Afternoon Must-Read: Daniel Kuehn: Yes, Acemoglu and Robinson’s Piketty Review Is Strange

Daniel Kuehn: Yes, Acemoglu and Robinson’s review of Piketty is very strange: “I just happened to get to one of the parts in Piketty that Acemoglu and Robinson quote…

…to show that Piketty doesn’t think institutions matter (from page 365):

The fundamental inequality r > g can explain the very high level of capital inequality observed in the nineteenth century, and thus in a sense the failure of the French revolution…. The formal nature of the regime was of little moment compared with the inequality r > g.

So what is in that ellipses? [Piketty] explains that the revolution didn’t change the course of inequality (relative to monarchical Britain) because the new institutions that were established were much closer to Britain than popular perception in France at the time suggested! It was NOT a big change in institutions, which was why the French revolution did not shift the parameters…. Immediately after this he goes on to discuss changes in institutions in the 20th century that WERE substantial enough to impact inequality…. In other words, the real point of this section is that institutions matter a lot…. And not only did A&R get that wrong–they deliberately removed the portion of the quote where he made the point…. All of the explanations for the empirical changes in the distribution over time are either (1) institutions, or (2) shocks…. Apparently it’s not just Acemoglu and Robinson that missed this memo…. Piketty without institutions in the capital share of income section could probably survive. Piketty without institutions in the inequality section of the book simply wouldn’t exist any more…. This is like saying Milton Friedman wasn’t all that concerned with money!