Thomas Piketty explains why the world is ripe for ‘participatory socialism’ — Marcus Baram interviews — Thomas Piketty

Transcript of an interview about Thomas Piketty's latest book,  Capital and Ideology.

Fast Company
Thomas Piketty explains why the world is ripe for ‘participatory socialism’
Marcus Baram interviews Thomas Piketty

Tyler Cowen — *Capital and Ideology*, by Thomas Piketty

Ha ha. Libertarian-Austrian economist criticizes a left-leaning economist for being "highly partisan" in an analytic book that is about the socio-economic effects of ideology.

Marginal Revolution
*Capital and Ideology*, by Thomas Piketty
Tyler Cowen | Holbert C. Harris Chair of Economics at George Mason University and serves as chairman and general director of the Mercatus Center

Capital in the 21st Century by Thomas Piketty — Book Review by Michael Roberts

A Marxian economist looks at Piketty.

Bella Caledonia
Capital in the 21st Century by Thomas Piketty
Book Review by Michael Roberts

Cross posted from Brave New Europe.

Thomas Piketty’s New Book — Ramanan

Piketty coins a new term, the "Brahmin left."

The Case for Concerted Action
Thomas Piketty’s New Book
V. Ramanan

Thomas Piketty’s New Book Brings Political Economy Back to Its Sources — Branko Milanovic

In the same way that Capital in the Twenty-First Century transformed the way economists look at inequality, Piketty’s new book Capital and Ideology will transform the way political scientists look at their own field.

ProMarket — The blog of the Stigler Center at the University of Chicago Booth School of Business
Thomas Piketty’s New Book Brings Political Economy Back to Its Sources

Branko Milanovic | Visiting Presidential Professor at City University of New York Graduate Center and senior scholar at the Luxembourg Income Study (LIS), and formerly lead economist in the World Bank's research department and senior associate at Carnegie Endowment for International Peace

James K. Galbraith — Piketty's World Inequality Review: A Critical Analysis

My new essay examines the question from three points of view: the coverage provided by tax data in the world economy, the consistency of tax data with other sources of information on income inequality, and the peculiarities of tax-based measurement of inequality in the United States. It goes on to make a comparison with measures drawn from other forms of administrative data—specifically payroll records, used by the University of Texas Inequality Project—which are generally more consistent with records of inequality measured in household surveys than are the WIR’s tax records.

In brief summary, the review shows that by comparison with payroll and survey data, available records from tax files are relatively sparse, and biased toward wealthier countries and those that were once British colonies, which imposed income tax. It shows that tax data are far less consistent with survey and payroll records than are the latter two with each other. And it shows that even within the United States, a country with good tax records by world standards, changes in tax law distort the WIR’s measures of changes in the top income shares, while a misunderstanding of the nature of low-income tax filers in the US leads to a dramatic but nonsensical claim that the earnings of the bottom 50 percent of Americans have “collapsed” in recent decades. 

Overall, the review casts doubt on claims by the authors of the World Inequality Report to have produced major advances in the study of world economic inequality, and documents that many of the findings touted in the Report as new and unprecedented have in fact been reported in the literature for years, even decades in some cases....

INET

Piketty's World Inequality Review: A Critical Analysis

James K. Galbraith | Lloyd M. Bentsen Jr. Chair in Government/Business Relations and Professor of Government at the Lyndon B. Johnson School of Public Affairs, The University of Texas at Austin

Thomas Piketty, Emmanuel Saez. Gabriel Zucman — Distributional National Accounts: Methods and Estimates for the United States

This article combines tax, survey, and national accounts data to estimate the distribution of national income in the United States since 1913. Our distributional national accounts capture 100% of national income, allowing us to compute growth rates for each quantile of the income distribution consistent with macroeconomic growth. We estimate the distribution of both pretax and posttax income, making it possible to provide a comprehensive view of how government redistribution affects inequality. Average pretax real national income per adult has increased 60% from 1980 to 2014, but we find that it has stagnated for the bottom 50% of the distribution at about $16,000 a year. The pretax income of the middle class—adults between the median and the 90th percentile—has grown 40% since 1980, faster than what tax and survey data suggest, due in particular to the rise of tax-exempt fringe benefits. Income has boomed at the top. The upsurge of top incomes was first a labor income phenomenon but has mostly been a capital income phenomenon since 2000. The government has offset only a small fraction of the increase in inequality. The reduction of the gender gap in earnings has mitigated the increase in inequality among adults, but the share of women falls steeply as one moves up the labor income distribution, and is only 11% in the top 0.1% in 2014. JEL Codes: E01, H2, H5, J3....

