been privately despairing about the direction of academic economics for years, started to express their concerns more publicly after the financial crisis hit in 2008.
To summarise bluntly, students and many employers feel that the typical economics graduate today receives a training that is irrelevant to understanding real economies, incomprehensible to the target audiences for economic advice, and often just plain incorrect.

What needs to change? – 'Back to the future'

Students, employers and many economists from outside academia are in broad agreement about necessary changes.
Students need to learn more about the real world. They need to know about the current state of the world economy, the history of capitalism (including the history of finance), and some details about specific contemporary economies – why are the Chinese or the German economies so different from the UK one, for example?
Many observers advocate "economic pluralism": students should be introduced to different approaches to economics. Free-market economics alone has three distinctive varieties – the Classical (Adam Smith and David Ricardo) and the Austrian (Friedrich Hayek) schools, as well as the Neoclassical school, which is today's "mainstream" economics. Beyond that, there are many other influential schools of economic thinking, including Keynesian, Marxist, Schumpeterian, Institutionalist, Developmentalist, and Behaviouralist. All these different modes of analysis have their strengths and weaknesses, so students need to know something about all of them, because a good analysis of complex real-world problems demands more than one analytical perspective.
Another common suggestion is that students need a wider range of empirical skills. Nowadays students are just taught econometrics (application of sophisticated statistical techniques to large data sets). They should also be introduced to national accounts, company balance sheets, flow-of-funds accounts, surveys and interview techniques. These tools are routinely used in many jobs which economics students enter after their graduation.
The striking thing about most of these proposals is that they are not radical departures, but "back to the future" – topics and skills that used to be routinely taught in undergraduate economics degrees. In the past, economics was taught as a series of interrelated debates about competing theories and the different policy recommendations of those theories. Imprecise, even messy, but useful. This approach to teaching economics could work well today – it is how other social sciences are taught and there are no good reasons for treating economics differently. But the modern economics degree is so unlike this picture that it is unrecognisable to other social scientists – and equally unrecognisable to anyone who was an undergraduate economist more than twenty years ago.
Of course, undergraduates also need to be made aware of important new ideas and theories that did not feature on past courses. Behavioural economics is frequently mentioned, and now so established that it barely qualifies as "new", yet many undergraduate courses (such as the one in Cambridge) still completely ignore it. And even when mainstream economists do introduce behavioural economics to undergraduates, they mostly teach a watered-down version, stripped of the bits which contradict mainstream economic theory.
The psychologist Daniel Kahneman, who won the Nobel prize for his work in this field, warned in his prize lecture that orthodox behavioural economics is hard to reconcile with his analysis (as in his book Thinking, Fast and Slow) of how people actually make decisions.
In recent years, when we meet people living outside the academic bubble, from taxi drivers to fund managers, and they learn that we are university economists, they often say the same thing: "You must have had to rewrite the course."
And they are always shocked when we explain that in Cambridge, like every other elite university, the undergraduate economics curriculum has remained almost the same. Effectively no change, not even marginal acknowledgement that something might be wrong with conventional economic theories that, among other things, failed to see the 2008 financial crisis coming and can't satisfactorily explain it even in hindsight.
So here is the puzzle: why has the curriculum not changed, given that so many "consumers" – students and employers – are dissatisfied with economics education today, and that there is a broad and not-so-radical consensus on the changes required? The answer lies in the peculiar view of economics adopted by most mainstream economists.

Economics as the science of 'everything'

