Piketty and the Uses of History

History can work like a good set of prescription glasses

A couple of weeks ago, The New York Times ran a long interview with Thomas Piketty, the French economist who first came to prominence with his 2013 book Capital In The 21st Century and is set to release a new book called A Brief History of Equality. It’s interesting in its own right. But I want to focus on how Piketty uses history in thinking about the present and future.

There are two basic handicaps most people are afflicted with when they think in terms of time.

One is what I call “temporal myopia.” We know that the past is rich with insights so of course we look backwards before making a decision in the present. And we know that decisions play out in the future, so we must cast our minds forward when making decisions in the present. But how far back do we look? And how far ahead?

The answer is usually not much. And even less. For the most part, we are a species of Mr. Magoos.

Mr. Magoo — as I’m sure anyone reading this newsletter already knows but I’ll mention it for the sake of completeness — is a cartoon character created in 1949. Magoo was an elderly man who was desperately near-sighted. More importantly, Magoo didn’t know he was near-sighted, or at least wouldn’t acknowledge it. This inevitably led to misadventures.

So here’s how the interviewer starts that discussion with Thomas Piketty:

In the time since “Capital in the Twenty-First Century” was published, there has been a huge proliferation in the number of American billionaires. Something like 130 new ones were added between 2020 and 2021 alone. That happened in the context of growing public discussion — and anger — about economic inequality. So what the hell happened? What enabled the ultrawealthy to flourish in the face of such widespread antipathy?

It’s an important question. But notice that it looks back less than nine years. That’s the field of vision of someone afflicted with temporal myopia.

Here’s how Piketty responded:

Let me put this very clearly: I understand that each year and each decade is tremendously important, but it’s also important not to forget about the general evolution. We have become much more equal societies in terms of political equality, economic equality, social equality, as compared with 100 years ago, 200 years ago. This movement, which began with the French and U.S. revolutions, I think it is going to continue.

That’s Piketty politely saying we cannot have an intelligent conversation based on the last nine years. We should look back to 1776 and 1789 and work our way forward. In doing so, Piketty is handing Magoo a good pair of glasses and saying, “look further.”

Sounds simple, right? Looking more deeply into history gives a richer, fuller picture. And yet, it is remarkable how often people are satisfied by a near-sighted peek into the past.

If you have followed climate change as long as I have, you’ll remember an important example of how temporal myopia distorted perceptions on a crucial issue: In 1998, the average global temperature hit a new record high and for more than a decade afterward the annual average was lower or equal to that in 1998, but not higher. Climate change seemed to have … stopped. Or at least paused. Many commentators argued that this showed climate change wasn’t so dangerous, or even that the scientific theory behind it had been disproven. And I can understand why. If you are Mr. Magoo and you look back seven, eight, nine, ten years and more, it feels like you are looking back a very long way.

But that’s a puny time scale. Anyone who looked back not one decade, but five or ten or fifteen decades — still a very brief period in climate terms — would have discovered that temperatures had never risen smoothly. They rose, they plateaued, they rose some more. Over and over again. And the plateaus could last up to 15 years. Anyone who saw that — anyone who looked back far enough to see that — would have known that the absence of temperature increase for a decade doesn’t mean anything.

The “pause” ended in 2013, in line with the long-term trend. Since then, the temperature has gone up and up.

Another example: Rapidly rising housing prices in the United States played a critical role in the financial crisis of 2008 but in the years prior to the bubble bursting few observers thought anything was amiss. It’s normal for housing prices to rise rapidly, they said. Just look at the past. And they were right. Prices had been rising rapidly for many years, which made rising prices look pretty normal — to the many Mr. Magoos. But economist (and future Nobel laureate) Robert Shiller thought the data were far too shallow — too myopic — so he dug into archives and assembled a data set on housing prices that extended all the way back to the 19th century. It showed rapid rises were anything but normal. Shiller sounded the alarm but he was mostly dismissed. Until the crash.

If “temporal myopia” is one basic affliction we suffer from when we look backward and forward, “temporal tunnel vision” is another.

