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Must-Read: Ryan Avent: Free exchange: A new anthology of essays

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Must-Read: Ryan Avent: Free exchange: A new anthology of essays http://amzn.to/2pYyN2A reconsiders Thomas Piketty’s “Capital”: “The book explores arguments left undeveloped in Mr Piketty’s masterwork… http://www.economist.com/news/finance-and-economics/21722166-book-explores-arguments-left-undeveloped-mr-pikettys-masterwork-new …The Economist… Thomas Piketty… Capital in the Twenty-First Century… advi[sed] to take the analysis seriously, yet to treat the policy recommendations with caution. The book’s striking warning of the creeping dominance of the very wealthy, looks as relevant as ever: as Donald Trump’s heirs mind his business empire, he works to repeal inheritance tax. But “Capital” changed the agenda of academic economics far less than it seemed it might. A new volume of

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Must-Read: Ryan Avent: Free exchange: A new anthology of essays http://amzn.to/2pYyN2A reconsiders Thomas Piketty’s “Capital”: “The book explores arguments left undeveloped in Mr Piketty’s masterwork… http://www.economist.com/news/finance-and-economics/21722166-book-explores-arguments-left-undeveloped-mr-pikettys-masterwork-new

The Economist… Thomas Piketty… Capital in the Twenty-First Century… advi[sed] to take the analysis seriously, yet to treat the policy recommendations with caution. The book’s striking warning of the creeping dominance of the very wealthy, looks as relevant as ever: as Donald Trump’s heirs mind his business empire, he works to repeal inheritance tax. But “Capital” changed the agenda of academic economics far less than it seemed it might.

A new volume of essays reflecting on Mr Piketty’s book, published this month, prods economists to do better. It is not clear they can. After Piketty: The Agenda for Economics and Inequality, edited by Heather Boushey, Bradford DeLong and Marshall Steinbaum, is a book by economists, for economists…. Piketty argued that wealth naturally accumulates and concentrates, so that familial riches are ever more critical to determining an individual’s success or failure in life. The extravagant inequality of the Gilded Age could return if no preventive action is taken…. Despite its 700-odd pages, “Capital” gave important details short shrift. “After Piketty” takes these lacunae in turn, pointing out, essay by essay, how Mr Piketty might have devoted more space to the role of human capital and technological change, the structure of the firm and the rise in outsourcing, sexual inequality, geography and so on….

[The] damning critique [of Piketty]… treats the elasticity of substitution as a meaningful parameter in a well-behaved economy. It may not be. In the most incisive essay in “After Piketty”, Suresh Naidu describes a “domesticated Piketty” who communicates in the language of economics and whose argument hinges on things like the elasticity of substitution… [and] a “wild Piketty” who pays attention to social norms, political institutions and the exercise of raw power. He suggests that r > g is not a theory to be disproved but a historical fact to be explained. And he suggests that the wealthy use their influence to shape laws and society in order to guarantee themselves a better return on their wealth….

Politics is “everywhere and nowhere” in Mr Piketty’s book, as Elisabeth Jacobs notes in her essay. What “After Piketty” reveals is the message lurking within all the undeveloped arguments in “Capital” about politics and ideology. It is that economists set themselves too easy, too useless a task if they can describe how capitalism works only when politics is unchanging…

Bradford DeLong
J. Bradford DeLong is Professor of Economics at the University of California at Berkeley and a research associate at the National Bureau of Economic Research. He was Deputy Assistant US Treasury Secretary during the Clinton Administration, where he was heavily involved in budget and trade negotiations. His role in designing the bailout of Mexico during the 1994 peso crisis placed him at the forefront of Latin America’s transformation into a region of open economies, and cemented his stature as a leading voice in economic-policy debates.

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