The most important thing about mainstream economics today – and a source of pride among many of its supporters – is that it is not limited to the study of anything in particular, including the economy. It is defined by its tools of analysis (mathematical models mostly involving optimisation and equilibrium), rather than the object of inquiry.
The prevalence of this view is why so many popular economics books of recent years have claimed to be about "everything". Prominent examples include Freakonomics – probably the best-known economics book of our time – and the first volume in the Economic Naturalist book series by Robert Frank, the Cornell University professor and New York Times columnist, whose subtitle is Why Economics Explains Almost Everything (what modesty!)
This strange definition of economics, in terms of tools rather than objects of inquiry, explains a lot about why mainstream economists resist curriculum reform. They have constructed a Kafkaesque world in which proposed reforms are rejected because they are redundant, as economics already has tools to analyse "everything". At the same time, if reforms involve issues that the existing theories cannot explain well, they are rejected because they would take the curriculum outside the domain of economics. Challenged, for example, to introduce to the economics syllabus the study of the actual behaviour of traders in financial markets, academics defending the status quo reply that, first, their models can already capture the behaviour of "rational" traders, and second, the descriptive study of the actual behaviour of traders is a subject for sociologists, historians or psychologists.
In this world view, subjects such as economic and financial history, or the detailed empirical study of specific contemporary economies, are also topics best left outside the undergraduate course. Most (but not all) mainstream economists may recognise the value in studying these topics, but they are too peripheral to their understanding of what economics is for them to be given much space in the course. Students in Norway who asked to study real economies in their courses were told by their professors: "Our task is to give you an analytical framework, you have the rest of your lives to learn about current affairs."
Part of the self-image of most academic economists today is that the core of the subject is an established, settled science. At the frontiers of research, there may be controversy and even turmoil, but the undergraduate curriculum need not be disturbed, because it reflects the core of agreed theories – or at least an agreed mathematical toolkit – emerging from years of steady progress. This settled science can effectively be codified in textbooks, which include essentially everything that undergraduates need to know.
From this perspective, teaching undergraduates economics as a series of interconnected debates at best risks needlessly confusing students and at worst actively misleading them by suggesting problems or gaps in the theories where there are none (well, at least none that impressionable young students need to worry about). This is unfortunately the view taken by a leading group of curriculum reformers among mainstream economists – the CORE project group, whose proposals were recently launched with prominent media coverage in a conference at the UK Treasury. Assuming that economics is a settled science, or at least insisting that it be presented as such to undergraduates so as not to confuse them, is a serious obstacle to meaningful reform.
Academic economics, in any flavour or school of thought, is not characterised by steady scientific progress just because economists wish it were so. It is not hard to find evidence of mainstream economists being overconfident about their knowledge – think of all their declarations, in the years before the 2008 crisis, that the days of economic fluctuation and instability were over.
Even after the crisis, some economists show a stubbornness bordering on arrogance in their refusal to acknowledge the flaws in core theory. In a 2010 interview in the depths of recession, Nobel laureate Tom Sargent refused to accept any of the by then standard criticisms of macroeconomics, insisting instead that the critics showed "woeful ignorance or intentional disregard for what much of modern macroeconomics is about and what it has accomplished". Sargent added: "It is just wrong to say that this financial crisis caught modern macroeconomists by surprise."
There is another kind of arrogance at work in the refusal to reform the curriculum, especially in response to proposals to strengthen its "real world" relevance.
John Maynard Keynes famously said that economics should be like dentistry, by which he meant it should be a modest profession providing practical services to noneconomists, rather than indulging in grand theorising for its own sake. Unfortunately many academic economists seem to have an alternative, ivory-tower-centred view of the world: "pure" research is more prestigious than applied or policy-relevant research, and research is more important than teaching. So, the more detached from the real world your work is, the higher up in the intellectual hierarchy you are.
As a result, undergraduate economics courses are designed to prepare students to do further study leading to an academic research career, when in fact less than 10% of them intend to pursue one. No wonder the students and their future employers find the economics course unfit for purpose.
Given the definition of economics in terms of its toolkit and the importance accorded to "pure" research, the curriculum reform acceptable to most mainstream economists is that which proposes more maths – of the kind needed for an academic career.
Among mainstream economists who accept the need for change, the most popular reform proposal is the introduction of mathematical models of complex nonlinear systems – the kinds of models which, at least with hindsight, might have predicted the 2008 financial crisis.
There is no doubt that these models, and related research in "econophysics", represent a promising new research direction in macroeconomics. But that does not make them, even in simplified form, candidates for a new undergraduate curriculum. Most graduate economists will have no contact with these models in their careers; a few of them may need, at most, to understand their broad insights. A civil servant in the Government Economic Service expressed the requirements for the latter group pithily: government economists need to know how to drive the car, not build it.
This point extends to the teaching of models in the undergraduate course more generally. The focus should be on teaching the underlying ideas and mechanisms which drive the models, rather than the ability to derive all the results mathematically. Training students how to do these mathematical manipulations takes an enormous share of teaching time: this could be reallocated to teaching the new topics and skills mentioned earlier.

