What Happened to the Phillips Curve ? by Robert Waldmann
"It is easy to confuse what is with what ought to be, especially when what is has worked out in your favor."
- Tyrion Lannister
"Lannister. Baratheon. Stark. Tyrell. They're all just spokes on a wheel. This one's on top, then that's ones on top and on and on it spins, crushing those on the ground. I'm not going to stop the wheel. I'm going to break the wheel."
- Daenerys Targaryen
"The Lord of Light wants his enemies burned. The Drowned God wants them drowned. Why are all the gods such vicious cunts? Where's the God of Tits and Wine?"
- Tyrion Lannister
"The common people pray for rain, healthy children, and a summer that never ends. It is no matter to them if the high lords play their game of thrones, so long as they are left in peace. They never are."
- Jorah Mormont
"These bad people are what I'm good at. Out talking them. Out thinking them."
- Tyrion Lannister
"What happened? I think fundamentals were trumped by mechanics and, to a lesser extent, by demographics."
- Michael Barone
"If you want to know what God thinks of money, just look at the people he gave it to."
- Dorothy Parker
Saturday, June 28, 2014
Friday, June 27, 2014
Last year, Writers With Drinks brought you the special event, "An Evening of Uncomfortable Sex Talk." Now, we bring you "An Evening of Oversharing About Money"!
When: Saturday, July 12, from 7:30 PM to 9:30 PM, doors open 6:30 PM
Who: J. Bradford DeLong, Carol Queen, Farhad Manjoo, Frances Lefkowitz and Charlie Jane Anders
How much: $5 to $20, all proceeds benefit the Center for Sex and Culture.
Where: The Make Out Room, 3225 22nd. St., San Francisco
Tuesday, June 24, 2014
Lately the problem has been slow recoveries after recessions. Recessions reset these contracts. Before it was the Fed that would set off recessions. Now it's the bursting of bubbles and balance sheet recessions.
The Fed relays new needed demand via the banks and profitable investments (although lowering interest rates makes governments' borrowing cheaper.) The government relays new demand via spending (and it can temporarily cut taxes).
Monday, June 23, 2014
Sunday, June 22, 2014
Juncture interview: Thomas Piketty on capital, labour, growth and inequality (Juncture, 5.14.14)
The Top of the World: An ambitious study documents the long-term reign of the 1 percent by Doug Henwood (Bookforum, April/May 2014)
Tax as Policy: Capital in the Twenty-First Century by Heather Boushey (Challenge magazine, May/June 2014)
The Book Every Plutocrat Should Read: Thomas Piketty’s new tome just might save the super-rich from themselves. by Chrystia Freeland (Politico, 4.20.14)
Why We’re in a New Gilded Age by Paul Krugman (New York Review of Books, May 8, 2014 issue)
The Piketty Panic by Krugman (New York Times, 4.24.14)
The Piketty Phenomenon by David Brooks (New York Times, 4.24.14)
Wealth Over Work by Krugman (New York Times, 3.23.14)
Class, Oligarchy, and the Limits of Cynicism by Krugman (4.21.14 @ 8:29 a.m.)
Thomas Piketty Is Right: Everything you need to know about 'Capital in the Twenty-First Century' by Robert M. Solow (New Republic, 4.22.14)
THE HONEST BROKER: MR. PIKETTY AND THE “NEOCLASSICISTS”: A SUGGESTED INTERPRETATION: FOR THE WEEK OF MAY 17, 2014 by DeLong (5.22.14)
The Daily Piketty: Thursday Focus: April 24, 2014 by DeLong (4.24.14)
K21 translator Arthur Goldhammer tweets: "@delong plays Hicks to #Piketty: http://equitablegrowth.org/2014/05/07/slides-mr-piketty-neoclassicists-suggested-interpretation-wednesday-focus-may-7-2014/ … smart take, must read" (linked below as well)
OVER AT THE WCEG: SLIDES FOR: MR. PIKETTY AND THE "NEOCLASSICISTS": A SUGGESTED INTERPRETATION: WEDNESDAY FOCUS: MAY 7, 2014 by DeLong (5.7.14)
Capital in the 21 Century: Still Mired in the 19th (See correction) by Dean Baker (3.9.14 @ 10:35 p.m.)