The Quarterly Journal of Economics May 2018
Distributional National Accounts: Methods and Estimates for the United States

Thomas Piketty, Emmanuel Saez. Gabriel Zucman

Sophie Hardach — Here are 3 facts you need to know about inequality and populism

Why are democracies around the world failing to curb rising inequality? What explains the ascent of populist parties and politicians? In a recent paper, French economist Thomas Piketty argues not only that inequality and populism are linked – but that both can be explained by dramatic shifts in the traditional two-party system that favour different elites....

1. The rise of the “Brahmin Left”
2. The persistence of the “Merchant Right
3. Where does this leave poor and less educated voters? ...

World Economic Forum
Here are 3 facts you need to know about inequality and populism
Sophie Hardach

Oscar Jorda — The rate of return on everything

Important.

The rate of return on capital plays a pivotal role in shaping current macroeconomic debates. This column presents findings from a new dataset covering returns of major asset classes in the advanced economies over the last 150 years. The data offer new insights on several long-standing puzzles in economics, and uncover new relationships that seem at odds with some fundamental economic tenets.

VOX - CEPR's Policy Portal

The rate of return on everything
Òscar Jordà, Katharina Knoll, Dmitry Kuvshinov, Moritz Schularick, Alan Taylor 02 January 2018

Here is the link to the paper if you wish to pursue it further.

Here is the open-source database.

JORDÀ-SCHULARICK-TAYLOR MACROHISTORY DATABASE

See also

Economists have provided detailed analyses of the economic basis of international currency status, but they have paid less attention to the geopolitical underpinnings. This column sheds light on the geopolitical premium enjoyed by the US thanks to its security alliances and ‘dollar diplomacy’.

Mars or Mercury? The geopolitics of international currency choice
Barry Eichengreen, Arnaud Mehl, Livia Chiţu

Related

Counterpunch
The Petro-Yuan Bombshell

Pepe Escobar

Marshall Steinbaum — Why Are Economists Giving Piketty the Cold Shoulder?

Important.

Marshall Steinbaum catches us up on what's happened since the publication of Piketty's Capital in the 21st Century three years ago. Actually, lots. 

But the economics profession has largely ignored it since it involves distribution and the economics profession doesn't consider distribution to be relevant to economic analysis or policy formulation. Distribution is assumed to be the result of marginal product of capital and marginal product of labor. So, in aggregate everyone deserves what they get.

Boston Review
Why Are Economists Giving Piketty the Cold Shoulder?
Marshall Steinbaum | Fellow and Research Director at the Roosevelt Institute

Zac Tate — Capitalism is losing support. It is time for a new deal.

The financial crisis has led many to question the legitimacy of capitalism. The verdict, 10 years on, has not been favourable. In an opinion poll by YouGov, three-quarters of German adults, two-thirds of Britons and over half of Americans believe that, “the poor get poorer and the rich get richer in capitalist economies”.

Their sense of injustice is not only a reaction to bank bailouts, years of austerity and corporate scandals. The challenge is fundamental. There is a growing awareness in the rich world that most of the benefits of technology and globalization flow to people who own investible capital and to the well-educated, while the costs are borne by unskilled workers, local producers and people who have little property and savings.

The problem, however, is not capitalism itself. Instead, the issue lies with policies that extended the role of the free market beyond sensible limits. These have undermined the essential bargain between labour and capital, and pushed those with few assets into precarious working lives.

Rawer forms of capitalism are unsustainable if too many people do not have capital. Restoring faith in the system requires making amends, and rethinking how capitalism creates and distributes value....

Here we go again. These are the issue that Keynes faced at the time of the Great Depression. He came forward to save capitalism from socialism by moderating it.

This article is a useful backgrounder.

In this situation, demands for fairness have centered around two ideas. Either there must be a significant redistribution of wealth so that everyone has a fair stake in the economy. Or policymakers must reintroduce protections against market forces for those without the insurance of investible capital. Thomas Piketty, in his bestselling book Capital, advances the first solution; Dani Rodrik, in Straight Talk on Trade, promotes the second.

Each of these should be considered as parts of a new deal on capitalism. But there is also a third strand that looks to the future and responds to the thirst for something new. It says that capitalism itself must be redesigned. Private enterprise and public policy need to be realigned to the creation of public value and this requires changing how we think about economics....