Bad economics affects us all

Reform of economics teaching is resisted so strongly by mainstream economists because they find it threatening. It is like asking the medieval Catholic clergy to teach their new recruits different interpretations of Christianity, to stop teaching them exclusively in Latin and teach more in the local vernacular, and to encourage them to challenge the intellectual and the moral authority of the Holy See. No wonder it is so strongly resisted by most mainstream economists, even by those who claim to be interested in reform.
But what does this have to do with everyone outside the academic bubble? Why does it matter that those nerds doing economics degrees are made to jump through one set of hoops rather than another?
Reform of economics education is not just a matter for university economists. The current curriculum frustrates thousands of bright young students who started studying economics thinking that they would learn something useful for making the world a better place and find themselves learning an ersatz theory of "everything" instead. Cynicism about the purpose of economics leads some of the smartest students to careers in investment banking. For employers who recruit economists with first-class degrees, only to find that they possess very narrow skill sets, lack communication skills, and have little knowledge of real economies, the current curriculum hurts their bottom line.
Above all, the future of economics education is ultimately a matter for all of us, because what economists learn in their degree influences what they do later when they make important policy decisions that fundamentally affect our lives – financial deregulation, welfare cuts, gas prices, and healthcare reform. It is time that everyone gets involved in this debate.

Ha-Joon Chang and Jonathan Aldred teach economics at Cambridge University. Chang's Economics: The User's Guide has just been published. Aldred is author of The Skeptical Economist. Chang is appearing at the Bristol Festival of Ideas, in association with the Observer, on Wednesday 14 May

Occupy was right: capitalism has failed the world

One of the slogans of the 2011 Occupy protests was 'capitalism isn't working'. Now, in an epic, groundbreaking new book, French economist Thomas Piketty explains why they're right

Blogger Reference Link http://www.p2pfoundation.net/Transfinancial_Economics

       

   

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• • Andrew Hussey
  • The Observer, Sunday 13 April 2014
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French economist Thomas Piketty, author of Capital in the Twenty-First Century. 'I am not political.' Photograph: Ed Alcock for the Observer

The École d'économie de Paris (the Paris School of Economics) is actually situated in the most un-Parisian part of the city. It is on the boulevard Jourdan in the lower end of the 14th arrondissement, bordered on one side by the Parc Montsouris. Unlike most French parks, there is a distinct lack of Gallic order here; in fact, with lakes, open spaces, and its greedy and inquisitive ducks, you could very easily be in a park in any British city. The campus of the Paris School of Economics, however, looks unmistakably and reassuringly like nearly all French university campuses. That is to say, it is grey, dull and broken down, the corridors smelling vaguely of cabbage. This is where I have arranged an interview with Professor Thomas Piketty, a modest young Frenchman (he is in his early 40s), who has spent most of his career in archives and collecting data, but is just about to emerge as the most important thinker of his generation – as the Yale academic Jacob Hacker put it, a free thinker and a democrat who is no less than "an Alexis de Tocqueville for the 21st century".

