In a note, messrs krusell and smith claim that mr pikettys proposed second fundamental law of capitalism is supported neither by widely. On piketty and capital at steven landsburg the big. Messrs krusell and smith claim that mr pikettys proposed second fundamental law of. Lecture notes for macroeconomics i, 2004 yale university. Jun 02, 2014 krusell and smith lay out the solow and piketty growth models very nicely but perhaps not in a way that is immediately transparent if you are not already familiar with growth models. On other hand, krusell and smith 2014 note that pikettys assumption of a. Critical remarks on pikettys capital in the twentyfirst century. Since 1892, jpe has presented significant research and scholarship in economic theory and practice, publishing highly selective and widely cited articles of current relevance. May 28, 2014 per krusell and tony smith have a new paper on piketty pdf, which i take to be reflecting a crystallization of opinion on the theory side. They say piketty makes an unwittingly extreme assumption about saving that makes his math wrong. Among other interesting and important facts, the book quantifies the evolution of wealth inequality and wealth concentration over time and across a number of countries.
Lecture notes for macroeconomics i, 2004 per krusell please do not distribute without permission. A more sceptical approach from economists can be found in per krusell and tony smith, is pikettys second law of capitalism fundamental. Jun 16, 2014 several economists, including larry summers, tony smith and per krusell, have corrected errors in thomas pikettys book capital in the twentyfirst century. Thomas pikettys recent book capital in the twentyfirst century is a. Dec 30, 2014 i stand by that, even though much of the scholarly discussion of the book has led me to think i was too kind. Dec 23, 2014 the krusell smith criticism seems justified 4 but it could still be consistent with a large rise in the wealthincome ratio from here, especially if prof piketty is right about the variable that.
Thats a very different assumption, and, according to krusell and smith, not at all a plausible one. Robert rowthorn, a note on pikettys capital in the twentyfirst century, cambridge journal of economics, xxxviii 2014. It is krusell and smith 2014 that suffers from mathinesspeople not in control of their models deploying algebra untethered to the real world in a manner that approaches gibberish. Pikettys book capital in the twentyfirst century is, in the authors own words, a book about the history of the distribution of income and wealth. Us personal finance thomas piketty is a french economist whose capital in the twentyfirst century has swept american discourse. Thomas pikettys capital in the twentyfirst century1 is a treatise on how wealth inequality evolves in capitalistic economies. The most pointed scholarly critique was by per krusell stockholm university and tony smith yale. Despite this piketty panic, underlying logic behind the rg theory is not. As krusell and smith point out, the only reason pikettys model tends toward. Six demonstrably false claims in thomas pikettys theory of wealth.
Quantitative macroeconomic models with heterogeneous agents. Per krusell university of rochester, centre for economic policy research, and institute for international economic studies anthony a. Understanding thomas piketty and his critics the heritage. Nominated for the 2015 rogers writers trust fiction prize. For the benefit of the general reader, piketty writes it in the form. Carnegie mellon university how do movements in the distribution of income and wealth affect the macroeconomy. In this column we would like to present one perspective on the book that does not seem to have attracted sufficient attention in the public discussions. He is the director of studies at the ecole des hautes etudes en sciences sociales ehess and professor at the paris school of economics. Dec 22, 2015 thomas pikettys capital in the twentyfirst century quantified the evolution of wealth inequality and concentration over time and across a number of countries.
Pikettys charge if politics is a war by other means, then books often serve as the artillery. Category archive for books at steven landsburg the big. Thomas piketty asserts at the very start of his book that when the rate of return. Yale university and national bureau of economic research i. In order to investigate the effect of the second fundamental law of capitalism on inequality, we include the variable r. Pikettys book and macro models vox, cepr policy portal. Piketty and future inequality the relationship between saving and. The story begins with psmith accompanying his more. Krusell and smith 2014, but in the formulation of capital.
Krussell and smith seem to be treating the second law as an identity. Thomas piketty author of capital in the twentyfirst century. Thomas pikettys capital in the twentyfirst century became the most talkedabout and most critiqued economics book of 2014 before academic. May 18, 2015 paul romer inquired why i did not endorse his following krusell and smith 2014 in characterizing piketty and piketty and zucman as a canonical example of what romer calls mathiness. Quantitative macroeconomic models with heterogeneous agents per krusell. Krusell and smith 2014 also note that pikettys assumption of a constant. The krusellsmith criticism seems justified 4 but it could still be consistent with a large rise in the wealthincome ratio from here, especially if prof piketty is right about the variable that. He is also author of the documentary, credit is for poor people. Rupert psmith or ronald eustace psmith, as he is called in the last of the four books in which he appears is a recurring fictional character in several novels by british comic writer p.