Forces of Divergence: Is surging inequality endemic to capitalism? by John Cassidy (The New Yorker, 3.31.14)
PIKETTY’S INEQUALITY STORY IN SIX CHARTS by John Cassidy (The New Yorker, 3.26.14)
THE “PIKETTY BUBBLE” IS MORE THAN HOT AIR by John Cassidy (New Yorker, 5.1.14)
Even Elizabeth Warren doesn't want Piketty's wealth tax by Matthew Yglesias (Vox, 4.28.14 @ 4:40 p.m.)
Class warfare justified? by Robert J. Samuelson (Washington Post, 4.20.14)
dsquared's comment to Robin's Crooked Timber post:
"As far as I can tell, nothing really important in Piketty’s book depends on the capital controversy; it’s actually a book about wealth rather than capital in the technical sense. It’s just a bit irritating for people who happen to know that his use of “capital” and connected marginal concepts is wrong. Like if someone had written a really good book about climate change but kept on referring to “the temperature divided by zero” (4.26.14 @ 11:40 am) and this comment and this comment.
Hey, Big Thinker: Thomas Piketty, the Economist Behind ‘Capital in the Twenty-First Century’ Is the Latest Overnight Intellectual Sensation by Sam Tanenhaus (New York Times, 4.25.14)
Piketty for Dummies by Peter Dorman (4.26.14 @ 3:24 p.m.)
Two followups, in way too many words by Steve Randy Waldman (2.11.11(!) via DeLong)
Poulos Gets Piketty—and Tocqueville—Wrong by Arthur Goldhammer (Daily Beast, 4.26.14)
Thomas Piketty and Millennial Marxists on the Scourge of Inequality by Timothy Shenk (The Nation, 4.14.14)
Piketty's Tax Hikes Won't Help the Middle Class by Megan McArdle (BloombergView, 4.22.14)
Whither The Bottom 90 Percent, Thomas Piketty? by Scott Winship (Forbes, 4.17.14)
Thomas Piketty, Jedediah Purdy And The Leftist Ethic of Resentfulness by Repair Man Jack (Red State, 4.22.14 @ 8:47 pm)
Thomas Piketty Revives Marx for the 21st Century by Daniel Shuchman (Wall Street Journal, 4.21.14 @ 7:18 p.m.)
White House honors French neo-Marxist by Thomas Lifson (American Thinker, 4.20.14)
What’s Wrong with Piketty’s Answer To Inequality by Veronique de Rugy (National Review Online, 4.24.14 @6:57 p.m.)
Capital Punishment: Why a Global Tax on Wealth Won't End Inequality by Tyler Cowen (Foreign Affairs, May/June 2014 issue)
Why I am not persuaded by Thomas Piketty’s argument by Tyler Cowen (4.21.14 @ 2:20 p.m.)
The Hourly Piketty: Paul Krugman, “Gattopardo Economics”, and Economic Modelling by DeLong (4.24.14 @ 5:23 p.m.)
Piketty and Pareto by Krugman (4.25.14 @ 8:20 a.m.)
Frustrations of the Heterodox by Krugman (4.25.14 @ 10:09 a.m.)
The Daily Piketty: Thursday Focus: April 24, 2014 by DeLong (4.24.14 @ 2:47 p.m.)
Notes from Capital in the 21st Century Panel by Suresh Naidu (The Slack Wire, 4.20.14)
What Marx Really Meant by Suresh Naidu (Jacobin, 4.28.14)
‘Capital in the Twenty-First Century’, by Thomas Piketty by Martin Wolf (Financial Times, 4.15.14 @ 5:38 p.m.)
The return of "patrimonial capitalism": review of Thomas Piketty's Capital in the 21st century by Branko Milanovic (October 2013)
The Capital Creators, Piketty and Growth Theory by Joshua Gans (Digitopoly, 4.23.14)
OVER AT THE WASHINGTON CENTER FOR EQUITABLE GROWTH: PIKETTY DAY HERE AT BERKELEY: THE HONEST BROKER FOR THE WEEK OF APRIL 26, 2014 by DeLong (4.23.14)
A Good Question Re the Piketty Book by Jared Bernstein (4.26.14 @ 10:26 a.m.)
Piketty’s “Capital,” in a Lot Less than 696 Pages by Justin Fox (Harvard Business Review, 4.24.14 @ 8:00 a.m.)
