Alex Tabarrok interprets Thomas Piketty’s model of wealth and income dynamics in terms of a “super-simple” Solow growth model with the steady state requirement that investment is equal to depreciation. And he concludes on that basis that Piketty is committed to the idea that the economies he is modeling always invest in sufficient amounts to offset any depreciation, prior to any additional consumption and any additional saving....
As I have indicated previously, my strong suspicion is that this is a quite wrong-headed approach to understanding what Piketty is up to, and that any attempt to read Piketty as putting forward some kind of steady state equilibrium growth model distorts his argument...
My suggestion is that people throw out most of what they think they know about Piketty based on their adaptation of the pre-existing models they are carrying around in their heads, and build up Piketty’s model from scratch. The ingredients are all there in the text.Rugged Egalitarianism
What Is Piketty’s Model?
Dan Kervick
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