Economists and economics 2014

Written by  //  May 4, 2014  //  Global economy  //  No comments


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With 2014, a new face arrives to tweak economic thinking and provoke commentary from every possible economist spectrum; then it turns out that he also has a skeleton or two in the closet

Domestic abuse allegations haunting French neo-Marxist economist du jour, Thomas Piketty
(National Post) There comes a moment in the life of many a great economist when he (it is usually a he, often French) becomes famous due to a trashy tabloid scandal.
It happened when IMF chief Dominique Strauss-Kahn was arrested, later cleared, for assaulting a hotel maid in New York, which likely cost him the French presidency as more sexual escapades were exposed.
It happened twice to the transatlantic heartthrob monetary historian Niall Ferguson, first when he left his wife for the anti-Islamist firebrand Ayaan Hirsi Ali, and again when he said John Maynard Keynes, the great macroeconomic theorist, was gay, childless and “effete,” and thus selfish and insensitive to future generations.
So it is now with Thomas Piketty, the neo-Marxist economist du jour whose new book on inequality, Capital In The Twenty-First Century, has inspired left-leaning politicos from French President Francois Hollande and the British Labour Party to Justin Trudeau’s economic star Chrystia Freeland.
On the weekend, it emerged Mr. Piketty was once arrested, held and accused, though not charged, with domestic violence, making him the latest bright light of the dismal science to endure tabloid debasement arising from his sex life.
It is a juicy story for a country still reeling from the ill-fated love affairs of its president, not least because Mr. Piketty’s alleged victim, whom he dated until early 2009, is Aurélie Filippetti, then a Socialist Party spokesperson, now Culture Minister of France. …
Financial Times managing editor Robert Shrimsley … sketched the nine stages of popular attention, from “buy in,” when big thinkers feel they must discuss him, to adoption by politicians and pundits, through backlash and counter-offensive, into petty arguments about who has actually read the thing. From there, it progresses through boredom into disassociation, in which “even supporters begin to be embarrassed to refer to him.”
The historical scandal from his love life makes for a particularly modern stage ten.
The Economist explains: Thomas Piketty’s “Capital”, summarised in four [actually, three] paragraphs

3 May
… it is perhaps not surprising that we have only very recently become aware of the existence  of  the new French intellectual darling Thomas Piketty (described by The Guardian as a “rock-star economist”) and the furore created by his best-selling book Capital in the Twenty-First Century. [At 685 pages, it may well be best-selling, but we wonder about the claim that its “success indicates that this conversation is spilling into backyard barbeque and pub table discussions, as well.”] Paul Krugman is lavish in his praise “Piketty has written a truly superb book”, while, on the other hand,  Tim Worstall  writing in Forbes  argues that It’s Impossible To Benefit The Worker By Taxing Capital “the effect of taxing either capital or the returns to capital will be to lower the amount of capital applied to labour, leave said labour less productive than it would otherwise be and thus leave wages lower than they would otherwise be. Sure, the workers who receive the booty stripped from the capitalist will be better off for a while but over time the workers’ in the future will be poorer than they would have been.”  The Daily Beast offers a different perspective: Today’s Wonky Elite Is in Love With the Wrong French Intellectual. (From the Invitation for Wednesday Night #1678)

30 April
J. Bradford Delong: The Right’s Piketty Problem
(Project Syndicate) In center-left American communities like Berkeley, California, where I live and work, Piketty’s book has been received with praise bordering on reverence. We are impressed with the amount of work that he and his colleagues have put into collecting, assembling, and cleaning the data; the intelligence and skill with which he has constructed and presented his arguments; and how much blood Arthur Goldhammer sweated over the translation.
To be sure, everyone disagrees with 10-20% of Piketty’s argument, and everyone is unsure about perhaps another 10-20%. But, in both cases, everyone has a different 10-20%. In other words, there is majority agreement that each piece of the book is roughly correct, which means that there is near-consensus that the overall argument of the book is, broadly, right.
Unless Piketty’s right-wing critics step up their game and actually make some valid points, that will be the default judgment on Piketty’s book. No amount of Red-baiting or French-bashing will change that.
28 April
Capital in the Twenty-first CenturyHow to write a Thomas Piketty think piece, in 10 easy steps
I know, it must feel like you’re the only person who hasn’t weighed in on Thomas Piketty’s “Capital in the 21st Century.” Don’t worry: You, too, can join the Nobel laureates, Pulitzer winners and assorted big thinkers reviewing, analyzing and explainering Amazon’s top-selling book. Simply follow these 10 steps on how to write your very own Piketty review, just like the experts:
1. Tour de force it up.
“Piketty’s ‘Capital in the 21st Century’ is an intellectual tour de force, a triumph of economic history over the theoretical, mathematical modeling that has come to dominate the economics profession in recent years.” (Steven Pearlstein, Washington Post)
“. . . magnificent, sweeping meditation . . . a tour de force of economic modeling . . . an awesome work.” (Paul Krugman, New York Review of Books)
“As a data-gathering exercise, this book is unquestionably a tour de force . . .” (Kevin Drum, Mother Jones)
2. Mention Alexis de Tocqueville.
15 April
Kemal Dervis: The Future of Economic Progress
The nature and measurement of economic progress should involve a new social contract that allows societies to manage the power of technology so that it serves all citizens. Working, learning, enjoying leisure, and being healthy and “productive” should be part of a continuum in our lives, and policies should be explicitly aimed at what facilitates this continuum and increases measured wellbeing. The trends underpinning widening inequality will have to be counteracted using many policy instruments, with tax regimes and life-long, inclusive, and affordable education and health care at the center of the effort to ensure equity and social mobility. Though the quality of human lives can still be greatly improved, even in the advanced countries, focusing on aggregate GDP will be less helpful in achieving this goal.The questions surrounding future economic growth are becoming clearer. But we are only at the start of the process of creating the new conceptual framework needed to enable national and global policies to advance the cause of human progress.
(Project Syndicate) Slowly but surely, the debate about the nature of economic growth is entering a new phase. The emerging questions are sufficiently different from those of recent decades that one can sense a shift in the conceptual framework that will structure the discussion of economic progress – and economic policy – from now on.
The first question, concerning the potential pace of future economic growth, has given rise to serious disagreement among economists. … the “new technologists.” argue that we are at the beginning of a fourth industrial revolution, characterized by truly “intelligent machines” that will become almost perfect substitutes for low- and medium-skill labor. These “robots” (some in the form of software), as well as the “Internet of things,” will usher in huge new productivity increases in areas such as energy efficiency, transport (for example, self-driving vehicles), medical care, and customization of mass production, thanks to 3D printing.
Second, there is the question of income distribution. In his instantly famous book, Thomas Piketty argues that fundamental economic forces are fueling a persistent rise in profits as a share of total income, with the rate of return on capital constantly higher than the rate of economic growth. Moreover, many have observed that if capital is becoming a close substitute for all but very highly skilled labor, while education systems need long adjustment times to supply the new skills in large quantities, much greater wage differentials between highly skilled and all other labor will cause inequality to worsen.
The third question concerns the employment effects of further automation. As was true in previous industrial revolutions, human beings may be freed from much “tedious” work. There will be no need for cashiers, call operators, and toll collectors, for example, and less need for accountants, travel or financial advisers, drivers, and many others.
Finally, there is the question of climate change and possible natural-resource constraints, issues that have become more familiar over the last decade. Will these factors impede long-term growth, or can a transition to a clean-energy economy fuel another technological revolution that actually increases prosperity?

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