New French Book Will Become Important When It's In English by Kevin Drum (Mother Jones, 12.16.13 @ 1:15 p.m.)
All men are created unequal: Revisiting an old argument about the impact of capitalism (The Economist, 1.4.14)
American Economists Are Not Equipped To Digest What Piketty Has Served Them by Rob Wiley (Business Insider, 4.28.14 @5:54)
DeLong expanded his answers:
Over at Business Insider: Five Questions and Answers About Thomas Piketty’s “Capital in the Twenty-First Century”: Monday Focus; April 28, 2014 by DeLong (4.28.14 @ 11:42 a.m.)
Capital in partial equilibrium by Ryan Decker (3.25.14 @ 7:54 p.m.)
"From the right" by Ryan Decker (4.28.14 @ 6:14 p.m.)
What Piketty’s Conservative Critics Get Wrong by Kathleen Geier (The Baffler, 4.28.14)
Taking on the Heiristocracy: History shows that growth alone won’t stop vast economic inequality by Kathleen Geier (Washington Monthly, March/ April/ May 2014)
Physics and the 'marginalist revolution' by Philip Mirowski (via JW Mason)
JW Mason comment on different ways to formalize the Piketty argument (04.29.14)
The Conservative Case For Thomas Piketty by Pascal-Emmanuel Gobry (Forbes, 4.24.14 @ 9:14)
Minnesota Mafia Challenges Piketty by Barkley Rosser (4.28.14 @ 10:02 p.m.)
What Piketty Leaves Out by Robert Kuttner (4.29.14)
Thomas Piketty's Capital: everything you need to know about the surprise bestseller by Paul Mason (The Guardian, 4.28.14 @14:23)
Len McCluskey on Capital in the Twenty-first Century: 'manna from heaven' (The Guardian, 4.28.14 @14.18)
VC for the people by Steve Randy Waldman (4.16.14)
Piketty on Capital: A Footnote by Henry Farrell (Crooked Timber, 4.5.14)
Trickle-Up Economics by David Cay Johnston (Al Jazeera America, 3.23.14 @ 8:45 a.m.)
Capitalism vs. Democracy by Thomas Edsall (New York Times, 1.28.14)
Notes on Piketty (Wonkish) by Krugman (3.14.14 @ 7:47 a.m.)
Thomas Piketty Has a Grim View of Our Plutocratic Future by Kevin Drum (Mother Jones, 1.29.14 @ 11:51 a.m.)
Q&A: Thomas Piketty on the Wealth Divide by Eduardo Porter (3.11.14 @ 6:21 p.m.)
Adam Smith is not the antidote to Thomas Piketty by Deborah Boucoyannis (Washington Post-The Monkey Cage, 4.22.14 @ 10:14 a.m.)
Why Piketty's Book Is a Bigger Deal in America Than in France by Tyler Cowen and Veronique de Rugy (The Upshot, 4.29.14)
The Most Important Book of the Twenty-First Century by Stephen Marche (Esquire, 4.24.14)
Piketty and the case for land capital by Karl Smith (FT Alphaville, 2.3.14 @ 15:00)
Heather Boushey (and Me) on Thomas Piketty: Tuesday Focus by DeLong (3.11.14 8:15 a.m.)
THOMAS PIKETTY UNSUCCESSFUL ATTEMPTED SMACKDOWN WATCH: I FIND MYSELF DISAPPOINTED BY THE USUALLY-RELIABLE JAMES GALBRAITH AND PETHOKOUKIS by DeLong (4.6.14 @ 10:23 p.m.)
Thinking About Piketty’s “Capital” by Steve Roth (Angry Bear, 4.6.14 @ 12:50)
America risks becoming a Downton Abbey economy by Lawrence Summers (2.16.14 @ 5:28 p.m.)
Dude, Where’s Your Piketty Review??!! by Jared Bernstein (4.19.14 @ 10:01 a.m.)
Economist Receives Rock Star Treatment by Jennifer Schuessler (New York Times, 4.18.14)
JW Mason comment (Crooked Timber, 4.30.14 at 12:46 a.m.)
"Right. Or think about Milton Friedman, whose Monetary History of the United States is about as far from the ahistorical, mathematical abstraction of contemporary economics as you can get. Bob Pollin once told me that that book is the model we radical economists should be trying to emulate. I think he was right."
