Thomas Piketty’s new book, Capital in the Twenty-First Century, has created quite thestir, andwith its overwhelming size (700 pages) and corresponding array mentaries and critiques, it’s toughto know where to start.

Cutting throughsuch noise, Russ Roberts provides his usual service on EconTalk,chatting one-on-one with Pikettyabout the key themes, strengths, and weaknesses of the book. The interview is just over an hour, and I encourage youto listen to the whole thing.

Piketty lays out his argument quite concisely in the beginning, followed by a fruitful back-and-forth led by Roberts.For those who aren’t aware, thebook chronicles arecent rise in economic inequality, wherein, by Piketty’s account, wealthy elites sit on their stashes while those at the bottom increasingly struggle to keep pace. His solution:Tax, baby, tax.

In response to such an approach,there are many areas to poke and prod, but Roberts zeroes in on one of the more fundamental and overarching questions:What about those who accumulate their wealth by helping those at “the bottom”?

As Roberts puts it in a collectionof post-interview reflections:“We ought to focus on whether the wealth at the es from making more and more of us increasingly better off, or whether it is the result of, say, cronyism.”

For example (from the same reflections):

There is an in-between case–Liliane Bettencourt, the heiress to the Oreal fortune…I guess it doesn’t bother me that she has more and more money to spend, presumably the result of investing wisely and not consuming an inordinate amount of her principal. I presume that her investments often help others beside herself and on this question, Piketty is virtually silent in the book. He focuses on the return to capital that accrues to investors and ignores the gains to the rest of us from those who consume less and invest more.

Of course in a world of crony capitalism, some investments have perverse effects–adding to the housing stock say, rather than curing cancer. I’d like to spend more energy getting rid of the perverse incentives that encourage over-investment in housing and encourage instead, the effective use of scarce capital in other, more productive places.

Next,Piketty explainswhy some wealth is better offdead:

The most surprising moment of our conversation came here…

Russ: How do average people get wealthy or better off by rich people doing badly? What happened there? What’s the mechanism?[Piketty]: Oh, the simplest mechanism is that if you have a destruction of wealth, the rate of return to wealth is going to increase, and you know, this creates space for accumulation from people who start from less wealth or zero wealth and that work for labor es they can invest.

Piketty is implicitly assuming that there is no benefit from investments and capital created by the rich. So if their wealth is destroyed, the rate on the investments the rest of us can make will go up. The poor and middle class will have better lives when there is less investment. My thought is that yes, they might earn more on their savings accounts. They will earn a lot less from their labor though, if capital is destroyed or scarcer.

At a deeper and broader level, Piketty’s oversight does damage because it undermines the potential that the wealthy bring to the table, takingreal exchanges ofreal value betweenreal people and diverting themto thebureaucrat’s dynamite field.

Piketty’s warnings about the sources of economic inequality deserveour attention and serious consideration. But such acramped approachto social diagnosis and solution-seeking removesno smallamountof beauty and mystery fromeconomic exchange, and in turn, isnot likely to promote thetype of responsibility, creativity, and servicewe’re called to assume as stewards of the earth.