Category: Equitablog

Should-Read: Mark Thoma: Killing Banking Rules Will Invite a Whopper of a Recession: “As for repealing Dodd-Frank, consider this statement by Treasury Secretary Steven Mnuchin… http://www.thefiscaltimes.com/Columns/2017/05/08/Killing-Banking-Rules-Will-Invite-Whopper-Recession

…Speaking at the Milken Global Conference last week, which is attended by key people in the financial industry, he boasted, “You should all thank me for your bank stocks doing better.”… Increasing the risk of another financial meltdown and a large recession, which would once again be paid for mainly by all the people who lose their jobs, homes, retirement savings, and so on rather than the wealthy interests benefitting from the change in policy, is worth making bank stocks do better. If the Financial Choice Act is passed, the risk of a deep and prolonged recession, which would once again hurt millions and millions of households, will go up…

Should-Read: Bruno Caprettini and Joachim Voth: Rage against the machines: New technology and violent unrest in industrialising Britain: “New machines have increasingly replaced humans… http://voxeu.org/article/rage-against-machines-new-technology-and-violent-unrest

…even advanced tasks like speech recognition and translation can now be performed by relatively cheap computers and smartphones. This column describes how labour-saving technology appeared to play a key role in one of the most dramatic cases of labour unrest in recent history–the Swing riots in England during the 1830s–serving as a reminder of how disruptive new, labour-saving technologies can be in economic, social, and political terms…

Should-Read: Good for you, Peter, in reading “the introduction, the retrospective by translator Arthur Goldhammer, and bits and pieces of some of the following essays.”

I would recommend that you, next, read Piketty’s response. After that, browse first through “A Political Economy Take on W/Y” [Suresh Naidu], “Increasing Capital Income Share and Its Effect on Personal Income Inequality” [Branko Milanovic], “The Research Agenda after Capital in the Twenty-First Century” [Emmanuel Saez], and “The Legal Constitution of Capitalism” [David Singh Grewal]—those are, I think, the chapters that you are likely to find most accessible.

As I wrote in my Amazon review: As one of the co-editors of this book, I know it very well. I am greatly pleased with how this project came out—we have very serious people, as Bob Solow would put it, writing very serious takes on what Thomas Piketty has accomplished, where he has gone wrong, and what gaps remain to be investigated by others. Social scientists thinking of citing on, working along lines related to, or drawing on Piketty should certainly read this book. People who have read Capital in the Twenty-First Century who are curious about how serious people are reacting to and assessing the book should read it as well.

Peter Coy: Piketty’s Capital Was So Popular There’s a Sequel: “Another hefty volume that looks at the connection between capitalism and inequality… https://www.bloomberg.com/news/articles/2017-05-08/piketty-s-capital-was-so-popular-there-s-a-sequel

…If you’re reading this article, it may be because you’re one of the 2 million people who bought a copy of Capital in the Twenty-First Century by French economist Thomas Piketty. The long, dense academic treatise was the biggest publishing surprise of the year when it came out in English in 2014…. Now comes After Piketty, a book that, at 678 pages, is almost as long and almost as weighty. Released May 8 in the U.S., it’s a sympathetic appraisal of what Piketty got right and what he got wrong. I have read the introduction, the retrospective by translator Arthur Goldhammer, and bits and pieces of some of the following essays….

One recurrent gripe about Capital in the Twenty-First Century… is that it was too deterministic, failing to acknowledge that society could choose…. Another is that the rate of profit has held roughly constant over a long period in a way that Piketty doesn’t account for. “This seems to be a substantial hole in the book,” the editors write…. Boushey says in an interview that… the impetus for the new volume is that Piketty’s ideas haven’t been taken up, or even wrestled with, to the degree that the editors felt they deserved…. The reception that Piketty has received from fellow economists, says Boushey, relates to “a deeper question about the purpose of economics as a social science”…

Should-Read: Thomas Piketty: After Piketty: The Agenda for Economics and Inequality http://amzn.to/2qSUgdl: “Had I believed that the one-dimensional neoclassical model of capital accumulation…

…(based upon the so-called production function Y = F(K,L) and the assumption of perfect competition) provided an adequate description of economic structures and property relations, then my book would have been 30 pages long rather than 800 pages long. The central reason my book is so long is that I try to describe the multidimensional transformations of capital and the complex power patterns and property relations that come with these metamorphoses (as the examples given above illustrate). I should probably have been more explicit about this issue….

