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Thomas Piketty’s Capital in the 21st Century, in 20 minutes (2014) [video]

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Re: Thomas Piketty’s Capital in the 21st Century, in 20 minutes (2014) [video]

#31

Post by LeanderK »

VodkaHaze wrote: post #2

In the interest of giving the fuller discussion: Picketty's book has been out for a while now. It is good economics. It deserves rightful praise, and scrutiny. Acemoglu and Robinson's answer[1] is also good economics. Digestible podcast form here [2]. It purports that Picketty's "r>g" model is flawed. It also deserves a reading. All of this is part of a larger discussion, which C21 started. r > g doesn't seem to expl…

One also has to keep in mind that we try to approximate or explain reality. I currently do a lot of maths and we can prove theorems from our axioms. Something is a certain way and not the other, here is my proof! End of discussion.

Economics doesn't have axioms and therefore no provable proof. If somebody has a good idea and data to support it it's an good argument, but it doesn't mean it will repeat or even that we now have solved the problem. If somebody has a better idea backed by better (or even the same!) data he also has a good argument and we now have a bad time with no best argument, but 2 conflicting.

Re: Thomas Piketty’s Capital in the 21st Century, in 20 minutes (2014) [video]

#32

Post by trapperkeeper79 »

smallnamespace wrote: post #28
patrickg_zill wrote: post #22

My problem with this book is that he doesn't deal at all with the gold standard. During the timeline of his survey, the currencies were almost all gold-backed and by the end, are all fiat currencies. He completely ignores it, yet at the least he should have explained why it was not relevant.

This is a sort of facile answer, since there are a lot of details to prove, but in short, because monetary policy over the long run should not have any effect on the real rate of return r and economy-wide growth rate g , which is what the book's argument hinges on. The two big differences between the gold-backed system before the 70s and afterwards are: - We picked fixed pegs to gold, meaning exchange rates were fixe…

Some people believe central banks are essentially printing money right now (since 2008, so for nearly a decade). Why has inflation not picked up?

Re: Thomas Piketty’s Capital in the 21st Century, in 20 minutes (2014) [video]

#34

Post by lumberjack »

VodkaHaze wrote: post #5
debt wrote: post #3

This is perfect. That book Capital is like 700 pages.

The fact that the book is a best seller when its intended audience is really people with a graduate education in economics tells me that most people bought is as a signal of smartness (or as an honest effort to inform oneself, but without actually slogging through the book)

Don't be too elitist. How many who posted a comment on HN right now actually have the education to comprehend the book? I'm pretty sure it's no higher percentage than that of the general population and yet here you all are commenting on it as if you know what you're talking about.

Re: Thomas Piketty’s Capital in the 21st Century, in 20 minutes (2014) [video]

#35

Post by sdenton4 »

refurb wrote: post #19
trapperkeeper79 wrote: post #11

Wonderful talk. One thing he called for was a wealth tax, which is something that makes complete sense but is going to be very unpopular. On the otherhand, he also calls for progressive income taxes (something that is reported by the media and an easier pill to swallow) - in my country, Canada, progressive income taxes are not the answer IMHO. We didn't have as much inequality for education (i.e. lots of decent Unive…

The one thing I think people forget is that since wealth is a function of time (and age), there is intronsic inequality that you can't get rid of. Looking at wealth by age bracket. It is strongly correlated, which shouldn't surprise anyone. The longer you work the more you save. A 20 year old is going to have a lot less wealth than a 60 year old. I'm not sure that will ever change.

Sure, but there's a strong sense that the bottom rungs of the ladder are progressively more out of reach for the younger generation.

Housing is a great example. Instead of getting into the initial mortgage, we're paying rent for longer, and have a harder time coming up with the money for the down payment... In part because the rent is, to borrow a phrase, too damn high.

"Millennials are delaying all kinds of major life decisions, like getting married and having kids, so it makes sense that they would also delay buying a home," said Zillow Chief Economist Dr. Svenja Gudell. "We know Millennials value homeownership and want to buy. The next challenge will be figuring out how they can save for a downpayment and qualify for a mortgage, especially while the rental market is so unaffordable all over the country. The last hurdle will be finding a home they like amidst very tight inventory, especially among starter homes."

And then there's education. The low-cost public universities have turned into massive debt generators.

The entry points to the wealth curve are more and more beset by the vampires of finance and their rent-seeking necromancers, summoning up undying debt to prey on unsuspecting youth. Inequality is growing wider as a result.

Re: Thomas Piketty’s Capital in the 21st Century, in 20 minutes (2014) [video]

#36

Post by smallnamespace »

trapperkeeper79 wrote: post #32
smallnamespace wrote: post #28

Earlier quoted context omitted.

This is a sort of facile answer, since there are a lot of details to prove, but in short, because monetary policy over the long run should not have any effect on the real rate of return r and economy-wide growth rate g , which is what the book's argument hinges on. The two big differences between the gold-backed system before the 70s and afterwards are: - We picked fixed pegs to gold, meaning exchange rates were fixe…

Some people believe central banks are essentially printing money right now (since 2008, so for nearly a decade). Why has inflation not picked up?

'Long run' in economist-speak means multiple decades, generally.

But to answer your question directly, it's because the financial crisis and the massive deleveraging it caused effectively sucked a lot of money from the world economies. In the absence of QE we would've seen a painful, grinding deflation like Japan went through during the 90s.