Why everyone is talking about Thomas Piketty's Capital in the Twenty-First Century by Ryan Cooper (The Week, 3.25.14)
Video of Piketty with Joseph Stiglitz, Paul Krugman, and Steven Durlauf participated in a panel moderated by Branko Milanovic.
Here’s an unlikely bestseller: A 700-page book on 21st century economics by Jia Lynn Yang (Wonkblog, 4.22.14 @ 12:35 p.m.)
Thomas Piketty’s Improbable Data by Hunter Lewis (The Ludwig Von Mises Institute, 5.2.14)
Inequality 101: The Picket Fence and the Staircase by John Cassidy (New Yorker, 4.12.12)
Piketty Review Roundup: “Capital in the 21st Century” by Jeff Madrick (Century Foundation, 5.2.14)
The Right Needs a New Message on Income Inequality by Benjamin Domenech (Wall Street Journal, 4.28.14 @ 7:31 p.m.)
Tyler Cowen's anti-Piketty crusade by Noah Smith (5.2.14)
Piketty, Doom Loops and Haymarket by Ross Douthat (New York Times, 4.22.14 @ 3:53 p.m.)
Robert Solow on Piketty by Arnold Kling (4.23.14)
For Larry Summers, Inequality A Subject Worthy of Yawns by Ellen Killoran (International Business Times, 5.2.14 @ 12:28 p.m.)
Book review: Capital in the 21st Century by Thomas Piketty by Robert Skidelsky (Prospect Magazine, 3.27.14)
How to Write a Marxist Critique of Thomas Piketty Without Actually Reading the Book by Zachary Levenson (Jacobin, 5.2.14)
Hangups of the Heterodox (Vaguely Wonkish) by Krugman (5.1.14 @ 3:41 p.m.)
Thomas Piketty and the Ghost of Joan Robinson by Dean Baker (5.1.14 @ 20:16)
Why Economists Are Finally Taking Inequality Seriously by Mark Thoma (Fiscal Times, 5.6.14)
The coming boom in inherited wealth by John Quiggin (Crooked Timber, 4.16.12)
Piketty, Oligarchy, and Conservative Evasion by Jonathan Chait (New York Magazine, 4.25.14 @ 3:51 p.m.)
A Prologomena to Any Future Reading of Piketty by Steven Pressman (Dollars and Sense, 5.5.14)
THE MAGICAL MATHEMATICS OF MR PIKETTY by George Cooper (4.29.14)
THE MAGICAL MATHEMATICS OF MR PIKETTY – PART II by George Cooper (5.5.14)
The Critique of Capital in the Twenty-First Century: In Search of Macroeconomic Foundations of Inequatlity by Guillaume Allègre and Xavier Timbeau
Where do profits come from? by Matthew Yglesias (Vox, 5.8.14)
Obama’s Top Economist Has Some Problems With Piketty’s Book by Neil Irwin (The Upshot, 5.7.14)
Piketty’s Arguments Still Hold Up, After Taxes by Jared Bernstein (The Upshot, 5.9.14)
Jason Furman, POTUS’s Chief Economist, on Inequality, Piketty, and Growth by Jared Bernstein (5.10.14 @ 10:04 a.m.)
The problem with Thomas Piketty: “Capital” destroys right-wing lies, but there’s one solution it forgets by Thomas Frank (Salon, 5.11.14)
Selling Thomas Piketty (Harvard University Press Blog, 5.12.14)
Piketty's Wealth Tax Isn't a Joke by Clive Crook (BloombergView, 5.11.14)
Microfoundations of Inequality and Sabotage by Sandwichman (5.12.14)
Thomas Piketty and His Critics by Thomas Edsall (New York Times, 5.14.14)
The Inequality Puzzle by Lawrence H. Summers (Democracy, Spring 2014)
Summers reviews Piketty by Jared Bernstein (5.14.14)
What Larry Summers Gets Wrong On Piketty's 'Capital' by Matt Bruenig (Demos, 5.15.14)
Demos on Piketty's Capital
The Politics of Income Inequality by Eduardo Porter (New York Times, 5.13.14)
What Piketty's Neoliberal Critics Get Wrong by Kathleen Geier (Baffler, 5.15.14)
The Two Inequalities by Peter Dorman (Econospeak, 5.16.14 @ 1:15 a.m.)
