Interview with Economist Thomas Piketty
QUEST: "Capital in the Twenty-First Century" by Thomas Piketty. Now, to some it is all about wealth inequality. To others, it is perhaps the holy grail, the book that everybody is talking about. Well the issue of wealth inequality is something we have discussed many times on this program. This book has sold more than 650,000 copies. It's about to be printed in 30 languages. It is not an easy read - more than 500/600 pages. It had some damning criticisms, especially by the "Financial Times" which accuses the author of using flawed statistics. In a wide-ranging interview, we were so pleased Thomas Piketty joined us from Paris and he told me - well, he welcomed a bit of literary argy bargy.</s>THOMAS PIKETTY, AUTHOR, "CAPITAL IN THE TWENTY-FIRST CENTURY": -- reason, you know I try to make it clear that this is of interest to everybody, not just elite economists. It's also a political story, a future story, representations of inequality including literary representation play a big role. And, yes, I'm very glad that, you know, an (unbirthed polar) seem to enjoy it. And, you know, even multi persons seem to be talking about it, maybe some of - some of -- whom have not really your kind of book, but this is fine, you know, that's part of the game and I'm very happy with this one.</s>QUEST: Are we reaching a level of rising inequality that alarm bells should be ringing?</s>PIKETTY: I think we have different situations in different countries. Now, in the United States, I think that, you know, indeed the rising inequality of wealth the past three decades has been so enormous that I think it creates a, you know, a major disruption, you know, of, you know, the ways of the political process itself is working. So, just to give an order (ph) of magnitude, you know, almost three chapters of aggregate gross and primary income between 1980 and 2010 in the United States went to the top 10 percent, and most of it to the top 1 percent. So, if the gross performance of the U.S. economy had been extremely good, you know, 4 or 5 percent a year, that maybe it would be acceptable. But with the (inaudible) GDP growth of 1.5 percent a year, you know, it's three quarters of that goes to the top, then this is not a very good deal for the rest of the population. And I think many people now agree that this has led (inaudible) to the stagnation of median income and the rise of (inaudible) debt, but that's contributed also to make the financial system not fragile.</s>QUEST: If you're going to start reversing a trend of inequality, you either do it through regulation, you do it through government, you do it through taxation, you do it through social stabilizers - all the usual techniques. Where do you believe the right way in your view is to begin?</s>PIKETTY: I think that there's all combination of policies that need to be put in place, so education, you know, investment in education certainly is a primary force that can reduce inequality in the long run. And one problem that you have in the United States is that, you know, you have very good top universities at the very top of the distribution you know, probably the best in the world. But your bottom part of the U.S. educational system is not that good.</s>QUEST: Were you very annoyed or were you frustrated, were you angry or were you just bemused with the "Financial Times" attack on your work and its underlying academic assumptions?</s>PIKETTY: You know, I have responded to their, you know, criticism point by point, and I think, you know, anybody looking at this will conclude that they made a lot of noise out of nothing, but, you know, this is fine. This is part of the game. I put everything online, you know, including old detailed (ph), data sources and formulas so that we can have a very open debate about this issue. So, you know, to me this is perfectly fine. If I was to rewrite the book today, in fact probably the only change I would make is that I would show an even bigger increase in wealth inequality in the United States, that's why -- what --</s>QUEST: Right.</s>PIKETTY: -- I actually show. And there was a recent study by Saez and Zucman which apparently the "FT" seems to ignore, which actually shows that the increase in wealth concentration - you know - the (inaudible) has been even larger than what I report in my book.</s>QUEST: Right.</s>PIKETTY: So, but you know, there will be more data in the future, we are going to update imminently all existing series online that will be available publically. And, you know, I welcome all those who want to contribute to this effort to promote more transparency in income and wealth inequality.