Earlier this week Paul Krugman took another step closer to conceding that the case against income inequality is mistaken. He said, “I’m actually a skeptic on the inequality-is-bad-for-performance proposition. … [I’m] worried that the evidence for some popular stories is weaker than I’d like.” Krugman laid some of the groundwork for his growing concession in his review of Piketty’s Capital in the Twenty-First Century where Krugman voiced cautious skepticism for ... Read More
Piketty Overlooks the Circumstantial Nature of Economics
Despite the implausible economic theory underlying Capital in the Twenty-First Century (as addressed here, here, here, and here), Thomas Piketty nevertheless makes a valuable contribution by questioning Simon Kuznets' theory that income becomes more equally distributed as economies grow more prosperous. Instead, growing income equality (and inequality) appears to be highly circumstantial. When the U.S. economy prospered in the 1950s and ‘60s by educating its ... Read More
Economists Krusell & Smith find “Piketty’s second law…misleading, and…not fundamental”
Alex Tabarrok reports on a recent paper by Per Krusell and Tony Smith that articulates the problem with Thomas Piketty’s so-called “Second Law of Capitalism” a problem that Larry Summers claims stems from Piketty “misreading the literature by conflating gross and net returns to capital.” Krusell and Smith conclude: “We find Piketty’s second law quite misleading, and certainly not fundamental.” Krusell and Smith reach this conclusion as follows: “The second ... Read More
Financial Times raises concerns about integrity of Piketty’s data but effects likely inconsequential
First, liberal economists damned Thomas Piketty’s book, Capital in the Twenty-First Century, with a stream of faint praise by applauding the quality of Piketty’s data while admitting to concerns about the quality of his economic logic. Then, Larry Summers took Piketty’s logic to the woodshed. Marty Feldstein followed by denouncing Piketty’s interpretation of the U.S. data. Meanwhile, Bonnet et al found that Piketty’s findings were entirely attributable to real estate, ... Read More
Ed Conard reviews Piketty’s Capital in the 21st Century and its critics on Bloomberg TV’s In the Loop with Betty Liu
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Marty Feldstein denounces Piketty’s Capital in the 21st Century in the WSJ
Marty Feldstein denounces Piketty’s Capital in the Twenty-First Century in The Wall Street Journal: “His [Piketty’s] thesis rests on … a flawed interpretation of U.S. income tax data …. The … problem with Mr. Piketty’s conclusions about increasing inequality is his use of income tax returns without recognizing the importance of the changes that have occurred in tax rules. … Changes in taxpayer behavior [in reaction to changes in the tax laws since 1980] substantially ... 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
