Saturday, May 31, 2014

More on Piketty -- Oh God No, Please, No...

Cover: Capital in the Twenty-First Century in HARDCOVER

Piketty, Piketty, Piketty! How did the Piketty phenomenon happen? Surely Piketty must be one of the all-time great economists. Maybe even as great as Marx.
Yes, parts of the emerging backlash against Piketty's Capital resonate with me. Guido Menzio nails its spirit in a recent post, announcing to the Facebook universe that he'll "send you $10 and a nice Hallmark card with kitties if you refrain from talking/writing about Piketty's book for the next six months." (The irony of my now writing this Piketty post has not escaped me.)
As I see it, the problem is that Piketty's book is popularly viewed as a landmark contribution to economic theory, which it most definitely is not. In another Facebook post, leading economic theorist David Levine gets it right:
People keep referring to economists who have favorable views of Piketty's book. Leaving aside Krugman, I would be interested in knowing the name of any economist who asserts that Piketty's reasoning ... is other than gibberish.

    So the backlash is focused on dubious "reasoning" touted as penetrating by a book-buying
    public that unfortunately can't tell scientific wheat from chaff. I'm there.

But what of Piketty's data and conclusion? I admire Piketty's data -- more on that below.  I also agree with his conclusion, which I interpret broadly to be that the poor in developed countries have apparently become relatively much more poor since 1980, and that we should care, and that we should try to understand why. 
In my view, Piketty's book truly shines on the data side. If much of its "reasoning" is little more than neo-Marxist drivel, much of its underlying measurement is nevertheless marvelous (assuming of course that it's trustworthy). Its tables and figures -- there's no need to look at anything else -- provide a rich and jaw-dropping image, like a new high-resolution photo of a previously-unseen galaxy. I'm grateful to Piketty for sending it our way, for heightening awareness, and for raising important questions. Now we just need those questions answered.

8 comments:

  1. Not only Krugman, but also Solow

    ReplyDelete
    Replies
    1. Yep, fair enough. For the life of me I can't understand what Solow found to like, beyond the good data and good intentions. I have heard several speculative explanations, but I'll refrain from repeating or embellishing.

      Delete
  2. http://marginalrevolution.com/marginalrevolution/2014/05/is-pikettys-second-law-of-capitalism-fundamental.html

    Out of curiosity, what's your take on this?

    ReplyDelete
  3. To Levine's remark: Bradford DeLong, Steven Durlauf and Joseph Stiglitz to name a few.

    ReplyDelete
  4. I'm not sure if Piketty covers this, but two effects that confound time series comparisons of inequality are:

    1) increase in the number of single parent households. One low income household in the 1950s is two now so focusing on households skews statistics.
    2) increase in number of women in the labor force. People tend to marry within their social and economic class so to the extent women entering the labor force increased output this increases inequality.

    Both have increased significantly since the 1970s. In fact, given the push by President Obama to close the gender gap in wages one might consider him pro-inequality (just to clarify, I am being facetious).

    ReplyDelete
  5. first row question askerJune 1, 2014 at 8:05 PM

    Debraj Ray has a rather good review of the book http://debrajray.blogspot.co.uk/2014/05/nit-piketty.html

    ReplyDelete
    Replies
    1. Yep. Also Greg Mankiw's blog (May 28) http://gregmankiw.blogspot.com, had a compilation of commentary. I wonder if he'll include mine when updating? Perhaps too irreverent!

      Delete
  6. I agree entirely that Piketty is very good on the data and much weaker on adding to existing theory. What about subtracting from existing theory? Or is all that data irrelevant to existing theory?

    ReplyDelete