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Comment by reckoner2 | Hacker News Reader

Some thoughts: While working in finance I was able to talk to many people who's work was related to economics. Employees at banks and brokerages, governments and regulator bodies. Most had heard of Piketty, and many agreed with his basic premises (r>g, and all it entails). His reach actually surprised me.

But I also had contact with academics, and like the article said, it's not so much that academics are refuting Piketty, but that they simply aren't studying the same problems that he is talking about. From what I've been told, a lot of academic work in economics is focused on incredibly unique and specific problems. It isn't "fashionable" to be studying something so broad and perhaps abstract as inequality.

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Dean Baker (warned of the housing bubble since 2002, "Bernie 2016") gave the best response to Piketty that I heard from a left-wing economist:

* Piketty's data is correct

* him collecting it was a harder feat than one might think

* attributing r>g to some unchangeable nature of capitalism is wrong because "capitalism is infinitely malleable" (every market is regulated somehow, things change a lot depending for instance on whether you do or don't have patents)

* Piketty's policy prescription (a global wealth tax) is unimplementable and harmful in the sense of getting all the attention instead of people focusing on his correct assessment that r>g and then on realistically implementable policies which could change this.

Normalizing the concept of a wealth tax is productive even if it's unimplementable. The right has used the same approach by having think tanks promote flat consumption taxes and zero corporate tax rates.

If nothing else the absence of a theoretically desirable wealth tax serves as a justification for progressive income taxes and higher capital gains taxes.

Isn't taxing income making r>g?

A wealth tax isn't unimplementable because of political will but because a lot of assets are illiquid, hard to price, easy to hide, easy to move to another country (hence the call for a global tax, but what if a few countries defect?) or a combination.

As to approaches: "the left" if there is such a thing successfully campaigned for a full confiscation of property, a 100÷ wealth tax if you like, in huge chunks of the world - I don't see a weakness in persuasive ability there. Wasn't a great idea though. A smaller wealth tax is a better idea, but still not great. Baker who one can agree or disagree with has better policy ideas, or at least better thought-out and consistent ones IMO.

On the topic of that last point, Dr. Mazzucato proposes the alternative of greater licensing of government developed technology as a more realistic alternative in her book "The Entrepreneurial State". I wrote a summary here if you're curious: https://medium.com/@seanaubin/book-review-the-entrepreneuria...

So what does Dean Baker suggest?

That's a great perspective, thank you for sharing.

I think it can be summarised as: Inequality has a marketing problem.

No one's buying equality. Those who can afford equality don't need it and those who need it can't afford it.

> Those who can afford equality

The most ardent fight against tyranny and overlords comes from aristocrats who wish to be equal - but just to each other, not to the common herd (thank you very much, goodbye my good man).

The real problem is, while many complain about 'inequality' no one has consistently defined what 'equality' looks like in a way that can be replicable, implementable, or prescriptive.

What is this world in which income / wealth / opportunity is 'equal'? Is this a world we want to live in? What are the rules of this world? What steps need to be taken on the policy front to achieve this world? Are those steps that the anti-inequality elites are willing to undertake?

I found this via HN when it was published, the TL;DR being that people aren't really opposed to inequality, they're opposed to unfairness. https://www.nature.com/articles/s41562-017-0082

The relevant chunk of the abstract:

> There is immense concern about economic inequality, both among the scholarly community and in the general public, and many insist that equality is an important social goal. However, when people are asked about the ideal distribution of wealth in their country, they actually prefer unequal societies. We suggest that these two phenomena can be reconciled by noticing that, despite appearances to the contrary, there is no evidence that people are bothered by economic inequality itself. Rather, they are bothered by something that is often confounded with inequality: economic unfairness.

Not that this actually answers your question... ;)

This is an excellent piece and does answer my question actually. People simply conflate fairness and equality and that seeps into the discourse because it makes for easy platitudinal soundbites. Of course, taken to its logical conclusion, equality looks like this[1]. No one actually wants that world.

