Legal Theory Book Review 128 Harv. L. Rev. 626

The Laws of Capitalism

Capitalism is a legal order, not a statistical regularity



The past year has seen the surprising ascent of French economist Thomas Piketty to “rock star” status. The reading public’s appetite for his economic treatise seems motivated by a growing unease about economic inequality and an anxiety that the “Great Recession,” which followed the financial crisis of 2008, defines a new economic normal. The seemingly plutocratic response to the crisis has become the focus of angry attacks by protesters on both left and right, but their criticisms have had little practical effect, even while subsequent events have confirmed their fears. In 2010, the United States Supreme Court sealed the union of corporate money and politics in Citizens United v. FEC, which subsequent judgments have further entrenched. Meanwhile, the response to the crisis in Europe has suggested that Brussels now operates as an arm of finance capital and that monetary union is more likely to prove the undertaker of European social democracy than its savior.

Piketty first came to prominence with his collaborator Professor Emmanuel Saez during the mid-2000s when they published several carefully researched studies of income inequality in the United States. Their finding that since the mid-1970s the “one percent” in the United States had received an ever-growing share of the national income was seized on by academics and commentators — and later provided the basis for the political slogans of the Occupy movement. Piketty also published analyses of historical trends in income and wealth inequality across most developed countries, a project undertaken with several prominent international collaborators, including the distinguished British economist Professor Anthony Atkinson.

Piketty’s most recent volume, published in French in 2013, and in English in 2014 as Capital in the Twenty-First Century — a knowing nod to Karl Marx — is a sprawling, ambitious text that builds on this earlier work while rendering it accessible to a wider audience. Its argument, backed by impressive empirical data, may be summed up in three words: capitalism generates inequality. This in some ways old-fashioned claim has been received with great enthusiasm (and controversy) in the United States and elsewhere and has managed the rare feat of generating widespread discussion in both popular and academic circles. It has garnered reviews, sometimes several, in every important newspaper; received detailed coverage from all major economics journalists and commentators; and been scrutinized by mainstream academic economists, such as Professors Robert Solow, Larry Summers, and Paul Krugman — who called it “the most important economics book of the year — and maybe of the decade” — as well as more heterodox scholars, who have greeted the work with a mixture of respect, disappointment, and relief.

Capital in the Twenty-First Century has thus prompted discussion of inequality, financial regulation, and political economy across an unusually wide spectrum, and for this alone the work deserves the praise it has received. Not every book can bring academic economists, businesspeople, students, central bankers, politicians, policymakers, and social activists into a conversation about the future of capitalism. Nor need one ask the last time a 700-page book written by a French socialist received a chapter-by-chapter reading in The Economist.

This broad appeal is not only the result of fortuitous timing and a careful argument, however. It also reflects the fact that both the subject itself and Piketty’s handling of it invite interdisciplinary interest. In what follows, I will bring that aspect to the fore, especially as it interests a legal-academic audience. Piketty’s major claim — that capitalist societies exhibit a persistent trend of increasing inequality — should come as a prompt to examine the underlying legal and institutional foundations of capitalist economic relations. And his empirical analysis should provide an opening for an interdisciplinary discussion to be conducted among scholars working in fields such as philosophy, politics, history, sociology, and law.

I begin in Part II by introducing Piketty’s analysis of long-run economic trends, particularly in wealth and income inequality. Part III develops an internal critique concerning the role of normative evaluation in the construction of the index numbers on which his empirical analysis depends. Across these two Parts, I introduce Piketty’s main findings and suggest how his conclusions indicate deeper issues that his data do not independently resolve, including the normative import of the increasing inequality he catalogs and the underlying determinants of the rate of return on capital, which is at the heart of his argument. Accordingly, in Part IV, I consider capitalism understood as a legal ordering. Here I develop an account of the “laws” of capitalism, understood not as statistical regularities obtaining in a given socioeconomic regime, but as the legal structuring that undergirds it — in other words, the laws of capitalism understood as laws. Finally, in Part V, I critically assess Piketty’s proposals for taming twenty-first-century capitalism through a new transnational regulatory regime.