Piketty's Old News by Eric Schnurer (U.S. News & World Report, 5.16.14)
Piketty crossing the Delaware by John Quiggin (Crooked Timber, 5.18.14)
Thomas Piketty: I Don't Care for Marx by Isaac Chotiner (New Republic, 5.5.14)
Middle Class Earnings Are Stagnant! (Because Retirees Have No Earnings) by Scott Winship (Forbes, 5.20.14)
Ross Douthat Makes Some Good Points (and one bad one) by Jared Bernstein (5.19.14)
Whiskey Tango Foxtrot Bang Query by Brad DeLong (5.23.14)
The FT Gets Piketty's Capital Argument Wrong by Mike Konczal (5.24.14)
My view on Piketty's critique by the FT by Branko Milanovic
That Big Financial Times Story on Errors in Piketty's Data is Overrated by Danny Vick (5.23.14)
Criticisms of Piketty by James Hamilton (5.25.14)
More on Piketty by James Hamilton (5.28.14)
Nit-Piketty by Debraj Ray (5.25.14)
Should We Count Out Piketty Due to Sum Math Errors? by Steve Pressman (Dollars and Sense, 5.25.14)
Political Economy is Political by Henry Farrell (Crooked Timber, 5.27.14)
Policy, not capitalism, is to blame for the income divide by James Galbraith (Financial Times, 5.26.14)
The Piketty data controversy by Jérémie Cohen-Setton (Bruegel, 5.26.14)
Piketty’s data deserve better analysis by Carter Price (5.27.14)
Reviewing Lawrence H. Summers’s Review of Piketty IV: Combatting Inequality on Many Fronts: Tuesday Focus: May 27, 2014 by Brad DeLong (28 May 2014)
PARSING PIKETTY: IS WEALTH INEQUALITY RISING IN THE U.S.? by John Cassidy (New Yorker, 5.27.14)
Thomas Piketty and Joseph Schumpeter (and Gerard Debreu) by David Glasner (5.28.14)
Piketty versus Hassett: a primer on after-tax income and inequality by Marshall Steinbaum (29 May 2014)
Thomas Doubting Refuted by Krugman (5.30.14)
Morning Must-Read: Daniel Kuehn Reads Howard Reed on Piketty vs. Giles: “It’s All About the Discontinuities” by Brad DeLong (30 May 2014)
The Daily Piketty: May 30, 2014 by Brad DeLong
Department of “Huh?!”–I Don’t Understand More and More of Piketty’s Critics: Per Krusell and Tony Smith by Brad DeLong (2 June 2014)
Thomas Piketty’s big book: What do you really need to know? by Heather Boushey (5.14.14)
Reviewing Lawrence H. Summers’s Review of Piketty V: Secular Stagnation and the High-Pressure Economy: Tuesday Focus: June 32014 by DeLong (6.3.14)
Educating Brad DeLong by James Hamilton (6.4.14)
When Piketty Came to America by Andrea Levere and Ezra Levin (Politco, 4.28.14)
Economist says U.S. inequality reaching "spectacular" heights by Alain Sherter (CBS News Moneywatch, 6.5.14)
Not Another Piketty Symposium by Mike Beggs (Jacobin)
Piketty, Marx and the roots of inequality by Benjamin Selwyn (Le Monde Diplomatique, 6.6.14)
Piketty’s Fair-Weather Friends by Seth Ackerman (Jacobin, 5.29.14)
Three Ways of Looking at alpha = r k by JW Mason (6.4.14)
Capital Man: Thomas Piketty is economics’ biggest sensation. He’s also the field’s fiercest critic. By Emily Eakin (Chronicle of Higher Education, 4.17.14)
OVER AT EQUITABLE GROWTH: DEPRECIATION RATES ON WEALTH IN THOMAS PIKETTY'S DATABASE: MONDAY FOCUS: JUNE 9, 2014 by DeLong
OVER AT EQUITABLE GROWTH: DAILY PIKETTY: MATT ROGNLIE HAS A FIRST-RATE CRITIQUE: THURSDAY FOCUS FOR JUNE 12, 2014 by DeLong
Housing in the twenty-first century by Ryan Avent (Economist, 6.17.14)
Inequality in the long run by Thomas Piketty and Emanuel Saez (Science, May 2014)
CAPITAL IN PIKETTY'S 'CAPITAL' by Unlearning Economics (Jun 18th 2014)
Piketty’s laws with investment replacement and depreciation by Ton van Schaik, (6 July 2014, Vox)
When The Rate Of Return And The Rate Of Growth Do Not Matter Much For Piketty by Barkley Rosser (Econospeak, 7.7.14)
Piketty vs. Marx (8.11.14, Bookforum)
Yes, Acemoglu and Robinson's review of Piketty is very strange by Daniel Kuehn (8.26.14)
Understanding Piketty, part 3 by Kenneth Thomas (Angry Bear, 8.21.14)
But, speaking of white people, the liberation of the slaves after the Civil War was probably the greatest expropriation of capital in history. If one counts slaves as wealth—which, grotesquely, was how American society defined them from the country’s founding through 1865—their value was about 150 percent of national income throughout the slavery era. And practically overnight, with Lincoln’s 1863 Emancipation Proclamation, they were no longer someone’s property.