Sep 12, 2014 thomas pikettys capital in the twentyfirst century1 is a treatise on how wealth inequality evolves in capitalistic economies. A schumpeterian model of top income inequality charles i. Piketty wont go away because his book is useful in promoting. Income and wealth heterogeneity in the macroeconomy. The relationship between saving and growth the economist. According to economists per krusell and anthony smith jr. Introduction we emphasize, first, that piketty s predictions are not mere extrapolations from past data but, instead, rest importantly on the use of economic theory. The macroeconomics of top income and wealth inequality jorda. Thomas pikettys recent book capital in the twentyfirst century.
Per krusell and tony smith is pikettys second law of. Pikettys big book of marxiness commentary magazine. In krusell and smith 1998, we in fact studied, as a second leading. Smith, is pikettys second law of capitalism fundamental. Introduction thomas piketty s recent book capital in the twentyfirst century. Piketty takes us on a historical and geographical tour of inequalities in income and wealth. Contrary to what piketty suggests in his book and papers, this.
Piketty 2014 defines r as the real rate of return and uses the historical rate of around 4%5% for his analysis by allowing growth to vary. There are no errors in the formula piketty uses, and it is actually consistent with the very earliest formulations of the neoclassical growth model, but. Per krusell institute for international economic studies, university of gothenburg, centre for economic policy research, and national bureau of economic research anthony a. A native of memphis, tennessee, smith graduated from tennessee state university with a bachelors degree in sociology. Thomas pikettys new book has been widely praised for its empirical. Critical remarks on pikettys capital in the twentyfirst. Piketty, by contrast, assumes that our net saving is a fixed percentage of our net incomes, where net means after subtracting depreciation of our assets. In his book capital in the twentyfirst century thomas piketty combines two distinct.
Smith writes that as the title of the book suggests, it makes predictions about the future. Per krusell and tony smith have a new paper on piketty pdf, which i take to. Coincidentally one of the books im most looking forward to this summer is lev grossmans the magicians land, which i havent read its out. We use cookies to make interactions with our website easy and meaningful, to better understand the use of our services, and to tailor advertising. Piketty s second fundamental law is not an identity or an approximate identity. Capital and ideology is thomas pikettys third major work, after les hauts revenus en france au xxe siecle piketty, 2001 and capital in the 21st century piketty, 2014.
The comparative effect of corruption and pikettys second. Pikettys unintended advice for investors financial times. Some fundamental problems with thomas pikettys capital in. I do, however, trust per krusell and tony smith to have given it a fair reading, because krusell and smith have long track records as diligent and thoughtful scholars. Piketty and future inequality the relationship between saving and growth.
Smith is the author of how to outsmart the credit bureaus and his latest release, the conspiracy of credit. Thus, in this note i want to lay out the differences using the super simple solow model that tyler and i developed in. Jones stanford university and national bureau of economic research jihee kim korea advanced institute of science and technology top income inequality rose sharply in the united states over the last 40 years but increased only slightly in france and japan. Tony smith, a yale university economist, and per krusell of stockholm universitys institute for international economic studies, say that the central aspect of piketty s book is the prediction of a dramatic increase in inequality in this century. It is the most talkedabout and most critiqued economics book of. Although, piketty 2014 denotes by g the long run rate of growth of national income, which combines both increases in the labor force and in technology, krusell and smith 2015 seems to abstract from population growth and, in their analysis of optimal savings, g stands for the rate of growth of laboraugmenting technology, see their. Alex tabarrok reports on a recent paper by per krusell and tony smith that articulates the problem with thomas piketty s socalled second law of capitalism a problem that larry summers claims stems from piketty misreading the literature by conflating gross and net returns to capital. I have not read thomas pikettys book on capital in the twentyfirst century, and therefore cannot possibly have given it a fair reading. Its implausible first because it has extremely odd implications. Take herbert crolys the promise of american life, the foundational text of modern american liberalism. Several economists, including larry summers, tony smith and per krusell, have corrected errors in thomas pikettys book capital in the twentyfirst century. Institute for international economic studies, university of gothenburg, centre for economic policy research, and national bureau of economic research. This column examines existing macroeconomic models of wealth inequality through the lenses of the facts and ideas in pikettys book.
We develop these arguments in detail in a separate document krusell and smith 2014. Thomas piketty s new book has been widely praised for its empirical contribution, but his prediction of rising inequality rests on economic theory. Per krusell and tony smith is piketty s second law of capitalism fundamental. Huhi dont understand more and more of pikettys critics. It is, as piketty makes clear at some length on pages 166170, a longterm asymptotic law. Indeed, i think that, instead, it is krusell and smith 2014 that suffers from mathinesspeople not in control of their models deploying algebra untethered to. The journal of political economy jpe is one of the oldest and most prestigious journals in economics. Smith, is piketty s second law of capitalism fundamental. Piketty on growth and distribution piketty on growth and distribution. It is the most talkedabout and most critiqued economics book of 2014 because pikettys timing was perfect.
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