Think about the world as it is right now, at this moment. Now look ahead five minutes. How much can it change? Some, but not much. Five hours? More. Five days? Much more. Five weeks? Five months? Five years? The more time that passes, the more mundane change can pile up. And the more time that passes, the greater the likelihood of events that are highly improbable (a Pacific Ocean earthquake causes a worldwide shift away from nuclear power) or ridiculous (a reality TV star becomes president) or downright fantastical (an asteroid wipes out Australia). Thus the range of possible futures rapidly becomes vast.

Now think about standing here in the present and looking into the past. We know what happened. But how could it have turned out differently? Think about that question carefully (which means taking chaos theory seriously) and you will quickly realize that the vast array of possible futures that lies ahead of us mirrors a staggering array of possible pasts behind us — all pasts that could have happened, in addition to the one that did.

Anyone can understand this if they think in such highly abstract terms. But we almost never look forward and back in such terms. Instead, we think of concrete concerns (“what will the market for my widget be?”) or ways that specific plans could be derailed (“will our party lose the support of young people?”). When we do that, we think only about the thing we are interested in (widget sales or popular support) and the factors that are obviously relevant to it — and miss the staggering number of factors that could influence what we’re interested in but are seemingly very far removed from our concern (think of all the people who had plans derailed by Covid but had never given even a minutes’ thought to the risk of global pandemic). As a result, we see only a narrow range of possible futures.

It doesn’t feel like a narrow range. In fact, if we’re thinking hard, we will feel we’re being broad-minded and considering a wide range of possible futures. But relative to reality, the range will be tiny. That is temporal tunnel vision.

That narrow range is what we think is possible in the future. Thus we will miss a huge range of bad futures we should mitigate against. And we will never give any thought to a huge range of desirable futures that we perhaps would have striven for if we hadn’t assumed they were impossible.

In the Times interview, Piketty was asked this:

I understand what you’re saying about the popularity of a proposed billionaire tax, but do you believe America is at a place where a phrase like “wealth redistribution,” which is what you’re talking about, is broadly politically plausible?

This is a polite way of saying, “come on! Wealth redistribution?! In America!? Do you really believe that could ever happen?”

Piketty’s answer was, quite literally, open your eyes and look at history.

When you say Americans don’t like redistribution, some certainly don’t like it, but in the 20th century, high, progressive taxation of income and inherited wealth was to a large extent invented in the United States. That’s why it always makes me skeptical when people say, Americans don’t like this, don’t like that. Look at history! There’s no deterministic reason why a given country should be this or that. Sometimes, in my country and in the U.S. also, people tell you, “Look, we are not Swedes.” This is used as an argument to say that there is a culture of equality in Sweden, which we would never have…. [But] Sweden until 1910, 1920 was one of the most unequal countries in the world, with a special sophistication in the way inequality was organized. You could have between one and 100 votes, depending on the size of your wealth. This rule, which varied by municipality, excluded all women and approximately 80% of men from voting. Even corporations had the right to vote in municipal elections in Sweden until 1910. Sweden was like this but then moved on to something else.

By studying history deeply — which requires looking far beyond national borders — we inevitably encounter surprises, ruptures, and changes as severe as the transformation of Sweden in the 20th century. Even better, we encounter the people who lived through those surprises, ruptures, and changes. And we feel their disorientation as yesterday’s impossibility (“An egalitarian Sweden? Ridiculous.”) becomes tomorrow’s inevitability (“It’s in Sweden’s DNA. It couldn’t be anything else.”).

History is stuffed with such mind-expanding encounters. But only if it is read not as a series of stories of predictable progression but is seen, rather, as what it is: a highly uncertain, indeterminate, unpredictable process that could have unfolded the way it did or in an almost infinite number of other ways.

When you have seen reality through the eyes of a middle-class German family whose sons were killed in a war many experts thought impossible, then had their life savings erased by a hyper-inflation that was unimaginable, then stared in amazement as a fringe pack of simpletons and bigots took power (the word “Nazi” was originally an insulting joke) — then you know the range of possible futures is vast. You know that nothing which does not violate a law of physics is possible. You know that it’s dangerous to see reality any other way.

In this way, history pushes back the walls of tunnel vision, broadening our perception of the possible. And that can change everything.