In 2016, Mazzucato published Rethinking Capitalism, a collection of articles from distinguished thinkers who challenge the conventional wisdom on a range of topics from fiscal policy to inequality. It concludes that many of our economic theories are not only inadequate but lead to poor policies that often have harmful impacts.

Mazzucato argues that to nurture public value, the state has a key role to play. The state uniquely has the time-horizon and the financial and organizational capacity to create and shape new markets. Embedded in the innovation process with firms and research institutes, it can also influence both the rate and direction of technological development.…

Unfortunately, no mention of MMT and the fiscal space its understanding opens up to use.

World Economic Form
Capitalism is losing support. It is time for a new deal.
Zac Tate | Economic strategist, Hottinger Group

See also

A Goldman Sachs banker [Bobby Vedra] has likened the UK under Jeremy Corbyn to “Cuba without the sunshine” in a nervy attack on the Labour leader at the Super Investor private-equity conference in Amsterdam.

The London Economic
UK would be like “Cuba without the sunshine” under Corbyn – says fat cat banker

Jack Peat

Diane Coyle — Inequality, revisited

Review of responses to Thomas Piketty's Capital.

There have been a few essay collections recently responding to the splash created by Thomas Piketty’s Capital in the 21st Century.

The Enlightened Economist
Inequality, revisited
Diane Coyle | freelance economist and a former advisor to the UK Treasury. She is a member of the UK Competition Commission and is acting Chairman of the BBC Trust, the governing body of the British Broadcasting Corporation

Leonid Bershidsky — Piketty Zeroes In on Putin's Pain Point

Russian ex-pat Leonid Bershidsky is blowing holes through Western narratives that are out of touch with Russian reality and heavily influenced by Western russophobia.

This raises the question of whether the current Western sanctions against Russia strike at the heart of the Russian system or merely pretend to do so. Since the sanctions were introduced, no Western government has made a meaningful effort to investigate the provenance of hundreds of billions of dollars in Russian offshore assets. No significant asset freezes have taken place. The money is still out there, to be invested inside or outside Russia, in the service of its "perceived national interest" or otherwise (Putin would like to get his hands on some of it, too, but it doesn't belong to his cronies).

A Western effort to track down that money and make it available to a post-Putin, democratic Russia could potentially be a game-changer. But it would require far more work, and probably a lot of uncomfortable revelations about Western business and politics. The current sanctions regime is simply not intended to open that can of worms.

Bloomberg View
Piketty Zeroes In on Putin's Pain Point
Leonid Bershidsky

Austin Clemens — The once and future measurement of economic inequality in the United States

A slew of research into economic inequality replete with serious looking graphs may give the impression that measuring inequality in the United States is a solved problem. This is misleading. Inequality is still measured incompletely because existing U.S. government statistics do not attempt to match their estimates to the National Income and Product Accounts. NIPA is the source of the most reported and well-understood economic statistics such as the nation’s Gross Domestic Product and quarterly GDP growth figures.

Because existing estimates of economic inequality are not pegged to NIPA, they don’t account for all sources of income. They may exclude, for example, fringe benefits provided by employers such as employer-provided health insurance and retirement benefits, government transfers such as supplemental nutrition assistance or the child tax credit, government services such as public education, and tax expenditures such as the home mortgage tax deduction and tax breaks for employer-provided insurance. These exclusions, big and small, make many existing estimates of inequality fundamentally incomparable to our most well-established measures of economic growth....

Important analysis from the POV of stock-flow consistency follows. Efforts are underway to improve measurement to bring estimates of income in line with national income accounting in order to remove the inconsistencies arrive at a better understanding of income and wealth distribution in the US.

The ability to look at the geographic distribution of inequality and at slices of income within different income groups teases the possibilities of a more robust project to disaggregate the National Income and Product Accounts statistics that are currently the most referenced statistics of economic progress in the nation. Devoting federal resources to the project could allow us to track inequality not only by income bands, but also by age, geographic location, gender, ethnicity, and type of income.

WCEG — The Equitablog
The once and future measurement of economic inequality in the United States
Austin Clemens

Steve Roth — How Do Americans Get Rich? (And Stay Rich?)

Wealth is generally conceived as a stock that is increased by the flow of income. But some wealth grows by itself, for example, equity prices based on market cap and real estate based on land rent. While interest is considered a type of income and is booked periodically (and is taxable in the period), asset appreciation that increases wealth is not considered income but capital gains and it is not booked (or taxed) until it is realized  even though it results in actual wealth accrual. Steve Roth poses some questions about this.