</s>QUEST: Now, we asked Thomas Piketty who he was reading, and it's this book. It's "The Second Age (ph) Machine," how the digital age is transforming every element of our lives, such as Googles, driverless cars, IBM's super computer called Watson. The chief exec - sorry, the co-author - I don't suppose there's a chief exec for the book - of "The Second Machine Age" is Erik Brynjolfsson who joins me now from Massachusetts. Erik, good to talk to you. I mean, when Thomas Piketty is reading and praising your book, you know you're on to something about a revolution taking place in the way machines and man are interacting, aren't you?</s>ERIK BRYNJOLFSSON, AUTHOR, "THE SECOND MACHINE AGE": Absolutely. And I - that was very nice for him to say that. I've been a fan of his even before he became an international sensation. So I'm glad he's interested in this issue and how it's changing the world.</s>QUEST: We have looked at this - I mean - just this week we have seen Androids wearables, we've seen Google - everybody's bringing out new devices that push the boundaries. But I need to understand from you what are the caveats, the cautions, the concerns that as a society we need to have for this?</s>BRYNJOLFSSON: Well, I want to underscore that this can and should be good news. But before I get to the cautions, I want to say that having machines that can do all these wondrous things - increase our lifespans, drive our cars, solve medical problems - that can and should be good news. But you're right, there're also some important caveats, and one of the most important ones is the one that Thomas Piketty has been emphasizing is that this rising tide doesn't necessarily benefit everyone -</s>QUEST: Right.</s>BRYNJOLFSSON: -- evenly. There's no economic law that says everyone will share in the bounty. In fact, some people have been left behind, in some cases, a majority of people. And one of the things we need to work on is how to maintain the bounty but also lead to shared prosperity.</s>QUEST: And that is so difficult, isn't it? That is in a nutshell what this book's really all about, because you can't hold back the tide, so you had better work out a way to ride the waves.</s>BRYNJOLFSSON: That's exactly right. And so I there's a - this is the grand challenge that we face over the next ten years. We absolutely aren't going to stop technology. We shouldn't try to stop technology. I'm disappointed with those who try to protect the past from the future. What we need to do is embrace it -</s>QUEST: Right.</s>BRYNJOLFSSON: But do it in a way that also brings up the whole society.</s>QUEST: Do you think at the moment - at this moment, 2014 - we are winning or losing that battle of successfully managing this second machine age?</s>BRYNJOLFSSON: Well there's no question that half the population at least hasn't participated in it. That's been a big disappointment. Median income in the United States is lower now than it was 15 or 20 years ago. The - most of the benefits have accrued to not even to just the top 1 percent, but even the top 100th of 1 percent has gotten the biggest gains. And I do think most of us want to live in a society -</s>QUEST: Right.</s>BRYNJOLFSSON: -- where all the benefits accrue to a very small group.</s>QUEST: So, if I ask you which machine, which gadget, which device do you believe you really want? Do you want the vacuum cleaner that'll think for itself, do you want the driverless car? Which is the one that you think will be the one that you would like?</s>BRYNJOLFSSON: Well I'm very excited about some of the tools that use big data -</s>QUEST: Ah.</s>BRYNJOLFSSON: -- to improve diagnosis, cure cancer, to be able to extend our lifespans. And it's been just wondrous some of the breakthroughs we've seen in using these machine learning and artificial intelligence techniques to push the boundaries of medical knowledge.</s>QUEST: Sir, brilliant to have you on the program. Please do come back again. We'd love to talk about these issues on "Quest Means Business." It is (Erick verione) -</s>BRYNJOLFSSON: Thank you.</s>QUEST: -- to be in Watson on "The Second Machine Age." Now, this weekend's "Best of Quest." It has the choice cups from our nightly conversations. You'll hear Jordan's finance minister pleading again for the international help in the region's refugee camp crisis. And a chef and restaurateur Heston Blumenthal who's our guest in "Reading for Leading," sharing the books that change the way that he looks at food.</s>HESTON BLUMENTHAL, CHEF: I read a book written by an American called Hal McGee on the science of cooking. Not food science, but why the eggs make the souffles rise. Before that, I never questioned anything. After that, I questioned everything - that's my strap line (ph). And that really opened my eyes to a new world of cooking.</s>QUEST: A wonderful weekend digest, it's "The Best of Quest" it's at CNN, noon London and reported like a bad dose of something throughout the weekend. We'll have a "Profitable Moment" after the break.