Mike Konczal in Boston Review (Photo: Emmanuelle Marchadour):
If economists to Piketty’s right are concerned that he doesn’t ground his theory deep enough in economic models, economists and others to Piketty’s left are concerned that he concedes too much to mainstream economics and not enough to politics.
Recently, there has been a strong recent resurgence on the left in emphasizing the way the state, through law, regulation, and public policy, necessarily structures markets. In this telling there is no such thing as a “free” market, just different choices about how to structure markets fundamentally based in politics and power. The idea of a “free” market is a vacuous, question-begging abstraction, invoked to defend the status quo or the interests of the wealthy. (A quick look at the titles of current academic works like The Illusion of Free Markets, The Myth of Ownership, and The Progressive Assault on Laissez Faire give a sense of the argument.)
This context explains what is at stake in the left critique of Piketty. Some economists, like Dean Baker, have argued that Piketty doesn’t do enough to explain how financial regulations or patent protections could help deal with the problems he identifies. Others,like James Galbraith, invoke debates among midcentury Keynesians to argue that adding up capital and assigning it a return doesn’t make sense as a model. More broadly, Piketty has been criticized for not acknowledging how institutions and politics influence the returns on capital: his theory of the dominoes is too focused on economic forces.
So, while economists to Piketty’s right think he should create a model that predicts the rate of return on capital (his r) based on the state of the economy, rather than historical data, economists to Piketty’s left want him to emphasize the idea that many different rates of return are consistent with the character of the economy; “r” is a function of institutions and political decisions. Those on the left also worry that the debate over Capital could devolve into, as the economist Suresh Naidu argues, a “bastard Pikettyism” that just navel-gazes at the mathematical economic models discussed above, instead of a more critical, broader inquiry of how capital works in economies and societies.
More here.