Results for “piketty”
171 found

Wednesday assorted links

1. Markets in everything: Sol LeWitt sports bra.  And there is no great stagnation.

2. Canadian documentary about Jordan Peterson.  Covers gnosticism, the Heideggerian side, Jung, etc.  Not so much about the anti-PC stuff or the personality psychology.

3. Virtual reality gyms.

4. Chetty’s on-line Stanford class.

5. The drone wars heat up, this time in Syria and against Russia.

6. Dylan Matthews on Auten and Splinter and inequality debates.

The rate of return on everything

There is a new NBER paper on that topic by Òscar Jordà, Katharina Knoll, Dmitry Kuvshinov, Moritz Schularick, and Alan M. Taylor, here is the abstract:

This paper answers fundamental questions that have preoccupied modern economic thought since the 18th century. What is the aggregate real rate of return in the economy? Is it higher than the growth rate of the economy and, if so, by how much? Is there a tendency for returns to fall in the long-run?Which particular assets have the highest long-run returns? We answer these questions on the basis of a new and comprehensive dataset for all major asset classes, including—for the first time—total returns to the largest, but oft ignored, component of household wealth, housing. The annual data on total returns for equity, housing, bonds, and bills cover 16 advanced economies from 1870 to 2015, and our new evidence reveals many new insights and puzzles.

Here is what I learned from the paper itself:

1. Risky assets such as equities and residential real estate average about 7% gains per year in real terms.  Housing outperformed equity before WWII, vice versa after WWII.  In any case it is a puzzle that housing returns are less volatile but about at the same level as equity returns over a broader time span.

2. Equity and housing gains have a relatively low covariance.  Buy both!

3. Equity returns across countries have become increasingly correlated, housing returns not.

4. The return on real safe assets is much more volatile than you might think.

5. The equity premium is volatile too.

6. The authors find support for Piketty’s r > g, except near periods of war.  Furthermore, the gap between r and g does not seem to be correlated with the growth rate of the economy.

I found this to be one of the best and most interesting papers of the year.

The working rich are driving income inequality, not the rentiers

Anti-Piketty:

Have passive rentiers replaced the working rich at the top of the U.S. income distribution? Using administrative data linking 10 million firms to their owners, this paper shows that private business owners who actively manage their firms are key for top income inequality. Private business income accounts for most of the rise of top incomes since 2000 and the majority of top earners receive private business income—most of which accrues to active owner-managers of mid-market firms in relatively skill-intensive and unconcentrated industries. Profit falls substantially after premature owner deaths. Top-owned firms are twice as profitable per worker as other firms despite similar risk, and rising profitability without rising scale explains most of their profit growth. Together, these facts indicate that the working rich remain central to rising top incomes in the twenty-first century.

That is from a new paper by Matthew Smith, Danny Yagan, Owen Zidar, and Eric Zwick, via the excellent Kevin Lewis.

My short essay on opportunity concepts for South Africa

Here is the piece (pdf), here is the broader symposium, with other notable contributors, including Bill Easterly, Charles Kenny, and Brandon Fuller.  Here is one excerpt from my essay:

…we should keep in mind the strictures of Dani Rodrik that every country, or sometimes every region, is different. Nonetheless this reorientation of measures of progress would have some implications for policy analysis. In particular, high levels of inequality, inequality of opportunity, and relative income mobility would not be seen as problems per se.

Furthermore, the frequent appearance of those concepts in political and also scholarly rhetoric would be seen as misleading and a distraction. The focus instead would be on expanding the absolute size of opportunities for the poor. To make this more concrete, consider a policy change which benefitted both the rich and the poor. Many of the equality metrics would have to struggle with such a policy, which might increase inequality in some manner, whereas the approach recommended in this paper could endorse it wholeheartedly.

It is interesting to note the recent visit of Thomas Piketty to South Africa. He called for a national minimum wage, greater worker participation in company boards, and land reform. Those are all attempts to provide equalizing measures across one dimension or another. Although some parts of those ideas may have merit, they do not seem overall focused on incentivizing wealth creation and opportunity. Piketty even stated: “I think it’s fair to say that black economic empowerment strategies, which were mostly based on voluntary market transactions […] were not that successful in spreading wealth.” It perhaps would have been more appropriate to note South Africa remains a highly regulated, highly legally privileged, and indeed mercantilist economy; the country ranked only number 72 on the 2015 Heritage Foundation Index of Economic Freedom. So perhaps empowerment based on voluntary market transactions has not yet really been tried.