"Oh, and she's a fireproof messiah with a trio of flying nuclear dinosaurs at her disposal."
Why are fantasy stories set in a pre-capitalist era popular?
Oathkeeper, Brienne and Catelyn, Brienne and Jaime, Pod and Tyrion, Selmy wants to serve a good ruler.
Kingslayer, house guest rules and Freys-Boltons are cursed/ will end up in the Seven Hells for the Red Wedding.
The family is communism/socialism/postcapitalism in embryo. Too each according to their needs from each according to their ability.
appeal of Game of Thrones and fantasy is that it's pre-capitalist. Not everything is reduced to exchange value.
aware of the problematics of a conservative desire for order and father knows best, unquestioning submission to authority. Ross Douthat in his review of K21.
As an honorable man, Ned Stark had a code of accountability. He who passed the sentence should swing the sword. It's why he didn't have an executioner/headsman.
King Robert Baratheon to Cersei on the prospect of the Dothraki invading: "The kingdom is nothing but money-grubbing and backstabbing."
That seems to be the choice facing humanity.
mentions of Milton Friedman and Anna Schwartz's A Monetary History of the United States. Pethokoukis, Naidu, Shenk.
In the advanced nations, at about 1950 the wealth to income ratio began widening again even has growth remained high until the 1970s? Is this in Solow's review? Krugman and Baker and Kuttner warn against cyncism (see below). But Picketty has a valid point. From his interview with Porter:
The experience of Europe in the early 20th century does not lead to optimism: The democratic systems did not respond peacefully to rising inequality, which was halted only by wars and violent social conflicts. But hopefully we can do better next time. At the end of the day, it is in the common interest to find peaceful solutions. Otherwise there is a serious risk that growing parts of the public opinion turn against globalization.Baker has an interesting point about the global level:
The top of my list is the loss of China as a source of extremely low cost labor. According to the International Labor Organization, real wages in China tripled in the decade from 2002-2012. While these data are not very accurate, there is little doubt that wages in China are rising rapidly. While Chinese wages still have a long way to go before they are on a par with wages in the United States or Europe, its huge cost advantage is rapidly disappearing. Manufacturers can look for other low-wage havens, but there are no other Chinas out there. The loss of extreme low wage havens is likely to enhance the bargaining power of large segments of the workforce.
However, perhaps a more fundamental objection to Pikettys' grim future is the fact that a very large share, perhaps a majority, of corporate profit hinges on rules and regulations that could in principle be altered. My favorite example is drug patents. This industry accounts for more than $340 billion a year in sales (@ 2 percent of GDP and 15 percent of all corporate profits). The source of its profits is government granted patent monopolies.
For Britain and France, the total value of the capital stock—owned, as is almost always the case, largely by the 1 percent (whether aristocrats or members of the bourgeoisie, whether it’s France in 1780 or the United States in 2014)—was about seven times national income from 1700 until around 1910. (National income, roughly speaking, is the sum of all forms of income in a given economy—wages, profits, interest, dividends, and so on.) With two world wars and a depression, the capital stock fell to about three times national income. (Curiously, Piketty notes that the monetary destruction of paying for war through taxes and inflation did more damage to the capital stock than the physical destruction of combat itself.) It began to recover around 1950, but was inhibited by extremely high tax rates in the first postwar decades. As of 2010, the capital stock had recovered to between five and six times national income in Britain and France.
