Those 21st century inequality blues

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Thomas Piketty is well known for having (with Emmanuel Saez and others) assembled long-run (18th century onwards) data on income and wealth in capitalist economies. He has now used the findings in a book forthcoming in English in March from Harvard University Press, [amazon_link id=”067443000X” target=”_blank” ]Capital in the 21st Century[/amazon_link]. It’s recently out in French, [amazon_link id=”2021082288″ target=”_blank” ]Le capital au XXIe siècle[/amazon_link].

There is a set of slides summing up the message (pdf). In short, he predicts that the concentration of wealth could exceed 19th century levels due to the combination of slow growth and high net-of-tax returns as a result in part of tax competition. The charts he presents suggest that the 20th century – fast per capita growth and an expanding middle class – might be an historical aberration.

He warns: “The history of income and wealth inequality is always political, chaotic and unpredictable; it involves national identities and sharp reversals; nobody can predict the reversals of the future.” Still, a global progressive wealth tax would be a good idea, he reckons. I can’t see the globocrats and oligarchs agreeing, however.

[amazon_image id=”067443000X” link=”true” target=”_blank” size=”medium” ]Capital in the Twenty-First Century[/amazon_image]

The publication of the book will be an event – I’m looking forward to it. My thanks to @went1955 for pointing out the slides.

went1955
Inequality & Capitalism in the Long-Run — Slides lecture Thomas Piketty — http://t.co/yMaLyFPnLk (↬ FT Alphaville)
17/12/2013 09:10

J K Galbraith redux

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This morning @J_K_Galbraith (or rather, his representative on earth) tweeted me to say:

J_K_Galbraith
Time 4 another look at JK Galbraith? @raffasadun @rodrikdani @neilrankinza @TheEconomist @diane1859 http://t.co/YjKfoAcbW4 via @cambup_books
16/12/2013 08:40

I haven’t read Stephen Dunn’s book, [amazon_link id=”0521518768″ target=”_blank” ]The Economics of John Kenneth Galbraith[/amazon_link], although I did meet the great man himself when I was at Harvard. He had stopped teaching by then, but funded a prize for the best teacher in the economics department, selected by a panel of graduate students. The panel members, including me, were invited to dinner at the Galbraith house. My colleagues were all American men and at least a foot taller than me, and Galbraith a foot taller then them, so I couldn’t hear all that much as I stood in the circle gathered around the great man.

[amazon_image id=”0521518768″ link=”true” target=”_blank” size=”medium” ]The Economics of John Kenneth Galbraith: Introduction, Persuasion, and Rehabilitation[/amazon_image]

It’s been a while since I read any Galbraith and I must confess to never having been a huge fan. With hindsight, I had the technically-trained young economist’s suspicion of somebody who used no equations at all in any of his work, and that’s something I hope I’ve grown out of. One must also certainly admire Galbraith’s ability to popularize economics, and recognise that the subject is too important not to engage the public.

Just picking off my shelves a couple at random – [amazon_link id=”1856194159″ target=”_blank” ]The World Economy Since the Wars [/amazon_link]and [amazon_link id=”014103825X” target=”_blank” ]The Great Crash of 1929[/amazon_link], they seem a mixed bag. The latter is a deservedly classic account of the crash, a terrific read. The former – a late (1994) book – is for me one of his weaker books, general political argument not well backed up by the economics; it has scarcely any mention of empirical evidence in it, for one thing. In between are the other classics such as [amazon_link id=”0140173668″ target=”_blank” ]The Culture of Contentment[/amazon_link] and [amazon_link id=”0140285199″ target=”_blank” ]The Affluent Society[/amazon_link], writings of genius but stronger on assertion than convincing argument. But I’m open to persuasion.

[amazon_image id=”014103825X” link=”true” target=”_blank” size=”medium” ]The Great Crash 1929[/amazon_image]

 

 

 

A not-so-dismal science

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I was just browsing through a book of this title, A Not-so-dismal Science: A Broader View of Economies and Societies, edited by Mancur Olson and Satu Kahkonen, published in 2000. It has some great essays, including Olson’s Big Bills Left on the Sidewalk: Why some nations are rich and others poor (pdf), a must-read for economists in my view.

[amazon_image id=”0198294905″ link=”true” target=”_blank” size=”medium” ]A Not-So-Dismal Science: A Broader View of Economies and Societies[/amazon_image]

This time my eye was caught by Joel Mokyr’s essay, Innovation and its Enemies: the economic and political roots of technological inertia. It starts with a question both simple and profound. If it is primarily markets that determine the allocation of resources (the ‘fundamentalist economics’ assertion), then how does innovation ever occur – because by definition there are no markets for new goods. “Innovation is much more than an economic phenomenon,” Mokyr writes. It’s a superb essay. I’m going to have to re-read the whole book – judging from the dust, I haven’t looked at it for years.

 

Back to the future in economics

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As I was clearing out some stuff, I came across a January 1991 special centenary edition of the Economic Journal. The editors invited 22 distinguished economists to speculate about the next 100 years of their discipline.

It’s fascinating to see the similarity of the points made about the changes under way, or needing to get under way, in economics then and now. Will Baumol warns that there is too much mathematics for its own sake in economics. He welcomes the new research in behavioural economics but says it is disappointing to see how slowly it is being incorporated into economists’ everyday work – he suggests this is because behavioural economists have spent too little time researching when people (or animals) act rationally and when instead their behavioural biases take over. Andrew Oswald was encouraged by the growing use of microeconomic data sets to do empirical work. Frank Hahn predicts that evolutionary theory will contribute more to economics, and Charles Plott says that in general economics will move closer to the life sciences, with particular focus on how people’s preferences are formed. Richard Schmalensee says economists will have to pay more attention to the effects of technology in service industries, and the importance of R&D and intellectual property.

So you could end up feeling pessimistic that the debate – and the subject – has moved on little since 1991. Or optimistic that the encouraging current trends to use maths more sparingly and psychology more often, to look at evolutionary models, or big questions like technology and jobs have such long and deep roots among economists – perhaps economics will actually develop in this way.

The one constant that is truly depressing is the low proportion of women included in this high-profile special issue – zero. But I fear that the same exercise now would result in only 1 or 2 women being invited to contribute. The problem isn’t that there are not enough good female economists, for there are plenty. It’s in the social construction of careers in economics and the definition of what makes an economist ‘good’.

Myths and realities of decline?

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Incoming

Looking forward to reading both of these, just arrived for review. [amazon_link id=”0871404494″ target=”_blank” ]The Myth of America’s Decline[/amazon_link] by Josef Joffe is out in January – the blurb says it is a history of declinism that debunks the current wave. [amazon_link id=”1780742665″ target=”_blank” ]The Blunders of our Governments[/amazon_link] by Anthony King and Ivor Crewe has been widely reviewed and sounds excellent. I’ll read it for this blog – a volunteer to review it for the next issue of The Business Economist would be welcome.