The absolute opportunities approach also suggests a different emphasis for a topic such as land reform. Many arguments for land reform focus on the difference in the land holdings between the rich and the poor, yet perhaps those are not the relevant numbers. A better focus would be the following question: “by how much would receiving more land elevate the opportunities of the poor?” If indeed the answer to that question is optimistic, the case for land reform will be stronger.

Do read the whole thing.

What I’ve been reading

1. Michael J. Klarman, The Framers’ Coup: The Making of the United States Constitution.  Excellent author, the chapters on the time period before the Constitution are good enough to make the “best books of the year list,” the rest is a much above-average summary and distillation, but of more familiar material.  At 880 pp. of clear, limpid, and instructive prose, it is a winner in any case.

2. W.H. Auden and Louis MacNeice, Letters from Iceland.  More of a mutual travelogue, with alternating contributions, than a series of letters, one learns that even in 1936: “There is little stigma attached to illegitimacy.  Bastards are brought up on an equal footing with legitimate children of the family.”  Furthermore, “All chocolate or sweets should be bought in London.”  During the trip they run into Goering, yes the Goering.

3. Richard A. Posner, The Federal Judiciary: Strengths and Weaknesses.  This is a grumpy book, but I don’t mean that in a grumpy kind of way, as I like many grumpy books: “The dominant theme of this book has been judicial standpattism — more precisely, the stubborn refusal of the judiciary to adapt to modernity.”  By the end, Posner gives the federal judiciary a grade between B and B+, I was surprised it was so high.

4. Duff McDonald, The Golden Passport: Harvard Business School, the Limits of Capitalism, and the Moral Failure of the MBA Elite. “In the early 1920s, HBS was still without its own buildings at Harvard, faculty were crammed together in cramped offices, and classrooms were scattered around Harvard Yard.”  This is a remarkably clear and engaging survey of its subject matter, the main drawback being it never explains the rise of HBS in terms of…management, as HBS itself might do so.  There is thus an odd cipher at the book’s core, plus from the discussion of Michael Jensen onward, the book descends increasingly into ad hominem attacks and unfair moralizing.  This volume is an odd mix, but still worth reading for its contributions.

Stephen Ellis, This Present Darkness: A History of Nigerian Organized Crime, is one of the better books on that country: “…there are even private colleges in Lagos offering courses in credit card fraud and advance-fee fraud.”

Hugh Nibley, Approaching Zion, is a series of essays on society and theology from one of the Mormon “grandmasters.”

After Piketty: The Agenda for Economics and Inequality, edited by Heather Boushey, J. Bradford DeLong, and Marshall Steinbaum, collects many essays on the Piketty book and also on the topic more generally.

Shahab Ahmed, Before Orthodoxy: The Satanic Verses of Early Islam, “…the early Muslim community believed almost universally that the Satanic verses incident was a true historical fact.”  Ahmed, a brilliant scholar at Harvard, passed away in 2015, here is a short appreciation.  If they wrote books for me, someone would be working on “Islam and Strauss” right now.

What I’ve been reading

1. Ian McEwan. The Children Act.  The main story line pretends to revolve around a Jehovah’s Witness who won’t take a blood transfusion, but I think it was meant as a book about Islam and he was afraid to say so.  The resulting mix doesn’t quite work.

2. Arundhati Roy and John Cusack, Things That Can and Cannot Be Said, Daniel Ellsberg and Edward Snowden are part of the book too.  The two main authors conversing with Snowden is in fact the strongest argument against Snowden I’ve seen.  Maybe he is just being polite, but it’s the only time I’ve heard him sound like an idiot.

3. Helen Hardacre, Shinto: A History.  I’ve read only about a fifth of this 720 pp. book, but it seems to be a highly useful history on a topic hardly anyone knows anything about.

4. Daniel Ellsberg, Secrets: A Memoir of Vietnam and the Pentagon Papers.  Compelling throughout, and worthwhile reading for anyone interested in media and media policy.  Ellsberg, of course, was closely connected to Thomas Schelling and made significant contributions to the theory of choice under uncertainty.

There is also:

After Piketty: The Agenda for Economics and Inequality, edited by Heather Boushey, J. Bradford DeLong, and Marshall Steinbaum, is a very useful collection of writings on Piketty-related themes, including Solow and Krugman.