Doug Henwood (emphasis added)
Still, while such deliberation is clearly necessary, political action cannot be factored out of that process just because we happen to have lived through the Cold War’s unmourned collapse. It’s energizing to see that a younger generation of political intellectuals, who were in grade school when the Berlin Wall came down, missed the anticapitalist vaccination. They might be able to take Piketty’s data and cause some genuine trouble with it. Because serious trouble—demonstrations, strikes, insurgent political movements—is what it will take to derail capitalism’s inevitable tendency toward concentration. Short of that, it looks like we’ll be continuing our journey along the road to a new serfdom.
Despite some losses to financial capital during the Great Depression, the more powerful era of equality in the U.S. began during World War II. The war was a massive macroeconomic stimulus; it produced full employment, stronger unions, and investment of public capital. The government’s wartime policies also repressed private finance in multiple and reinforcing ways, including the Fed’s pegging interest rates on Treasury bonds at a maximum of 2.5 percent, marginal tax rates set as high as 94 percent, and an intensification of the anti-speculative financial regulation of the New Deal. All of this did not end with the war. It had a half-life well into the postwar era, until unions were bashed and finance deregulated beginning in the 1970s.
Piketty mentions some of this briefly but doesn’t focus on the political dynamics, and he is surprisingly blasé about the role of deliberate policy. “Neither the economic liberalization that began around 1980 nor the state intervention that began in 1945 deserves much praise or blame,” he contends. “The most one can say is that state intervention did no harm.”...
Not surprisingly, Piketty is much better informed on the nuances of French politics and economic history. In France, where the prosperity of the postwar boom is known as the Trente Glorieuses—30 glorious years of high growth and full employment—Piketty reports that the wealth distribution was already becoming more unequal again in the late 1940s as capital began recovering its normal place. It was rather high rates of growth, rising real incomes, and the expanding welfare state that made the postwar boom a happy French memory.
Robert Kuttner (emphasis added)But doesn't Piketty also credit the Baby Boom and reconstruction for the high growth rates, changes that ended in the 1970s? Japan and Germany went online. Nixon went off the gold standard. Maybe social democratic policies that encouraged high growth rates slowed down the erosion of the r/g ratio?
“In North America,” Piketty writes, “there is no nostalgia for the postwar period because the Trente Glorieuses never existed there: per capita output grew at roughly the same 1.5–2 percent rate throughout the period 1820-2012.” But this is a non sequitur. A two-century average tells us nothing about particular decades, nor does the average per capita output tell us anything about the wage dispersion. In fact, there is great nostalgia in the U.S. for the postwar boom, and appropriately so, precisely because it was a period of steadily rising wages and job security—a period of both rapid growth and more equal distribution.
He also writes, “The significant compression of income inequality over the course of the 20th century was due entirely to the diminished top income from capital.” But that is misleading, too. What really happened is that the temporary weakening of capital, financially and politically, gave progressives and social democrats an opening that they successfully exploited for three decades after the war.
This is an important insight [politicians listen to elites only]— and it gains special force these days, when the elite’s views not only favor the elite versus the rest (duh) but have also been systematically wrong, on issues from invading Iraq to giving deficits a higher priority than jobs.
But there is a danger here of going too far, and imagining that electoral politics is irrelevant. Why bother getting involved in campaigns, when the oligarchy rules whichever party is in power?
So it’s worth pointing out it does make a difference. Yes, Democrats pay a lot of attention to plutocrats, and even make a point of inviting Patrimonial Capitalism: The Next Generation to White House galas (I would have missed that, even though it’s in my own paper, but for Kathleen Geier. Thanks!). But it’s quite wrong to say that the parties’ behavior in office is the same. As Floyd Norris points out, Obama has in fact significantly raised taxes on very high incomes, largely through special surcharges included in the Affordable Care Act; and what the Act does with the extra revenue is expand Medicaid and provide subsidies on the exchanges, both means-tested programs whose beneficiaries tend to be mainly lower-income adults. The net effect will be significant losses for the super-elite — not crippling losses, to be sure, and hardly anything that will affect their elite status — and major gains to tens of millions of less fortunate Americans.
