Morning Must-Read: Branko Milanovic: My Take on the Acemoglu-Robinson Critique of Piketty

Branko Milanovic: My Take on the Acemoglu-Robinson Critique of Piketty: “My brief reaction…

…1) ‘Piketty totally neglects institutions.’ This is hard to understand since Piketty’s explanation for a large part of changes in inequality in the US, France and elsewhere are precisely institutional…. So I really fail to see any validity… the critique is fundamentally dishonest…. First, Acemoglu and Robinson establish the equation Piketty=Marx. Then then criticize Marx for ignoring institutions…. Then, since they have already decided that Piketty is really Marx, they barely give one or two examples of Piketty’s lack of concern with institutions…. 2) ‘Lots of inequality increase is due to higher inequality of labor incomes.’ This is true especially for the United States and no one disputes it; neither does Piketty. He actually mentions it repeatedly…. 3) Panel regressions… test[ing] whether r-g is correlated with increase in inequality…. They find that the sign of the coefficient is in most cases negative…. The right-hand side variable is not r-g but simply ‘g’. This approach is surely wrong…. Only the second set… makes sense. But there, the results are inconclusive. Moreover, there are no controls at all except for the country and year dummies…