1. Capital in the Twenty-First Century
2. by Thomas Piketty, Arthur Goldhammer
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This is on account of his latest work, which is called Capital in the Twenty-First Century. This is a huge book, more than 700 pages long, dense with footnotes, graphs and mathematical formulae. At first sight it is unashamedly an academic tome and seems both daunting and incomprehensible. In recent weeks and months the book has however set off fierce debates in the United States about the dynamics of capitalism, and especially the apparently unstoppable rise of the tiny elite that controls more and more of the world's wealth. In non-specialist blogs and websites across America, it has ignited arguments about power and money, questioning the myth at the very heart of American life – that capitalism improves the quality of life for everyone. This is just not so, says Piketty, and he makes his case in a clear and rigorous manner that debunks everything that capitalists believe about the ethical status of making money.
The groundbreaking status of the book was recognised by a recent long essay in the New Yorker in which Branko Milanovic, a former senior economist at the World Bank, was quoted as describing Piketty's volume as "one of the watershed books in economic thinking". In the same vein, a writer in the Economist reported that Piketty's work fundamentally rewrote 200 years of economic thinking on inequality. In short, the arguments have centred on two poles: the first is a tradition that begins with Karl Marx, who believed that capitalism would self-destruct in the endless pursuit of diminishing profit returns. At the opposite end of the spectrum is the work of Simon Kuznets, who won a Nobel prize in 1971 and who made the case that the inequality gap inevitably grows smaller as economies develop and become sophisticated.
Piketty says that neither of these arguments stand up to the evidence he has accumulated. More to the point, he demonstrates that there is no reason to believe that capitalism can ever solve the problem of inequality, which he insists is getting worse rather than better. From the banking crisis of 2008 to the Occupy movement of 2011, this much has been intuited by ordinary people. The singular significance of his book is that it proves "scientifically" that this intuition is correct. This is why his book has crossed over into the mainstream – it says what many people have already been thinking.
"I did deliberately aim the book at the general reader," says Piketty as we begin our conversation, "and although it is obviously a book which can be read by specialists too, I wanted the information here to be made clear to everyone who wants to read it.' And indeed it has to said that Capital in the Twenty-First Century is surprisingly readable. It is packed with anecdotes and literary references that illuminate the narrative. It also helps that it is fluently translated by Arthur Goldhammer, a literary stylist who has tackled the work of the likes of Albert Camus. But even so, as I note that Piketty's bookshelves are lined with such headache-inducing titles as The Principles of Microeconomics and The Political Influence of Keynesianism, simple folk like me still need some help here. So I asked him the most obvious question I could: what is the big idea behind this book?
"I began with a straightforward research problematic," he says in elegant French-accented English. "I began to wonder a few years ago where was the hard data behind all the theories about inequality, from Marx to David Ricardo (the 19th-century English economist and advocate of free trade) and more contemporary thinkers. I started with Britain and America and I discovered that there wasn't much at all. And then I discovered that the data that did exist contradicted nearly all of the theories including Marx and Ricardo. And then I started to look at other countries and I saw a pattern beginning to emerge, which is that capital, and the money that it produces, accumulates faster than growth in capital societies. And this pattern, which we last saw in the 19th century, has become even more predominant since the 1980s when controls on capital were lifted in many rich countries."
So, Piketty's thesis, supported by his extensive research, is that financial inequality in the 21st century is on the rise, and accelerating at a very dangerous pace. For one thing, this changes the way we look at the past. We already knew that the end of capitalism predicted by Marx never happened – and that even by the time of the Russian revolution of 1917, wages across the rest of Europe were already on the rise. We also knew that Russia was anyway the most undeveloped country in Europe and it was for this reason that communism took root there. Piketty goes on to point out, however, that only the varying crises of the 20th century – mainly two world wars – prevented the steady growth of wealth by temporarily and artificially levelling out inequality. Contrary to our perceived perception of the 20th century as an age in which inequality was eroded, in real terms it was always on the rise.
In the 21st century, this is not only the case in the so-called "rich" countries – the US, the UK and western Europe – but also in Russia, China and other countries which are emerging from a phase of development. The real danger is that if this process is not arrested, poverty will increase at the same rate and, Piketty argues, we may well find that the 21st century will be a century of greater inequality, and therefore greater social discord, than the 19th century.
