Acemoglu and Robinson on Piketty

There is a new paper out by them:

Thomas Piketty’s recent book, Capital in the Twenty First Century, follows in the tradition of the great classical economists, Malthus, Ricardo and Marx, in formulating “general” laws to diagnose and predict the dynamics of inequality. We argue that all of these general laws are unhelpful as a guide to understand the past or predict the future, because they ignore the central role of political and economic institutions in shaping the evolution of technology and the distribution of resources in a society. Using the economic and political histories of South Africa and Sweden, we illustrate not only that the focus on the share of top incomes gives a misleading characterization of the key determinants of societal inequality, but also that inequality dynamics are closely linked to institutional factors and their endogenous evolution, much more than the forces emphasized in Piketty’s book, such as the gap between the interest rate and the growth rate.

For the pointer I thank Nathaniel Bechhofer.

Comments

Why should I believe Marx was a great classical economist?

He has the highest body count.

+1

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What other persons actions can we blame on some other person?

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Great as in large: enormous, immense; they mean it in the pejorative sense.

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Needs more institutions. Shocker.
Institutions = cowbell
https://www.youtube.com/watch?v=lGBD1KUz2RA

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A careful reading of these sentences shows a contradiction: the authors say there's no general laws yet extrapolate from the experiences of two countries to come up with laws (or at least try and contradict Piketty, which is illogical). Nuff said.

Thomas Piketty’s recent book, Capital in the Twenty First Century, follows in the tradition of the great classical economists, Malthus, Ricardo and Marx, in formulating “general” laws to diagnose and predict the dynamics of inequality. We argue that all of these general laws are unhelpful as a guide to understand the past or predict the future, because they ignore the central role of political and economic institutions in shaping the evolution of technology and the distribution of resources in a society. Using the economic and political histories of South Africa and Sweden..."

Damn - essentially the observation I wanted to make.

Apparently, the only 'general' rules Acemoglu and Robinson feel are helpful are the ones they believe in.

Yes, agreed. One tacit admission from A & R is that economics is nonlinear, and at best you can perhaps only predict the envelope of upper and lower bound of economic curves. This is consistent with non-linear equations: the best you can hope for is figuring out min/max, general or local, not what happens in-between.

This comment is not only nonsense economically, it doesn't even make sense mathematically. You really aren't too bright, and probably should stick to commenting about Kim Kardashian's posterior from now on.

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"South Africa and Sweden"???

Acemoglu is deep into self-parody by now.

Lichtenstein's next.

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It's possible Acemoglu is actually closer to Steve's view in that he thinks you need a "thick" view of individual countries to understand the particular nature of inequality within them, which abstract "thin" theories based on interest vs growth ignores.

You must not have read much Acemoglu

I've read and critiqued Acemoglu. I think his malaria as proxy for colonial institutions paper was quite flawed in overlooking the possibility that malaria without colonialism could have had the same effect. "Institutions" have become a popular explanation among economists, so they attribute everything to them. It can still be true that Sailer is closer to Acemoglu than Piketty regarding "general laws of capitalism" vs the specifics of countries.

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Just when we seem to have approached the criticism of Piketty from every possible angle, no matter how contradictory, something new appears.

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For those on the fence, it seems to be getting picketier and picketier.

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"...the central role of political and economic institutions in shaping the evolution of technology and the distribution of resources in a society" - if i remember correctly, that is essentially what he was trying to get across. [no contradiction here?]

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I'll just use Malthus as a counter: he set up a "general law" -- the population principle -- through a thought experiment in order to explore the importance of political, cultural, and economic institutions on actual performance. See my paper from the last ASSA meeting: "Malthus with Institutions: A Comparative Analysis of Prudential Restraint." I argue that the degree of civilization (defined by the type of institutions a society possessed) was at the core of Malthus' comparative analysis of the operation of the principle of population across societies at his time. He undertook this analysis in the 2nd-to-6th editions of the Essay.

http://ssrn.com/abstract=2372211

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Wouldn't a pre-industrial society that implemented institutional constraints to reproduction be at a disadvantage relative to warlike neighbors without such constraints?

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This appears to be nothing more than an excuse for a shallow and thoughtless attack on Piketty.

Piketty makes it very clear that he is describing the effects of particular (rather long-lived) set of institutions. He's not making any claim to total generality -- he doesn't think his theory applies to ancient Egypt, or Easter Island, or the Mayans.

So this is a strawman attack. If they'd left out the gratuitous and irrelevant attacks on Piketty, it would be an interesting paper. As it is, it means I can't trust them.

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Another review of Piketty that leads me to question whether or not the authors have read the book at all. To take one example, AR quote Piketty:

"The reason why wealth today is not as unequally distributed as in the past is simply that not enough time has passed since 1945 (p. 372)."14

In footnote 14, they say:

"Capital is not always clear about the reach of this fundamental force (or general law). For example, the last sentence is immediately followed by "This is no doubt part of the explanation, but by itself it is not enough," leaving the reader to ponder what else is required for the claim to be true."

Yet Piketty completes the relevant paragraph with:

"[contemporary] top earned incomes (for a given distribution) roughly balance top capital incomes (we are now in a society of managers, or at any rate a more balanced society). Similarly, the emergence of a “patrimonial middle class” owning between a quarter and a third of national wealth rather than a tenth or a twentieth (scarcely more than the poorest half of society) represents a major social transformation."

In other words, the two major reasons for lower inequality are that (1) there has been significant redistribution and (2) labour incomes have become more important, both of which AR later reference as counterpoints to Piketty's thesis.

I generally disagree with these two, but I usually respect them. When I saw they had reviewed Piketty I honestly hoped for better.

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