05 May 2014

Bookkeeping: More Commentary From Others on Piketty

Capital & Interest, DeLong 9 Comments

This post is mostly so I don’t lose these links…

==> George Cooper is a blogger after my own heart. He comes up with a fable of a kingdom trying to show why Piketty’s approach confuses cause and effect. However, I think Cooper leaves out one loose end when valuing his capital stock etc.; his approach is a bit too mechanical and Ricardian for me. But you could plug in some subjective preferences to round out his story, I believe.

==> Piketty and co-author’s QJE paper in which they lay out the technical discussion. In the section on conceptual framework, they do get into the issues of a two-good model and how the capital/income ratio can rise because of a capital gain where the market price of capital goods vis-a-vis consumption goods increases, not because of physical growth in the stockpile of capital goods.

==> To his credit, Brad DeLong acknowledges the apparent contradiction between Summers (worrying about persistently low r and permanent secular stagnation) and Piketty (worrying about persistently high r and growing income inequality). DeLong solves the problem by saying there are different rs. (HT2 a reader in the comments at an earlier post here.) How convenient…

9 Responses to “Bookkeeping: More Commentary From Others on Piketty”

  1. Kevin Donoghue says:

    I’m too deaf to bother, but those who aren’t may be interested in the link below: an interview with Piketty’s translator, Arthur Goldhammer. Note that you can jump directly to the question: does it make sense to treat wealth and capital as synonyms? For better or worse, that’s what Piketty does and you’re misreading him if you suppose otherwise.


  2. Scott Angell says:

    You should check Arnold Kling’s blog, too. He’s had lots of good commentary.

  3. Major_Freedom says:

    More intellectual poison from Delong:

    “The difference between r1 and r2 is the risk premium. In a well-functioning market economy with well-functioning financial markets, there are powerful reasons to believe that this risk premium should be small: less than 1%-point per year. The fact the risk premium appears to me to be 7%-points per year today is a powerful evidence of the profound dysfunctionality of our financial markets, and of their failure to do their proper catallactic job. But that is a separate and largely independent discussion: that is a dysfunction of our modern market economy”

    Delong is blaming market actors, who have to work in an almost completely socialist monetary system, for failing to do their job. And why? Because Delong hath decreed that thou risk premium should be 1%, but thine risk premium is still 7%.

    Does this guy even understand how free markets work? I don’t think he does, because he believes he’s living in one.

    • Matt M (Dude Where's My Freedom) says:

      Oh come on MF, he SAID there were “powerful reasons” to accept his premise that the risk premium should be 1%. It’s not his fault that you’re too dumb to know what they are! *eyeroll*

  4. khodge says:

    If I were a somewhat liberal NY Times economics columnist and another economist (Gwartney) came out with a study showing that my textbook showed market failures were 100% caused by the market and 0% caused by government, I, too, would be heaping praise on a silly socialist book, just to change the topic.

  5. Tel says:


    Hannan buys into the Piketty discussion, putting the debate into its correct political context.

  6. guest says:

    consultingbyrpm blog tag piketty

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