As he explains his ideas to me with formulae and theorems, it still sounds a little too technical (I am someone who struggled with O-level maths). But by listening carefully to Piketty (he is clearly a good and patient teacher) and by breaking it down into bite-sized chunks it does all start to make sense. For this beginner he explains that income is a flow – it moves and can grow and change according to output. Capital is a stock – its wealth comes from what has been accumulated "in all prior years combined". It's a bit like the difference between an overdraft and a mortgage, and if you don't ever get to own your house you'll never have any stock and always be poor.
Student protests against tuition fee increases in 2010. Piketty says: 'It is a perfect example of how to inflict debt on the public sector.' Photograph: Dominic Lipinski/PA In other words, in global terms what he is saying is that those who have capital and assets that generate wealth (such as a Saudi prince) will always be richer than entrepreneurs who are trying to make capital. The tendency of capitalism in this model is to concentrate more and more wealth in the hands of fewer and fewer people. But didn't we already know this? The rich get rich and the poorer get poorer? And didn't the Clash and others sing about it in the 1970s?
"Well actually, we didn't know this, although we might have guessed at it," says Piketty, warming to his theme. "For one thing this is the first time we have accumulated the data which proves that this is the case. Second, although I am not a politician, it is obvious that this movement, which is speeding up, will have political implications – we will all be poorer in the future in every way and that creates crisis. I have proved that under the present circumstances capitalism simply cannot work."
Interestingly, Piketty says that he is an anglophile and indeed began his research career with a study of the English system of income tax ("one of the most important political devices in history"). But he also says that the English have too much blind faith in markets which they do not always understand. We discuss the current crisis in British universities, which having imposed fees now find that they are short of cash because the government miscalculated what students would have to pay and is now unable to ensure that the loans handed out to cover the fees will ever be repaid. In other words, the government thought it was on to a sure money-maker by introducing fees; in fact, because it could not control all the variables of the market, it was gambling with the nation's money and looks set to lose spectacularly. He chuckles: "This is a perfect example of how to inflict debt on to the public sector. Quite extraordinary and quite impossible to imagine in France."
For all that he is keen on Britain and the United States, Piketty says that he only really feels at home in France. Capital in the Twenty-First Century is constructed out of a plethora of French references (the historian François Furet is key), and Piketty declares that he understands the French political landscape best of all. He was brought up in Clichy in a mainly working-class district and his parents were both militant members of Lutte Ouvrière (Workers' Struggle) – a hardcore Trotskyist party which still has a significant following in France. Like many of their generation, disappointed by the failure of near-revolution of May '68, they dropped out to raise goats in the Aude (this was a classic trajectory for many babacools – leftist hippies – of that generation). The young Piketty worked hard at school, however, studying in Paris and finishing up with a PhD from the London School of Economics at the age of 22.  He then moved on to Massachusetts Institute of Technology, where he was a noted prodigy, before moving back to Paris to finally become director of the school where we are now sitting.
Piketty advocates a wealth tax, but admits that making the rich pay more will be difficult, as François Hollande has found. Photograph: Philippe Wojazer/Reuters His own political itinerary began, he tells me, with the fall of the Berlin Wall in 1989. He set out to travel across eastern Europe and was fascinated by the wreckage of communism. It was this initial fascination that led him towards a career as an economist. The gulf war of 1991 also influenced him. "I could see then that so many bad decisions were taken by politicians because they did not understand economics. But I am not political. It is not my job. But I would be happy if politicians could read my work and draw some conclusions from it."
This is slightly disingenuous as Piketty did actually work as an adviser to Ségolène Royal in 2007, when she was the socialist candidate in the presidential elections. This was not a happy period for him – his love affair with the politician and novelist Aurélie Filipetti, another Royal acolyte, ended around then with acrimonious accusations on both sides. Fair enough, after this murky business, that Piketty might want to distance himself from the everyday rough and tumble of real politics.
But no matter. What have we learned? Capitalism is bad. Hooray! What's the answer? Socialism? Hope so. "It is not quite so simple," he says, disappointing this former teenage Marxist. "What I argue for is a progressive tax, a global tax, based on the taxation of private property. This is the only civilised solution. The other solutions are, I think, much more barbaric – by that I mean the oligarch system of Russia, which I don't believe in, and inflation, which is really just a tax on the poor." He explains that oligarchy, particularly in the present Russian model, is quite simply the rule of the very rich over the majority. This is both tyrannical and not much more than a form of gangsterism. He adds that the very rich are not usually hurt by inflation – their wealth increases anyway – but the poor suffer worst of all with a rising cost of living. A progressive tax on wealth is the only sane solution.
