American Inequality in the Long Run

According to the famous thesis of Thomas Piketty’s Capital in the Twenty-First Century, ‘‘When the rate of return on capital exceeds the rate of growth of output and income, as it did in the nineteenth century and seems quite likely to do again in the twenty-first, capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based’’ (2014, p. 1). Inequality undermines democracy, and inequality grows whenever r . g. Can this theory explain why inequality is growing in the United States? Piketty asserted that his theory was best tested with data from France, whose history was, he argued, ‘‘more typical and more pertinent for understanding the future’’ than the historical experience of the United States (p. 29). Nevertheless, and no doubt because Capital in the Twenty-First Century sold so many copies, some university publishers in recent years have been willing to gamble on big, dry books of historical inequality statistics that purport to test his arguments against American data. A perhaps extreme example is Edward Wolff’s A Century of Wealth in America, which weighs in at almost three and a half pounds. I suspect that the ‘‘century’’ in the title is a nod to Piketty; in any case, it is not a very accurate description of the contents of the book, which, apart from a few data points presented in Chapters Twelve and Thirteen, is mainly concerned with the last 40 or so years of wealth in America. That is the period for which consistent, high-quality survey data on household wealth are available, and the bulk of the book is spent reporting analyses of those survey data. Wolff is a thoroughgoing empiricist of the old school. The practice of social science, for him, consists of accumulating facts and then making general statements about them. He opens the book with an encomium to ‘‘the Baconian method of inductive reasoning from empirical observation’’ (p. xi), and the book that follows is about as inductive as they come, presenting the reader with hundreds of pages of facts before finally announcing its argument on page 679: ‘‘The thesis of this book could be summarized as the rise and fall of the middle class.’’ That is not actually a thesis, it is a noun phrase; but, to be fair, this is a hard book to summarize. Much of it updates work that Wolff published over a period of decades. It is a treasure trove of description. We learn, for example, that adults in the top 1 percent of households by wealth are disproportionately old, white, married, highly educated, and healthy (pp. 440–41, 443). Since 1983, they are increasingly likely to be selfemployed. They are overrepresented in industries that fall within the umbrella category of ‘‘Finance, insurance, real estate, and business and repair services,’’ though not as massively overrepresented within that category in 2013 as they were in 1992; like everyone else, the wealthiest 1 percent have lately gravitated to industries that can be classified under the general umbrella of ‘‘Transportation, communications, utilities, personal services, and professional services’’ (pp. 441–42). All of this is, perhaps, as you might have guessed. But being unsurprised by something is not the same as knowing it; and if you actually knew any of these facts Unequal Gains: American Growth and Inequality since 1700, by Peter H. Lindert and Jeffrey G. Williamson. Princeton, NJ: Princeton University Press, 2016. 424 pp. $22.95 paper. ISBN: 9780691178271.