Wednesday, April 23, 2014

Thomas Palley — The accidental controversialist: deeper reflections on Thomas Piketty’s “Capital”

Tom Palley names it. This is nothing new based on what heterodox economists have been saying for some time. What is new is that a neoclassical economist is saying it in neoclassical terms — which is a strength in getting heard but a weakeness in terms of solutions, since solutions need to include institutional changes that neoclassical economists ignore.
... it is interesting to ask why Piketty has broken through where others have failed. In my view, one reason is political. Mishel, Galbraith, and Wolff are progressive left economists. Though their books are not theoretical or comprehensive policy treatments of the problem, their implicit theoretical logic emphasizes economic and political power....
The important point is mainstream economics has difficulty acknowledging work from such sources because to acknowledge is to legitimize. That creates the strange situation in economics whereby something is not thought or known until the right person says it. This pattern applies to income inequality, the macroeconomics of debt deflation, the economics of international capital controls, and Phillips curve inflation theory, to name a few instances.
These observations lead to a second concern which is, after the initial fuss dies down, Piketty’s book may end up being gattopardo economics that offers change without change. The public discourse on income and wealth inequality has been increasingly owned by progressive economists, both because of their early identification of the issue and the logical coherence and empirical consistency of their explanation. That has placed mainstream economics on the political defensive. Piketty provides a mainstream neoclassical explanation of worsening inequality in the first section of his book. That creates a gattopardo opportunity whereby inequality is folded back into mainstream economic theory which remains unchanged....
Thomas Palley
The accidental controversialist: deeper reflections on Thomas Piketty’s “Capital”

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