But for all that he is talking sense, much of it common sense, I put to him that no political party in Britain or the United States, of left or right, would dare to go to the polls with such idealistic ideas. The present government of François Hollande is widely despised not because of the president's sexual peccadilloes (in contrast, these are pretty much widely admired) but because of the punitive tax regime he has been seeking to impose.
"This is true," he says. "Of course it is true. But it is also true, as I and my colleagues have demonstrated in this book, that the present situation cannot be sustained for much longer. This is not necessarily an apocalyptic vision. I have made a diagnosis of the past and present situations and I do think that there are solutions. But before we come to them we must understand the situation. When I began, simply collecting data, I was genuinely surprised by what I found, which was that inequality is growing so fast and that capitalism cannot apparently solve it. Many economists begin the other way around, by asking questions about poverty, but I wanted to understand how wealth, or super-wealth, is working to increase the inequality gap. And what I found, as I said before, is that the speed at which the inequality gap is growing is getting faster and faster. You have to ask what does this mean for ordinary people, who are not billionaires and who will never will be billionaires. Well, I think it means a deterioration in the first instance of the economic wellbeing of the collective, in other words the degradation of the public sector. You only have to look at what Obama's administration wants to do – which is to erode inequality in healthcare and so on – and how difficult it is to achieve that, to understand how important this is. There is a fundamentalist belief by capitalists that capital will save the world, and it just isn't so. Not because of what Marx said about the contradictions of capitalism, because, as I discovered, capital is an end in itself and no more."
Piketty delivers this speech, erudite and powerful, with a quiet passion. He is, one would guess, a relatively modest and self-effacing character, but he loves his subject and it is indeed a delight to find oneself in the midst of a private seminar on money and how it works. His book is indeed long and complicated but anyone who lives in the capitalist world, which is all of us, can understand the arguments he makes about the way it works. One of the most penetrating of these is what he has to say about the rise of managers, or "super-managers", who do not produce wealth but who derive a salary from it. This, he argues, is effectively a form of theft – but this is not the worst crime of the super-managers. Most damaging is the way that they have set themselves in competition with the billionaires whose wealth, accelerating beyond the economy, is always going to be out of reach. This creates a permanent game of catch-up, whose victims are the "losers", that is to say ordinary people who do not aspire to such status or riches but must be despised nonetheless by the chief executives, vice-presidents and other wolves of Wall Street. In this section, Piketty effectively rips apart one of the great lies of the 21st century – that super-managers deserve their money because, like footballers, they have specialised skills which belong to an almost superhuman elite.
"One of the great divisive forces at work today," he says, "is what I call meritocratic extremism. This is the conflict between billionaires, whose income comes from property and assets, such as a Saudi prince, and super-managers. Neither of these categories makes or produces anything but their wealth, which is really a super-wealth that has broken away from the everyday reality of the market, which determines how most ordinary people live. Worse still, they are competing with each other to increase their wealth, and the worst of all case scenarios is how super-managers, whose income is based effectively on greed, keep driving up their salaries regardless of the reality of the market. This is what happened to the banks in 2008, for example."
It is this kind of thinking that makes Piketty's work so attractive and so compelling. Unlike many economists he insists that economic thinking cannot be separated from history or politics; this is what gives his book the range the American Nobel laureate Paul Krugman described as "epic" and a "sweeping vision". Piketty's influence indeed is growing well beyond the small enclosed micro-society of academic economists. In France he is becoming widely known as a commentator on public affairs, writing mainly for Le Monde and Libération, and his ideas are frequently discussed by politicians of all hues on current affairs programmes such as Soir 3. Perhaps most importantly, and unusually, his influence is growing in the world of mainstream Anglo-American politics (his book is apparently a favourite in the Miliband inner circle) – a place traditionally indifferent to French professors of economics. As poverty increases across the globe, everyone is being forced to listen to Piketty with great attention. But although his diagnosis is accurate and compelling, it is hard, almost impossible, to imagine that the cure he proposes – tax and more tax – will ever be implemented in a world where, from Beijing to Moscow to Washington, money, and those who have more of it than anyone else, still calls the shots.
Thomas Piketty will be talking about Capital at the IPPR, London WC2, on 30 April, and at the LSE, London WC2, on 16 June