Results for “piketty”
166 found

The IMF picks 25 top young economists

The list is here, I wonder how young is young, in any case overall a very good set of names.  Other than Piketty and Rey, they all teach in the United States.  John List is one person I would have added, Jesse Shapiro is another, plus I dare them to try out their judgment on someone who is not at a top ten school and then track how that person does over time.

Who else is missing?

Addendum: the original IMF link is here.

Matt Yglesias on Tyler Cowen

Which is to say that while Cowen’s point about the global picture is both interesting and correct, his political stance is backwards. It’s not fans of Capital in the 21st Century who are pushing nationalism as an alternative to plutocracy, but its detractors. And though the recent politics in the US Congress have been driven by the somewhat odd sequence of events around the arrival of unaccompanied minors from Central America, the underlying pattern runs much deeper than that.

I don’t have an “he says exactly that” quotation to pull from Matt’s piece, but I believe he is saying I (or someone?) should be a Progressive instead of a “conservative economist” as he calls me.  The article is interesting throughout.

My framing of course is different.  It is not about who are the best people, but rather which are the best set of positions.  Just to summarize, I generally favor much more immigration but not open borders, I am a liberal on most but not all social issues, and I am market-oriented on economic issues.  On most current foreign policy issues I am genuinely agnostic as to what exactly we should do but skeptical that we are doing the right thing at the moment.  I don’t like voting for either party or for third parties.

Disruption Big Time

In an excellent post on the Lepore-Christensen fracas, John Hagel draws on Deloitte’s Shift Index to provide some data on disruption. Disruption has increased by a variety of metrics.

One of the metrics in our Shift Index looks at what economists call topple rate – the rate at which leaders fall out of their leadership position. In this case, we focused on the rate at which public US companies in the top quartile of return on assets performance fall out of this leadership position.Between 1965 and 2012, the topple rate increased by 40%.

OK, but the skeptic might reply that this is only about financial performance. Another more significant measure of fall from leadership position is provided by my old colleague and mentor, Dick Foster, who looked at the average lifespan of companies on the S&P 500.  In 1937, at the height of the Great Depression and certainly a time of great turmoil, a company on the S&P 500 had an average lifespan of 75 years.  By 2011, that lifespan had dropped to 18 years – a decline in lifespan of almost 75%.  At the same time that humans are significantly increasing their lifespan, large companies have been heading rapidly in the opposite direction.

Another measure of disruption is executive turnover which has increased.


Some of Deloitte’s work also speaks to the implicit idea in Piketty that capital accumulation is easy. Once someone has capital, Piketty argues, that capital just grows and grows at r>g. Not so, and less so today than ever before. According to Deloitte the return on capital is decreasing and the volatility is increasing. Here’s the return on assets by top and bottom quartile. Even in the top quartile, r is decreasing but it’s easier than ever before to pick wrong and lose your shirt in the bottom quartile.


Lots more of interest in Hagel’s post and in Deloitte’s work.

Assorted links

1. New Chinese mega-city of 130 million?  Ho-hum.

2. “Uncle Sam Wants You — Unless You’re 71% of Youths.”

3. Robots are blossoming in China.

4. The new dispute over Janet Yellen has nothing to do with nominal gdp.  I call it The Culture that is Georgetown.

5. If gun control is popular, why don’t more Congressmen support it?

6. My 2007 discussion of Thomas Piketty, sort of.  And Piketty in R Markdown, and the code is here.

Timothy Lee interviews Marc Andreessen on the death of the IPO

It is excellent throughout, here is one good sentence:

The funny thing about Piketty is that he has a lot more faith in returns on invested capital than any professional investor I’ve ever met.

Here is another:

The result of all that is the effective death of the IPO. The number of public companies in the US has dropped dramatically. And then correspondingly, growth companies go public much later. Microsoft went out at under $1 billion, Facebook went out at $80 billion. Gains from the growth accrue to the private investor, not the public investor…

Most American retirement savings is invested in the public stock market. Most Americans can’t invest in private companies and most Americans can’t invest in venture capital and private equity funds. They’re actually prohibited from doing so by the SEC. If you both prohibit them from investing in private growth and wire the market so they can’t get into public growth, then you can’t be invested in growth. That raises the societal question of how are we going to pay for retirements. That’s the question that needs to be asked that nobody asks because it’s too scary.

The full interview is here.

The importance of tax evasion

Mr. Zucman’s tax evasion numbers are big enough to upend common assumptions, like the notion that China has become the world’s “owner” while Europe and America have become large debtors. The idea of the rich world’s indebtedness is “an illusion caused by tax havens,” Mr. Zucman wrote in a paper published last year. In fact, if offshore assets were properly measured, Europe would be a net creditor, and American indebtedness would fall from 18 percent of gross domestic product to 9 percent.

There is more here, interesting throughout.  You will find some of the related research here.

Depreciating Capital

Brad DeLong attacks Krusell and Smith for using in some of their thought experiments a depreciation rate of 10%, which is probably too high. Fair point but in my post I assumed a depreciation of just 5% and showed that Solow and Piketty give very different predictions about how the K/Y ratio will change with a change in g.

