Methodology in Capital in the Twenty-First Century: A "New-Historical" Approach to Political Economy

(ProQuest: ... denotes formulae omitted.)I. INTRODUCTIONThomas Piketty's (2014) Capital in the twenty-first century (from here on Capital) has been praised as "one of the watershed books in economic thinking" (Milanovic 2014, 519) and derided as a work whose conclusions "do not appear to be backed by the book's own sources" (Giles 2014, 1). However, for all that has been said about Piketty's book, it appears that more effort has been directed toward stating what Capital is not rather than what it is. Piketty's work is not easily pigeonholed; it provides economists with an array of sweeping insights backed by lengthy and comprehensive data sets. For its uniqueness, Piketty's work should be praised. However, the uniqueness of Piketty's methodology makes it difficult to classify his work. When trying to understand what exactly Capital's methodology consists in, the expansiveness of Piketty's analysis becomes problematic for those who wish to categorize the work within the history of economic thought. Institutionalist economists claim that Capital "ignores institutions" (Acemoglu and Robinson 2015, 1), Galbraith (2014a) critiques Piketty from a post-Keynesian perspective, Marxist economists do not support Piketty (Harvey 2014), while the Austrian school insists that Piketty is, in fact, a Marxist (Reisman 2014).For all the disagreement about where Piketty's methodology locates Capital in the spectrum of economic thought, there seems to be little agreement about what the methodological pillars of Capital actually are. But, before there can be agreement or disagreement about what school of thought Capital belongs to, there must be a comprehensive analysis of its methodology. This paper seeks to provide that analysis. In Section II this paper gives a general overview of Capital and identifies the central characteristics of the methodological framework. Section III responds to the lack of consensus in the literature, arguing that Piketty's methodology offers a new direction for economic science in the form of a new-historical analysis. This is predicated on an interpretation of Capital that analyzes general, dynamic laws on three levels: the level of distributions, the level of institutions, and the level of history. Section IV identifies some sources of confusion about the fit of Capital in the history of economic thought. Section V offers some concluding remarks and suggestions for future inquiry.II. CAPITAL IN THE TWENTY-FIRST CENTURY: AN OVERVIEWThe stated goal of Capital is a historical study of long-run distributional trends of wealth and income, rooted in "as complete and consistent a set of historical sources as possible" (Piketty 2014, 19). The text is structured according to three sections: an analysis of the capital/income ratio over time, an analysis of the structure of inequality (both wealth and income) over time, and policy recommendations based on those analyses. The historical analysis of Capital is woven into the framework of three "fundamental laws of capitalism", the formation of which is guided by three central methodological pillars: distributional analysis, historicism, and analysis of institutions. The following paragraphs will analyze the ways in which Piketty makes use of the three central methodological pillars of distributional analysis, historicism, and analysis of institutions in the context of the development of the three fundamental laws of capitalism.First, it is necessary to discuss what exactly is meant by the term 'law'. While the word-as it is used by Piketty-echoes language used by Marx and Ricardo, the laws that Piketty cites are not strictly empirical propositions (as in laws of nature). The first two fundamental laws are analytic propositions, a priori truths. The third fundamental law combines an empirical proposition with an analytic one. As will be noted later, the fact that 'r > g' holds is not a historical necessity (there may be economies where 'r g', then inequality will increase. …