Piketty does a great job on EconTalk, discussing his book with Russ Roberts. This was my favorite part of the whole discussion. It comes after Russ is asking about people who get wealthy in various ways - including very legitimate ways. I think this encapsulates so many of the criticisms of the book:
"Roberts: But I think as economists we should be careful about what the causal mechanism is. It matters a lot.
Piketty: Oh, yes, yes, yes. But this is why my book is long, because I talk a lot about this mechanism."
The book is long for at least two reasons. First I think he adds a bunch of stuff in there that doesn't need to be in there (the policy stuff, the discussion of the social state, could probably all be in a separate book - he could probably cut a third of the book by removing this material). But the second reason is that he is far more exhaustive than many of his critics seem to give him credit for. There is this notion that the book is all about inheritance and ill-gotten gains. The latter is a relatively small discussion and the former is a more sizable discussion but comes way late in the book and is not some kind of exclusive focus.
Generally I think this was a great EconTalk. My only criticism is along these lines. Several times Russ chimed in with a different version of "but this guy is wealthy because he improved the world!", and each time Piketty basically said "right, I agree, and I've never challenged the point" (of course it's Piketty so he spends much longer saying that). If Russ didn't keep asking those questions or if Piketty just replied "asked and answered" I think they could have gotten much deeper into the material. But still a very nice talk.
Generally I think this was a great EconTalk. My only criticism is along these lines. Several times Russ chimed in with a different version of "but this guy is wealthy because he improved the world!", and each time Piketty basically said "right, I agree, and I've never challenged the point" (of course it's Piketty so he spends much longer saying that). If Russ didn't keep asking those questions or if Piketty just replied "asked and answered" I think they could have gotten much deeper into the material. But still a very nice talk.
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I'm a fan of both Piketty and EconTalk, but I found the discussion quite frustrating. It was less a dialogue and more a lecture by TP, occasionally punctuated by exasperated comments by RR. I still enjoyed it, but it was frustrating. It would've been better if TP had responded as you suggest, and also if TP had resisted giving such long answers to some of the more straightforward questions. It was as if he was anticipating and answering the follow up questions, and the follow up to the follow up.
ReplyDeleteMy problem with the book is exactly that it *suggests* a casual mechanism but then never actually establishes it. It's more or less "during some periods in history when r>g, inequality grew, therefore, if r>g, inequality will grow". This is accepting his data and all that at face value. There's some hand-waving stuff about why it may be the case. Higher r means more higher return to capital. But then, poof, smoke, mirrors, look at that scantily clad women at stage right, and whoa! capital share is also higher. It slips from "return to capital is higher" (is it? Let's say it is) to "share of capital is higher" (is it? A little bit probably, but it's probably not what's driving inequality, but nevermind)
ReplyDeleteA return to a factor is NOT the same thing as a share of a factor. At the very least if you are going to equate the two, you should NOT be invoking Ricardo, for goodness sake, who understood the distinction, without doing any math about s=rK/Y or anything.
Very disappointed in this book. I sympathize with the conclusion and want Piketty to be right, but I feel like I was promised a Lexus and got a Yugo in a Lexus frame instead. Which is pretty much why outside the econ-blogosphere this will have zero effect on economics as a field of study. Not because economists are close minded or shills for corporations or anything like that, but simply because there isn't much here to contribute, outside of *maybe* highlighting an important area of research (inequality -which is a good thing). On the other hand, the data and the empirical work is fine and even great (and I've used the Piketty/Saez stuff myself) and that's an important contribution. But the hype/content ratio for this one might actually be higher than for Freakonomics 2.0. Bleah.