[1]http://www.tnellen.com/cybereng/harrison.html

> I think it can be summarised as: Inequality has a marketing problem.

Not as much as a marketing problem, but has populist political organizations that use it to advance their superficial socialist causes.

My undergrad was primarily in Econ, and it was a pretty common saying that "Nobody is a Macroeconomist."

After Economics moved hard away from Political Economy and into Mathematics some time ago, that kind of broad economics is rare so not really considered the same way or has the same amount of academic discussion.

But why? Doesn't that shut out a range of economic theories from the discussion? Classic political economy and its critiques (Marx et al.) I feel are still relevant and useful. If they are not to be studied in economics, then where?

Yes in fact it does. Those are all considered "heterodox" economics and are basically ignored.

They are moreso discussed in sociology and philosophy and to a limited extent graduate courses in economics.

Sociology tends to have more differentiation in what sources are taken as 'canon'. You can probably still find Marxist sociologists, although the field has somewhat collapsed since the 80's.

>It isn't "fashionable" to be studying something so broad and perhaps abstract as inequality.

I think it is more the fact that it isn't wise to study highly politicised topics until you gain some status.

Well, Piketty has been hired by LSE to work for their Inequality institute. Possibly an exception to the rule. http://www.lse.ac.uk/website-archive/newsAndMedia/newsArchiv...

That basic premise seems flawed to me for two reasons. First is that r is like a first deriative (of the asset value) and g as a second derivative (gdp being the first derivative of the total assets of a country, while gdp growth the seocnd), so they are not direcly copareable. The second is that r is very directly measurable, while the gdp and gdp growth have huge uncertainties and inconsistencies. Here's an example: the GDP of Bulgaria. In 1996 it was about $10BN, and in 2016 about $50BN. It grew in 20 years by 5, which means an annualized rate of 8.4%. However if you look at the historical gdp growth then the average for the last 20 years is about 1% (see [1] and [2]). Why the disconnect? I don't know, but if someone tells me that r>g because g is 1%, I take that with a grain of salt.

[1] http://www.tradingeconomics.com/bulgaria/gdp [2] http://www.tradingeconomics.com/bulgaria/gdp-growth

I don't mean to come off as harsh, but your reasons are wrong. Piketty isn't some random guy who threw together some numbers and came up with a theory. His work is extensively researched and reviewed. He's thought of and responded to every objection you made. If you are interested in the topic then you should definitely read his book.

Take a look at your numbers again. You have made multiple mistakes. Your 8.4% annualized rate is wrong - You can't just take the start and end points to calculate an average. Plus, you are plugging quarterly data into yearly calculations.

Your whole argument is nothing more than the fallacy of argument from authority.

Researchers aren't flawless, and they do make mistakes, even in the very methodology they adopt. That's why peer review is a thing, and academia subjects their work to peer review.

Hell, there's a very good reason why the Royal Society's motto is "take nobody's word for it."

Yeah, exactly, peer review. If you read your parent's argument again, they explicitly mention that.

My greatest issue with Pinketty's work is that he fails to address the fact that compound growth is not commutative (meaning that it is always better to concentrate higher growth rates earlier on, and then benefit from then comparatively ”coast along” at lower growth rates thereafter). This means that average returns is quite senseless as a topic: one needs to take into account the temporal distribution thereof.

That GDP growth is quarterly (or something, I didn't ponder it much).

They have annual data that makes more sense.

http://www.tradingeconomics.com/bulgaria/gdp-growth-annual

You ar right, it's not 1%, it's 2.89% (from your link). Still, a big distance from 8.4%.

In most of the years from 1998-2008 it was over 6%, with a spike above that.

And in most of the years after 2008 it was well below 5%, with some years of negative growth. Also, during the period 1998-2008, the GDP increased from about $15BN to about $55BN, representing an annualized rate of about 14%.

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