If you’re waiting for a revolution, or even a new New Deal, this may seem disappointing. But it matters a lot all the same.Konczal in his review:
Why does it matter? First, capital ownership is concentrated. In the United States, the top one percent own 35 percent of all capital, and the top 10 percent of wealth holders own roughly 70 percent. The bottom 50 percent have roughly 5 percent. Moreover, Piketty argues that “the past tends to devour the future”—wealth accumulated in the past becomes more dominant and commands more power and attention than wealth being created now. In France, for example, where the inheritance data is best, the wealth of the dead amounts to nearly twice that of the living.Skidelsky:
But towards the end of the 19th century, discussion of the class inequality of rewards faded away. The marginalist revolution— direct precursor of the mathematical economics of today—dropped the attempt at social realism, by positing a perfectly competitive market economy with numerous “agents,” each of whom would receive the value of his “marginal product”— the exact amount he added to economic value. The existence of power in the market was recognised only in the form of “monopoly”—a single firm in an industry being able to set the price of its product, a problem to be tackled by regulation or trust-busting laws. This new, marginal analysis was intended to bypass the unsettling distributional issues raised by the classical economists. The claim that the market paid every producer what he was worth undercut the socialist argument for redistribution.
In his massive book, Capital in the 21st Century, Thomas Piketty, a professor at the Paris School of Economics, revives the economics of David Ricardo and Karl Marx. His thesis is simple. The growing concentration of capital in fewer hands has enabled its owners to keep it relatively scarce and thus valuable. Agricultural land has dropped out as a factor of production, but urban real estate has taken its place. Capitalist societies therefore have a natural tendency to generate a highly unequal distribution of wealth and income
Deeply impressive in its style and learning, Piketty’s argument is nevertheless incomplete. His story is about the super-rich racing ahead of the rich (and everyone else) since the 1980s. He explains this by the power of the rich to set their own pay and the ease with which they can transform their super-salaries into capital. But there may be another explanation, which is that digital technology actually increases the marginal product of the top performers in all fields of endeavour, creating a global elite of superstars who are distinguished from the rest by their exceptional talents. This is the view of Erik Brynjolfsson and Andrew McAfee in their new book The Second Machine Age. To the extent that “technology increases the reach, scale, or monitoring capacity of a decision- maker,” it makes managers more “valuable.” This implies that supermanagers get higher pay because they are more productive, not just because they can set their own salaries.
Digital technology can also boost rewards to superstar writers and performers. For example, digitisation and globalisation have “supercharged the ability of authors like JK Rowling to leverage their talents… Rowling’s stories can be captured in movies and video games as well as text, and each of those formats… can be transmitted globally at a trivial cost.”Dean Baker:
Hmm, I don't quite see it that way. To me there is a very specific issue that Piketty raised that relates directly to the Cambridge controversies. He argued that the elasticity of substitution between capital and labor was greater than one. Therefore even as the amount of capital increased relative to labor, there was no reason that the rate of profit had to fall proportionately. This raises the prospect of an increasing capital share as economies get richer.
This relates to the Cambridge controversies since the Cambridge U.K. people argued that the idea of an aggregate production function did not make sense. They pointed out that there was no way to aggregate different types of capital independent of the rate of return. The equilibirum price of any capital good depended on the rate of return. Therefore we can't tell a simple story about how the rate of return will change as we get more capital, since we can't even say what is more capital independent of the rate of return.
The takeaway from this, or at least my takeaway, is that we don't have a theoretical construct that we can hope more or less approximates how the economy actually works. The theoretical construct doesn't make sense. This means if we want to determine the rate of return to capital we should not be looking to elasticities of substitution, but rather the institutional and political factors that determine the rate of profit.
The debate touched off by Piketty's claim about the elasticity of substitution will inevitably be a fruitless one. We are not going to find a technical relationship in past data that will tell us how profit shares will change as the ratio of capital to labor increases.
Does any of this mean that the Great Recession proved Joan Robinson and Nicholas Kaldor right? Not as far as I can see....Baker:
It certainly is worthwhile to know what central bankers think, but is this supposed to be a source of legitimation? After all, even by the I.M.F.'s measures the wealthy countries are losing well over $2 trillion a year due to economies operating below potential GDP. The cumulative losses to the rich countries from the Great Recession are virtually certain to exceed $20 trillion and could well top $30 trillion. Is it supposed to be some sort of validation that the folks who got us here share your view of the world?This blogpost.