Nathan B. Oman, The Dignity of Commerce: Markets and the Foundations of Contract Law.  An interesting blend of “moral foundations of capitalism” and analysis of Shakespeare’s Merchant of Venice.

Shahab Ahmed, Before Orthodoxy: The Satanic Verses in Early Islam, “…the early Muslim community believed almost universally that the Satanic verses incident was a true historical fact.”

Tuesday assorted links

1. Esther Duflo’s Ely lecture, “The economist as plumber.”

2. Disappearing markets in everything: the last disco ball maker (there is noisy sound at the link).  And how bad is authoritarianism really?  And David Brooks on Bannon vs. Trump, I am always happy to see actual analysis of the Trump administration.

3. The best economic history works in the last decade? (pt. I)

4. AI now wins in heads-up, no-limit Texas hold’em poker.  That is a game of asymmetric information.

5. The books some Australian guy is looking forward to.

6. If they had served this up as parody, I would have thought it too exaggerated.  Did Darwinian processes really produce this?  I guess so.

7. Long Piketty blog post on productivity in Germany and France.  It does seem he is now blogging in English (and French) for Le Monde.

Friday assorted links

1. India moves to a GST.

2. How to boost your medal count in seven easy steps, redux of my 2012 Grantland piece with Kevin Grier.

3. The culture that is French: “French town flooded with wine after protesters crack open vats.

4. “Using a sample of 19 advanced economies spanning over 30 years, I find no empirical evidence that dynamics move in the way Piketty suggests.

5. The couture culture that is Singapore.  And a German perspective on guns and violence in the United States.

6. Trump’s new economic advisory council.  And John Holbo on Johnson/Weld.

Clive Crook is mostly right

Here is one bit:

Trump’s critics complain about his relentless invoking of crisis — despite agreeing with him that the system is collapsing. Conservatives keep telling us that the American project is in mortal danger, that liberty itself is at stake. Liberals keep telling us that global capitalism is wrecking everything that’s decent in society, that the U.S. is institutionally racist, and America’s traditional values are so much hypocrisy. I think back to the rapturous reception accorded by the left in 2014 to Thomas Piketty’s “Capital,” which argued, you may recall, that capitalism is an engine of injustice, headed for self-destruction; progressives everywhere nodded wisely in agreement. Here’s what puzzles many of them today: Why does Trump have to be so negative?

Trump has the advantage of a fairly simple message, namely “Something has gone fundamentally wrong.”  No, I do not think he will win, but “something has gone wrong and you will make it worse” is not as effective a rebuttal as you might think.  Alternatively, the opposition could and will try “things aren’t as bad as you might think,” and also “yes something has gone wrong but we can fix it for you,” but those are also less compelling even when correct.  And while the former of those two is correct the latter probably is not.

I am reminded of a 2007 post I once wrote which I formerly considered my worst prediction ever.  I grimace again, but here goes:

I apply what I call The Angry Ape Test to the candidates.  Imagine each mimicking an angry ape, and ask how pretty or appealing the resulting picture is.  Most swing voters perceive America as being at war and so they demand toughness.  They demand An Angry Ape, if not at every moment in time, at least in principle.  Most Americans don’t find an angry Hillary to be a pleasant Hillary, whereas an angry, raging Giuliani fits his basic image.  Americans claim not to be biased, but at their core they don’t much like angry women; being female remains Hillary’s biggest barrier, even when explicit prejudice is absent.  Related prejudicial forces will keep Barack Obama from the presidency.  Being black, he is supposed to sound reasonable and intelligent all the time.  He is not allowed to mimic An Angry Ape.  Americans want their first women President to be like Margaret Thatcher — firm, no-nonsense schoolmarmish strength without much radiation of anger — and they want their first black President to be like Colin Powell.  We will allow “Magisterial” — I’m too strong to need to throw a tantrum — to trump Angry Ape, but Hillary can’t play that card.  Barack is too young, too inexperienced, and doesn’t have the military record.

Mitt Romney also can’t do The Angry Ape.  This same hypothesis suggests McCain still has some chance, though obviously his path to the top is no longer clear, given his limited resources.  He can at least do The Ape.  This is the main reason why I still think Giuliani will win.

Obviously I was quite wrong, but I no longer think it was one of my worst posts ever.  Still, timing is everything…