Capital in the XXIst Century is a major book. I was asked to discuss the French edition in December 2013 (Le Capital au XXIè siècle), a few weeks before the English edition was released, at a conference in Sciences Po organized by the MaxPo Center. I noticed the key role of housing capital in the U shape of the capital-labor ratio and elaborated on it during my discussion.
There are three possible ways to measure housing capital : at current prices ; the income approach ; or the replacement cost approach. The choice should not matter in the long term : each measure should "in equilibrium" give the same results. However the various measures deliver very different outcomes in the last decades : the short run may be quite long.
Indeed, depending on the choice of the measure, trends in capital to labor ratios are very different. My coauthors Odran Bonnet (Sciences Po), Pierre-Henri Bono (Sciences Po and LIEPP); Guillaume Chapelle (Sciences Po) and I are currently working on this issue.
The measure of capital to income ratios consistent with a story of explosive wealth accumulation is the measure based on actual returns to housing capital. With this measure, capital to income ratios seem to be close to the historical minimum of the Post-war period.
Hence, implications one may draw in terms of taxation of wealth and income may be much less provocative : our analysis is that one should tax more housing property - but not at its current price, rather indexed on the evolution of rents ; and one should tax a part of its capital gains, those not devoted to buy another housing unit.
As a matter of fact, the tax base for capital gains will remain limited if one excludes the main residency of households : in France, in 2012, 83.7% of housing transactions concerned the main residency of households, 10.5% are housing investments and 5.7% are for secondary residency.
More :
Slides of my first discussion, Dec. 12, 2013, in Sciences Po
First discussion paper (LIEPP) by Bonnet Odran ; Bono Pierre-Henri ; Chapelle Guillaume ; and Wasmer, Etienne ; in French, April 17, 2014. Current, extended version, à paraître, Revue d'Economie Politique, 2015.
Short version for Commentaire, Bonnet Odran ; Bono Pierre-Henri ; Chapelle Guillaume ; and Wasmer, Etienne, Automne 2014.
Slides of my second discussion, Nov. 14, 2014, in Lyon (Journées de l'Economie) (still in French, with a focus on taxation)
Forthcoming, 2015, Revue d'Economie politique : Bonnet Odran ; Bono Pierre-Henri ; Chapelle Guillaume ; and Wasmer, Etienne: .
In English
First discussion paper (Sciences Po Econ) Bonnet Odran ; Bono Pierre-Henri ; Chapelle Guillaume ; and Wasmer, Etienne ; in English, May 2014.
Vox column by the same authors in June 2014.
Extended discussion paper by Bonnet Odran ; Bono Pierre-Henri ; Chapelle Guillaume ; and Wasmer, Etienne in Oct. 2014.
April 2015 : Les Echos, Le « procès » de Monsieur Piketty. PDF de l'article
http://www.forbes.com/sites/kylesmith/2014/05/01/six-ways-thomas-pikettys-capital-isnt-holding-up-to-scrutiny/
http://www.nytimes.com/2014/04/30/upshot/why-pikettys-book-is-a-bigger-deal-in-america-than-in-france.html?hpw&rref=&_r=1&abt=0002&abg=1
http://thenextrecession.wordpress.com/2014/04/30/piketty-in-french-its-worse/
http://agonisticliberal.com/2014/05/08/housing-capital-in-the-21st-century/
http://www.ofce.sciences-po.fr/blog/le-capital-logement-ne-contribue-t-il-vraiment-pas-aux-inegalites/
http://debrajray.blogspot.fr/2014/05/nit-piketty.html
http://lareprise.fr/?p=2167
http://www.lincolninst.edu/news-events/news-listing/articletype/articleview/articleid/164717/home-prices-since-1870-no-price-like-home
http://www.ofce.sciences-po.fr/blog/le-capital-logement-ne-contribue-t-il-vraiment-pas-aux-inegalites/
Homburg, Stefan, 2014. "Critical Remarks on Piketty's 'Capital in the Twenty-first Century',"Hannover Economic Papers (HEP) dp-530, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät, revised Oct 2014.
A note on Piketty and diminishing returns to capital, by Matthew Rognlie,
Is Piketty’s “Second Law of Capitalism” Fundamental? by Per Krusell and Anthony Smith
The Rise and Fall of General Laws of Capitalism, by Daron Acemoglu and James Robinson
In French :
Le capital au XXIe siècle : un livre défi pour l’analyse, par Jean-Luc Gaffard
Le capital au XXIe siècle. Richesse des données, pauvreté de la théorie, par Michel Husson
La critique du capital au XXIe siècle : À la recherche des fondements macroéconomiques des inégalités, par Guillaume Allègre et Xavier Timbeau
Numéro spécial de la Revue de l'OFCE : http://www.ofce.sciences-po.fr/publications/revue137.htm