Dean Baker presents a wonderful critique of the Piketty book. The thesis that Piketty presents is in my view correct based on fairly restrictive assumptions, which Baker is able offer reasonable counters. Having studied economic history for many years and with access to all the studies performed at the IMF, I am amazed at how far Piketty has advanced the world's most complicated science / art. Seasoned economists will know that it is impossible for an economist to scope ahead very far into the future and get it right. Ronald Brech, one Britain's finest real economists, tried it for one country, the UK, in his book Britain 1984 and realized how immense the task was. It's just not possible without an enormous amount of simplification which becomes the undoing of any story of the economic future no matter how sophisticated the growth model used. Lord Kaldor and Professor Frank Hahn, Professor Joan Robinson at Cambridge all produced fascinating models with different degrees of sophistication, but none came close to capturing the real dynamics of economic growth and income distribution. The world's finest economic mind, that of Joseph Schumpeter of Harvard came closest in my view to the underlying trend in the dynamics of capitalist growth embodying innovation and a popular rebellion against capitalism arising from inequality and oligopolization of market structures, and even his sociology is proving more accurate over the long term than any one ever thought possible. Economics on the macro scale is not just a dismal science it is an impossible science. The tools are just not there. Mathematicians and econometricians will tell you that the economic system is over determined too many variables with too few reliable equations. However, what is apparent is that financial markets are excessively inefficient and for the most part need to be cleared of rubbish banking. Innovations could bring this about, but far better to have the political process say, enough is enough, and restructure international banking from the ground up eliminating the enormous waste and privilege. Perhaps Bitcoins will do just that.