A huge aid to answering that question arrived last month. Gabriel Zucman, Emmanuel Saez, and Thomas Piketty (PSZ) released one of the most important pieces of economic research in the last century. Their Distributional National Accounts (DINAs) reveal the distribution of national income to different income classes, wealth classes, age groups, and genders (and potentially different races, etc. etc.). This has been unavailable in the national accounts, and as a result it’s absent in most macroeconomic empirical work.…

But impressive as they are, the DINAs don’t fully answer the question of how Americans accumulate wealth. Because the DINAs only tally income, and income doesn’t include households’ holding (or “capital”) gains on stock portfolios, real estate, etc. Income does include much “property income” — dividends, interest, etc. That’s income from owning things. But it’s not everything that households receive from ownership. Holding gains figure large in that picture.

Any investor will tell you: cap gains are a big part of their wealth accumulation. Total return — dividends plus capital gains — is the measure that most savvy stock-market investors care about, long-term (and that fund managers like to tout, loudly). And much of Americans’ retirement saving — especially middle-class Americans — is accrued through capital gains on their homes.

The DINAs’ central goal is to match income as presented in the national accounts, and to reveal a multidimensional pyramid of distributional data underneath that income measure. A deeply worthy goal. But as a result, the DINAs can’t and don’t reveal the whole picture of household wealth accumulation (change in assets and net worth), or its distribution.…

Wealth accumulation greatly exceeds saving from income, pretty much always and everywhere, over very long periods. And holding gains are not a small part of wealth accumulation, especially for already-wealthy households....

Evonomics
How Do Americans Get Rich? (And Stay Rich?)

Steve Roth | Publisher of EvonomicsSae

Math Problems

Assessing this is beyond my math chops to assess, but it is an interesting criticism of the use of math in economic by two math guys. 

Somewhat wonkish, but all verbal explanation. No math, although some familiarity with the context is required. Even without knowing the details, anyone should be able to catch the drift of these relatively short posts without being familiar with the references. 

The claim is that "mistakes were made."

Nassim Nicholas Taleb Blog
Inequality and Skin in the Game

Nassim Nicholas Taleb, scientific adviser at Universa Investments

This was posted in 2011 but it is still relevant.

Rick Bookstaber Blog
A Crack in the Foundation: An error that has wended its way through economics for 77 years

Rick Bookstaber | Research Principal in the Office of Financial Research

Heiner Flassbeck — Thomas Piketty, neoclassical economics and reality

Short and incisive. 

flassbeck economics international

Thomas Piketty, neoclassical economics and reality
Heiner Flassbeck

Barkley Rosser — The Revenge Of Joan Robinson: Capital Theory Controversies Revive

It was just two years ago that Thomas Piketty's book, Capital, made the best seller lists. Right now considerable attention is being paid to Anwar Shaikh's voluminous magnum opus, Capitalism. Both of these books take as their central issue that of the underlying forces driving secular trends in income distribution, particularly the division between wage incomes and profit or interest-based incomes.

Curiously, Piketty's theory remains firmly in the neoclassical camp regarding the questions raised by the old Cambridge, England school. He notes those controversies, but more or less dismisses them, perhaps reflecting the influence of being at MIT for a long period of time, even as he mocks excessive mathematical abstraction of much of modern growth theory. Jamie Galbraith and others, including Shaikh, have taken Piketty to task for his dismissal of the issues raised by those old controversies,…

Shaikh is an old fan of Sraffa's and a participant in the original debates. While he also does not present most of his theory as drawing on these old arguments, his approach is much closer to it in flavor and atmosphere, even if he eventually draws more heavily on modern econophysics methods. These fit nicely into his more Marxist approach, even as he downplays Marx. But, of course, it was Marx who more sharply posed these questions regarding the nature of capital and how it affects income distribution, as well as power distribution, within societies.…

Econospeak
The Revenge Of Joan Robinson: Capital Theory Controversies Revive
J. Barkley Rosser | Professor of Economics and Business Administration James Madison University

Thomas Piketty — Panama Papers: Act now. Don't wait for another crisis

You knew this was coming.

The Guardian
Panama Papers: Act now. Don't wait for another crisis

Thomas Piketty

Nick Johnson — Wealth inequality and asset prices: a critique of Piketty

It's the asset inflation.

The Political Economy of Development
Wealth inequality and asset prices: a critique of Piketty
Nick Johnson