Continuing debate on rising inequality in America

I have been interested in this issue for some time.  The book by Thomas Piketty, CAPITAL - in the Twenty-First Century, has sparked additional debate.  Most of the debate centers around the interpretation of the data quoted by the author, however, little or no disagreement about the extensive data in the book.

I will be quoting from the book extensively.

The author is a professor at the Paris School of Economics.  The book is the culmination of 15 years of research covering 20 countries.  Its contribution to the field has been praised by luminaries such as Paul Krugman, and other well known economics and social policy experts.  Much criticism about its conclusions have come from conservatives, however.

I am still reading the book -- a long tome of 669 pages, chockfull of historical data used by the author to illustrate trends and key findings.  In it, Piketty examines in great detail the evolution of inequality, the concentration of wealth, and the prospects for economic growth.  He suggests that modern economic growth and the diffusion of knowledge have allowed us to avoid the apocalyptic scale of inequality predicted by Marx. He concludes that the main driver of inequality is the tendency of return on capital to exceed economic growth --  a factor that might create wide discontent and eventually might destabilize societies.  

In the introductory chapter, Piketty refreshes our understanding of key principles we might have forgotten from our 101 economics class ... Malthus (Over Population), Ricardo (Principle of Scarcity), Marx (Principle of Infinite Accumulation), and Kuznets (Rising water lifts all boats).  

Piketty's main conclusions are as follows:

1.  To be aware of any economic determinism with respect to inequalities of wealth and income. The history of distribution of wealth has always been deeply political, and it cannot be reduced to purely economic mechanisms.

2.  The dynamics of wealth distribution reveal powerful mechanisms pushing alternatively toward convergence and divergence. There is no natural, spontaneous process to prevent destabilizing, inegalitarian forces from prevailing permanently. 

The Financial Times on its June 9, 2014 commentary by Lawrence Summers, former U.S. Secretary of the Treasury, and a respected economist he laments that "the rich have advantages that money cannot buy."  Summers advocates changes in our taxation to eliminate loopholes for the wealthy and to become more progressive, while also promoting a more efficient allocation of investment.  He goes on to say that the real problem is not that the rich have so much, but that the middle and lower class have so little.  

To me, as as a dilettante in economics, there seem to be practical ways to reduce the gulf between the top 1% and the rest of the pyramid.  One, treat, from a taxation point of view, profits from financial transactions, the same way we treat wages and salaries.  And two, increase our income tax credit in order to raise people's income above the poverty level.  

I suggest you read the book yourself and come up with your own conclusions.  It is a big book to absorb in a gulp.  It is the kind of scholarly work that takes at least a full semester to absorb.

Enjoy your journey along the learning curve!