Two New 'Post-Piketty' Books.

• Author: Bailey, Norman A.

A review of

The Captured Economy: How the Powerful Enrich Themselves, Slow Down Growth, and Increase Inequality by Brink Lindsey and Steven M. Teles, Oxford University Press, 2017, and

Capitalism Without Capital: The Rise of the Intangible Economy by Jonathan Haskel and Stian Westlake, Princeton University Press, 2018

Two phenomena in recent years have seriously shaken traditional economic analysis: the unprecedented concentration of income and wealth in the western world, as famously documented by Thomas Piketty, and the agonizingly slow recovery from the 2008 "Great Recession," despite the massive quantities of liquidity poured into financial pipelines by the major central banks, especially the Federal Reserve and the European Central Bank.

Two recent books have joined in the discussion of these phenomena and have suggested that they are linked. In The Captured Economy, Brink Lindsey of the Niskanen Center and Steven Teles of Johns Hopkins University place the blame for both phenomena on Piketty's one percent of the holders of society's wealth (defined as income-producing assets) and the ten percent who service the one percent, through their joint control of the policymaking process, resulting in rent-seeking through distortions to market processes, especially barriers to entry and special subsidies, leading to massive moral hazards and widespread corruption. Included in their list of distortions and subsidies are the tsunami of liquidity mentioned above, and significant expansions of licensing, patenting, copyrighting, and land-use regulation, which taken together have resulted in "...economic stagnation and...unjust enrichment...." There you have it--the one percent and the lawyers, accountants, managers, and technocrats who serve them (the ten percent) use their wealth to increase their power, and use their power to increase their wealth.

This is hardly new news. It has, in fact, been ever thus throughout human history. What is new is the scale of the concentration of wealth and income and the shrinking of economic opportunity for the remaining 90 percent. Lindsey and Teles prove their thesis beyond any reasonable rejoinder, but their suggested "solutions" are less than convincing. They propose the creation of "countervailing forces" which will pressure the policymakers to adopt "countervailing measures," but provide no convincing explanation of where the countervailing forces will come from and from where they will obtain the...