...because I don't blog much these days so why not bring it up into a main post that a few other people might read.
Levi Russell starts a little rough on me: "This post seems like a bunch of appeal to authority. Are Magness &
Murphy not allowed to analyze the data and let it speak for itself?"
I don't think we have the same understanding of the term "appeal to authority". I'm not arguing that the accuracy of any of these claims is demonstrated by the authority of those making the claims, I'm highlighting that multiple well done independent analyses lend weight to the claim. Appeal to authority is really a logical fallacy anyway, and I'm not making a logical claim at all. I am making a generalization about the body of evidence we have available on these questions. And yes of course they are allowed to analyze the data. Nobody's said they aren't. I don't think data speak for themselves, though.
Russell continues: "They seem to have cited several relevant papers with big names on them.
Certainly if there is some standard adjustment being made, it can be
found in the articles of the big shots. If not, maybe there's a real
problem here. I mean, I can understand that in a huge book (aimed, as it is, at a lay
audience) your technical appendix might be a little sparse. However, in
the individual papers M&M cite, these standard adjustments had
better be pretty damn clear, right? Sort of like everyone citing Freund
1956 when discussing certainty equivalents and expected utility."
Yes! This is very much my point! They cite many (though not all) of, for example, the Kennickel papers which are the source of those adjustments that are added and yet in the paper they refer to those adjustments as "appending fixed percentages without further explanation". That is my concern, not their reference list! And those aren't even fancy adjustments in many cases. They're just data sources. There are adjustments that I've talked about with Magness and Murphy elsewhere (i.e., not in relation to this paper - which covers the U.S., the Soviet bloc stuff, etc.). Atkinson's adjustments of the UK series, for example. Those are described in great detail in Atkinson. But working through those adjustments is not what you get from the Murphy and Magness paper. And since they don't work through it and show me anything's wrong with it I'm going to trust Atkinson, his peer reviewers, and of course his peers who use the work on that. I don't personally know enough about the adjustment to second guess these guys.
He goes on: "Keep in mind here, I really don't care much what Piketty says about the
inequality data. I'm concerned about causality and I don't think
"r>g" is enough to justify an 80% wealth tax to "solve" the
So r > g doesn't justify 80% wealth tax unless I'm missing something. r > g is just a standard result from any growth model and the values of r and g determine the capital share. I feel like I'm missing something here.
Finally: "The real issue, as I see it, is theoretical. Bob has a lot of good stuff
on this, but even basic sophomore-level finance sort of puts the kibosh
on Piketty's flawed POV. (See here:
I'll take a look at it. Much of what Bob's said I agree with, though sometimes I don't attach the same significance to it (i.e. - how much the Cambridge Capital Controversies matter, etc.).
How did this happen?
6 hours ago