Wednesday, October 22, 2014

Economists' "Survey-Says" moment on Piketty

Not news, but here's a roundup of some of the thinking in North American economics departments about Thomas Piketty's Capital in the Twenty-First Century.

A broad collection of perspectives is available via the IGM Economic Experts Panel, although I think the way IGM phrased the question may have doomed it. Rather than asking about longer historical periods, Europe, or the future, it asked about the U.S. since the 1970s, and economists broadly agree to disagree with the relevance of Piketty's most parsimonious point about r > g, at least for that period.

Related to that are essays by Acemoglu and Johnson, who perhaps expectedly would rather talk about institutions than "laws" of capitalism, and slides by Justin Wolfers that draw from several other sources, including the ingeniously titled "Nit-Piketty" by Debraj Ray.  Also available is the April book review in the New Republic by Robert Solow, a springtime review by Larry Summers, and a recent review in J Econ History by Alex Field.

I think two of the main points about the relevance of Piketty's work to understanding modern inequality are that (1) a lot of U.S. inequality seems to be driven by labor income and/or technology, and not plausibly by excess growth of wealth over income as suggested by the r > g argument; and (2) how big r is relative to g may ultimately be an empirical question, but the empirical estimates vary depending on the time period and the definition of capital, and the theoretical reasons are also important (i.e., Eric Maskin's point that r and g are both determined by other stuff). I'm sure I've missed other important points!