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Wednesday, October 15, 2014

'No, Mainstream Economists Did Not Just Reject Thomas Piketty’s Big Theory'

Jordan Weissmann asks Piketty about the IGM poll:

No, Mainstream Economists Did Not Just Reject Thomas Piketty’s Big Theory, by Jordan Weissmann: ...the University of Chicago’s Initiative on Global Markets ... asked economists whether they agreed or disagreed with the following statement: "The most powerful force pushing towards greater wealth inequality in the US since the 1970s is the gap between the after-tax return on capital and the economic growth rate.” ... Overwhelmingly, the panel’s answer was no, with only one out 36 panelists agreeing with the statement.
Afterwards, a number of journalists, economists, and other wags took to Twitter and blogs to talk about how Piketty had just gotten a black eye. ... Except ... Piketty ... never suggests r>g is the main reason behind the recent rise of inequality. Rather, [he] theorizes that, in the absence of government intervention, r>g ensures the future concentration of income and wealth. ... Ultimately,... IGM was asking economists to opine on an argument that nobody was making in the first place.
I found myself wondering: How would Piketty himself weigh in? “Well,” he told me in an email this morning, “I think the book makes pretty clear that the powerful force behind rising income and wealth inequality in the US since the 1970s is the rise of the inequality of labor earnings, itself due to a mixture of rising inequality in access to skills and higher education, and of exploding top managerial compensation (itself probably stimulated by large cuts in top tax rates), So this indeed has little to do with r>g.”
In short, you can add Piketty to the "Disagree" column, too.

The caption under the picture of Piketty in the article says it well:

He's probably thinking how it would be nice if people read his book before arguing with it.

See also Brad DeLong, Nick Bunker, and Matt O'Brien.

    Posted by on Wednesday, October 15, 2014 at 09:54 AM in Economics, Income Distribution | Permalink  Comments (3)


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