Furthermore, having read DeLong’s comment, I went to the BEA and compared gross and net domestic product which gives capital depreciation as a fraction of GDP of around 15% in recent decades. At a K/Y ratio of 4 that’s a depreciation rate of 3.75%. Similarly, Inklaar and Timmer in constructing capital stocks for the Penn World Tables estimate a depreciation rate for the U.S. of 4.1%. I reran my simple Excel chart with the lower number, 3.75%.

As you can see, the numbers are very similar to earlier and the key point is still that a decrease in g increases K/Y much more in the Piketty model than in the Solow model. Piketty2 Krusell responds to DeLong here making the additional point that their thought experiments show that Piketty’s assumption about savings is implausible at any depreciation rate (see also Hamilton on this point).

First: if the net rate of saving remains positive as the economy’s growth rate falls toward zero, as Piketty assumes in his second fundamental law of capitalism, the gross saving rate in the economy must approach 100%. This observation is a way of illustrating how unreasonable the behavioral assumptions underlying his theory of saving really are.

Second: according to standard, and much more reasonable, saving theory (based either on the standard textbook Solow growth model or on the permanent-income model), the net saving rate must fall with the rate of growth, and become zero when growth is zero.

…These points are key because Piketty’s predictions are all about what happens as growth falls during the 21st century, as he argues it will.

…both of these results hold no matter what the depreciation rate is (so long as it is positive).

The heart of Piketty’s theory is his expression for the capital share of income in the long run, α = r × s/g with the prediction that if g falls the capital share will rise tremendously. This is a good opportunity to summarize some of the recent points about the theory.

There are no contradictions but many a slip ‘twixt the cup and the lip. Namely, will g fall? If g does fall, will K/Y increase? If K/Y increases will capital’s share of income increase? My answers:

Will g fall? Uncertain. Piketty’s forecast is as good as anyone’s. My own view is that at the global level g has been increasing for several centuries and that this will continue, especially because in this century we will see a massive increase in the number of scientists and engineers as China and then India devote increased human capital to the research frontier.

If g does fall, will K/Y increase? Yes, but probably less than Piketty estimates and more in line with Solow.

If K/Y increases will capital’s share of income increase? Uncertain but more likely no than yes. It depends on the elasticity of substitution between K and L and as Rognlie and Summers argue, the elasticity that Piketty needs is higher than current estimates suggest is the case.

Assorted links

1. Good charts and graphs about U.S. energy history.

2. Scott Sumner on Piketty on Kuznets, and Scott on the first chapter of Piketty.

3. Are we sexist about hurricanes? (speculative)  The original paper is here.

4. A very optimistic view on the unemployment rate.

5. How loyal was the Chinese army? (significant)

6. David Brooks on Adam Phillips.

7. Benjamin Hermalin responds to my earlier discussion of his paper.  The original page for the paper is here.

Assorted links

1. How to earn money trolling dating sites for hot, thin white women (those new service sector jobs).

2. What are the most edited Wikipedia articles?  And a critique of the internet.

3. Immortal soccer fans.

4. A chess grandmaster examines Piketty’s claim about rates of return.  And Krugman on where the Piketty debate is at now.

5. Stephen Williamson is moving full-time to the St. Louis Fed…and will continue blogging.

6. The influence of economists on merger reviews.

Assorted links

1. Good Naidu essay on Piketty.  And a good Guardian piece on data discontinuities in Piketty.  More from Krusell and Smith, Piketty vs. modern macro theory.  Kevin Vallier on Piketty’s political philosophy.  Don Boudreaux reviews Piketty.  David Graeber does a mood affiliation take on Piketty.  And yet more mood affiliation on Piketty.

2. The economics of book festivals, an FT piece.

3. Tax policy and The Bible, by Bruce Bartlett.

4. E. Glen Weyl has a new paper summarizing price theory.

5. Not since 1952 have the puffins been so late.  And Art Carden is returning to EconLog.

6. A tale of two brothers, one of whom is rich.

How is income inequality correlated with wealth inequality?

From the OECD, Kaja Bonesmo Frederiksen writes on “More income inequality and less growth” and presents this table:


If you were to fit that with a curve, the overall slope would be negative, suggesting a negative empirical correlation between income inequality and wealth inequality.  Now do not leap to a conclusion here, as there are points to be made:

1. This scatter plot is not based on a model with adjustments for confounding factors.

2. These may not be the right or best data on wealth inequality.

3. There are not many data points on this graph in the first place.

4. Lots of other stuff.

The point is that everyone is talking about wealth inequality lately, yet it is not always recognized that the relationship between wealth and income inequality is complex, as illustrated for instance by the case of Sweden.  (There is nothing in this post by the way which should be construed as criticism of Piketty, I’m just trying to lay out some basic expository principles.)

Wealth inequality and income inequality may diverge for at least three reasons.  First, savings rates may differ across societies.  Second, locally available rates of return may differ.  Third, the ups and downs of mobility may mean high income inequality in a given year but overall lower levels of wealth inequality.

By the way, here is a good sentence from the abstract:

Wealth dispersion [inequality] is especially high in the United States and Sweden

The support document is here, I have reproduced Figure 3a.  Hat tip goes to Luis Pedro Coelho.