Professor John McHale:

The Piketty work is extremely interesting and as a professional economist I have found much in it. In some ways I see it a little bit differently to Deputy Boyd Barrett. The relatively high rate of return on capital is emphasised. One gets tendencies towards wealth divergences and greater wealth inequality, particularly when the gap between the rate of return on capital and the growth rate is high. This is a little different from the analysis of Marx. For the most part I would say it is not a matter for the Irish Fiscal Advisory Council, even though it is something each of us as an individual economist could take on board.

On the narrow question of whether inequality affects growth, given part of what we do is examining growth projections, it is relevant to the extent it enters in this way and to the forecast assessment exercise, but this is a much narrower idea than what the Deputy has in mind. To be completely honest, such a level of discussion would be beyond the mandate of the Irish Fiscal Advisory Council, but we are all very much paying attention to the debate and it informs our review of the world as economists.

We do not necessarily agree with everything in the Piketty book but he does an excellent job in documenting what is happening with regard to wealth inequality. His basic point on the dynamics of the market economy could lead either to the convergence of incomes, which is done over a certain time period, or to divergence of income. There is no guarantee a market economy would produce an equal economy and he is absolutely right on this. There have been many critiques of some of the mechanisms on which he focuses.