The Piketty Phenomenon: New Zealand Perspectives

Today I heard 3 economists discussing the Piketty book with regards to the NZ economy. The Piketty book “Capital in the Twenty-First Century” is I suspect a mostly unread best seller that many of us think we should read but where to start… And more importantly – what is the relevance of Piketty’s idea to the New Zealand economy?

“Piketty’s assessment that inherited wealth will always grow faster, on average, than earned wealth has energised debate.”

Luckily for me (and you) there is an easier way to assess the Piketty book and its likely impacts ( or not) on the NZ economy.

What I got (so far) is that trickle down is complete bollocks and what is important in the NZ scenarios is that we should be looking at policy settings to provide an “equality of opportunity” which is different from equality of outcomes. But in New Zealand we aren’t even tracking the data so that makes any serious empirical analysis a “catch 22”.

Apparently NZ has less of an inequality situation than say the U.S but we are heading in that direction* and we should be thinking about how to address that via taxation of capital or some other policy. Susan Guthrie has a lot to say on changes to taxation changes.

*The wrong direction i.e. towards increasing inequality…

( My copy of the book is in the mail and I will update this when I can read some of the chapters myself.)

“The global debate on taxing wealth, sparked by economist Thomas Piketty and his proposals for improving income equality. Piketty’s thesis is contained in his bestselling book Capital in the Twenty-First Century.

The new book, The Piketty Phenomenon collects New Zealand responses to Thomas Piketty’s argument that inherited wealth will always grow faster, on average, than earned wealth.

(In the radio talk) Three New Zealand economists discuss Piketty’s thesis in the New Zealand context – Geoff Bertram is a research associate at the Institute for Governance and Policy Studies at Victoria University; Susan Guthrie is the co-author of the 2011 book, The Big Kahuna with Gareth Morgan which argued for significant tax and welfare reform to redistribute wealth; and Donal Curtin is the former chief economist at the BNZ and now works as a consultant.”

bwb7760textsinprintthepickettyphenomenonweb02In the radio talk there were only 3 economists but in the book there are more than a dozen and I have ordered my own copy from Bridget Williams Books so I can read the full content. The Piketty Phenomenon

NIKKI MANDOW has some comments on the NZ book over here and includes a chance to win a copy but for NZ$15 you should just buy your own copy in my view.

This is a chance to read responses from Bernard Hickey and others on the relevance of the Piketty book to NZ conditions.

“Thomas Piketty forces us to view the economy in a different way. At the same time, he offers New Zealand a new opportunity to lead the world in our response:” Hautahi Kingi

The book is being released tomorrow but I suggest you preorder it as it is unlikely to make it to the airport bookshop.

Here is a graph (below) on the Great Gatsby Curve which is referred to by one of the ecomomists during the radio interview.

“The predictive power of the Great Gatsby Curve, such as it was, did not quite require that inequality and mobility be causally linked, but the whole point of the exercise was to argue that rising inequality was lowering mobility.”