Aggregate capital/income ratios and aggregate capital shares tend to move together: they were both relatively low in the mid-twentieth century, and they were both relatively high in the nineteenth century and the early twentieth century, as well as in the late twentieth century and the early twenty-first century. If we were to use the language of aggregate production functions and the assumption of perfect competition, then the only way to explain the fact… would be to assume an elasticity of substitution that is somewhat larger than 1 over long periods…. Standard estimates suggest smaller elasticities (as rightly argued by Devesh Raval in Chapter 4), but they are typically not long-run estimates. It is also possible that technical change and the rise of new forms of machines, robots, and capital-intensive technologies (along the lines described by Laura Tyson and Michael Spence in Chapter 8) will lead to a gradual increase of the elasticity of substitution over time.

Let me make clear, however, that this is not my favored interpretation of the evidence…. At this stage, the important capital-intensive sectors are more traditional sectors like real estate and energy. I believe that the right model for thinking about why capital-income ratios and capital shares have moved together in the long run is a multisector model of capital accumulation, with substantial movements in relative prices, and most importantly with important variations in bargaining power and institutional rules over time. In particular, large upward or downward movements of real estate prices have played an important role in the evolution of aggregate capital values during recent decades, as they did during the first half of the twentieth century. This can in turn be accounted for by a complex mixture of institutional and technological forces….

More generally, the main reason capital values and capital shares are both relatively high in the late twentieth and early twenty-first centuries is that the institutional and legal systems have gradually become more favorable to capital owners (both owners of real estate capital and owners of corporate capital) and less favorable to tenants and workers in recent decades, in a way that is broadly similar (but with different specific institutional arrangements) to the regime that prevailed in the nineteenth century and early twentieth century. In contrast, the legal and institutional regimes prevailing in the mid-twentieth century and during the “Social Democratic Age (1945–1980)” was more favorable to tenants and workers….

This does not mean that changing production functions and elasticities of substitution are not important: I am convinced that this form of mathematical language can be useful to clarify certain concepts and logical relations between concepts. But these notions need to be embedded into a broader social-institutional framework and historical narrative if we want to be able to account for observed evolutions. In some cases, institutional change directly interacts with technological change—as in, for example, the decline of unions and the evolution toward a “fissured workplace” analyzed by David Weil in Chapter 9…

Must-Watch: I am going to miss this, being on the Wrong Coast on May 11:

After Piketty: “The Graduate Center 365 Fifth Avenue | 1201: Elebash Recital Hall | May 11, 2017: 6:30 PM http://www.gc.cuny.edu/publicprograms…

…Reservations are full; this event will be LIVE-STREAMED.

Capital in the Twenty-First Century by Thomas Piketty is the most widely discussed work of economics in recent history. (Piketty gave a major talk at the Graduate Center upon its release in 2014.) But are its insights about inequality and economic growth on target? And how should researchers explore the ideas Piketty pushed to the forefront? These questions and more are tackled in the new book After Piketty: The Agenda for Economics and Inequality, which is sure to spark much debate in its own right. Contributors join in a conversation to celebrate its release and discuss how lessons from Piketty can help us understand the current economic and political moment. 

• Heather Boushey, executive director and chief economist at the Washington Center for Equitable Growth and author of Finding Time: The Economics of Work-Life Conflict.

• Paul Krugman, Nobel Prize-winning economist; New York Times columnist; and GC distinguished professor of economics and senior scholar at the Stone Center.

• Branko Milanovic, GC visiting presidential professor and senior scholar at the Stone Center; former lead economist in the World Bank’s research department; and author of Global Inequality: A New Approach for the Age of Globalization.

• Suresh Naidu, assistant professor of economics and public affairs at Columbia University.

• Presented with the Stone Center on Socio-Economic Inequality and the Washington Center for Equitable Growth….” https://www.gc.cuny.edu/All-GC-Events/Calendar/Detail?id=40142