Larry Summer and Paul Krugman cite Atif Mian and Amir Sufi's hard-to-believe theory of the Great Recession to justify fiscal stimulus. In their book, House of Debt, Mian and Sufi claim falling home prices caused highly levered subprime households to reduce consumption and temporarily save a larger portion of their earnings. A more likely scenario is that subprime consumption fell back to sustainable levels when low-income households could no longer borrow against the ... Read More
Serious liberal economists are damning Piketty with faint praise
Finally, an economist on the left, Larry Summers, comes out and admits that the emperor, Thomas Piketty, has no clothes. In truth, Paul Krugman, Brad DeLong, and Robert Solow have already damned Piketty with faint praise. Like all serious reviewers, they acknowledge the quality of his historical data on the distribution of income and wealth. But they are far more qualified in their praise of his economic theories and policy prescriptions. DeLong, for example, says ... Read More
Larry Summers savages Piketty’s Capital in the 21st Century
Larry Summers’ review of Thomas Piketty’s book has finally arrived, and he savages it. Frankly, it’s hard to find any aspect of Piketty’s theory that escapes Summers’ disdain. Here are excerpts from Summers’ review: “I have serious reservations about Piketty’s theorizing as a guide to understanding the evolution of American inequality.” “Piketty argues that as long as the return to wealth exceeds an economy’s growth rate, wealth-to-income ratios will tend to rise, ... Read More