Central banks can print money to increase the monetary base, but that's directly offset by 1) the large destruction of financial value during the crisis and 2) the fact that people are just taking that money and sitting on it. The net effect is less leverage in the system and not much effective change in liquidity.

Note that less leverage is a good thing in this case -- it makes banks less likely to go bankrupt, and makes a repeat of the '08 crisis much less likely.

http://www.investopedia.com/articles/investing/022615/why-di...

Re: Thomas Piketty’s Capital in the 21st Century, in 20 minutes (2014) [video]

#37

Post by VodkaHaze »

lumberjack wrote: post #34
VodkaHaze wrote: post #5

Earlier quoted context omitted.

The fact that the book is a best seller when its intended audience is really people with a graduate education in economics tells me that most people bought is as a signal of smartness (or as an honest effort to inform oneself, but without actually slogging through the book)

Don't be too elitist. How many who posted a comment on HN right now actually have the education to comprehend the book? I'm pretty sure it's no higher percentage than that of the general population and yet here you all are commenting on it as if you know what you're talking about.

I didn't say it requires such an education; I said it was intended for those people.

Anyone can read it, really, it's just going to be a slog for most people. Like reading some famous philosophy books (Sartre or the big name German philosophers comes to mind); it's not that anyone lacks requisites to read those book,s just that they're a slog without.

Sartre sits on my shelf unread for that reason; I imagine C21 sits on a lot of shelves for the same reason.

Re: Thomas Piketty’s Capital in the 21st Century, in 20 minutes (2014) [video]

#39

Post by VodkaHaze »

bko wrote: post #29
VodkaHaze wrote: post #9

Earlier quoted context omitted.

r > g doesn't actually explain that much in terms of wealth inequality. See Acemoglu and Robinson paper in my other reply. There is evidence that intergenerational mobility is going down, but not so much at the tippy top of the ladder. More on the "if you are born from lower class parents, you are likely to be lower class at 40" side. Early childhood education is shown to help with the lower rungs of the ladder; most…

Right, wealthy parents are able to provide more opportunities for their offspring. But hasn't that always been true? I imagine the education available to the least fortunate today is much better than the education available to someone in the lower class from 100 years ago. Capitalism has allowed for better high end services, like better teachers and tutors, but overall information and knowledge has been democratized.…

> my experience is that everyone, more or less, is better off from generation to generation, at least in material terms.

That is correct. Even when people make claims like "middle class income hasn't grown in the last xyz years" they're basing it on statistical sleights of hand, see [1].

> The problem I see is that when we talk about social mobility, we always talk about relative classes, in which case there will always be 1/5th of the population in the bottom fifth.

Right, but the question is more about opportunity. Like if you created a Markov transition model, what are the probabilities of going [1/5]->[2/5] (or [3/5], etc.)

> Right, wealthy parents are able to provide more opportunities for their offspring. But hasn't that always been true?

Sure. But the point is that we aspire for our society to be meritocratic. That is we'd like it to be better to be born smart than rich. Of course that's never been the case, but we want to isolate the "why".

It's not necessarily even about opportunities. If you make college free, for example, it ends up being a subsidy on the children of the tiers [4/5] and [5/5] (playing loose with facts here) because, even if you isolate parent's wealth they __still__ end up in college more often.

Things that are difficult to measure (like motivation and noncognitive skills) are built at a young age, and a good environment is needed to foster that.

> I imagine the education available to the least fortunate today is much better than the education available to someone in the lower class from 100 years ago

I know it's been the case in Canada [2], I've been told it's not in the US, but I'm unsure it's really the case (turns out you need fairly sophisticated statistical models to measure it properly).

[2] http://link.springer.com/article/10.1007%2Fs00181-009-0275-9

[1] https://www.minneapolisfed.org/publications/the-region/where...

Re: Thomas Piketty’s Capital in the 21st Century, in 20 minutes (2014) [video]

#40

Post by VodkaHaze »

tmnvix wrote: post #23
trapperkeeper79 wrote: post #11

Wonderful talk. One thing he called for was a wealth tax, which is something that makes complete sense but is going to be very unpopular. On the otherhand, he also calls for progressive income taxes (something that is reported by the media and an easier pill to swallow) - in my country, Canada, progressive income taxes are not the answer IMHO. We didn't have as much inequality for education (i.e. lots of decent Unive…

Exactly. We should be taxing wealth and not income (or roughly speaking, unearned instead of earned income). Taxing productive activity is literally counter-productive. This will only become a more pressing issue once automation (esp. of the transport industry) gets into full-swing. Eventually we won't have a choice in the matter. There are a whole host of current issues that are culminating in wealth and income dist…

    > We should be taxing wealth and not income (or roughly speaking, unearned instead of earned income).
You'll see most economists advocating a consumption tax, instead.

    > quantitive easing pumping up asset prices while doing nothing for the real economy
Both the "pumping up asset prices" and "while doing nothing for the real economy" is extremely disputable. It's kind of pompous of you to think you know better than the team of PhDs at the Fed, too.

    > global corporate tax avoidance
The corporate tax should be 0%. No, I'm not kidding; hear me out.

Corporations aren't people; they don't ever actually pay taxes. People pay taxes. Yes, I know corporations are legal entities, but they're owned and managed by people, somewhere down the line. Those are the people the corporate tax is intended to target.

Presumably, the "goal" here is to get the corporations with scale economies, negotiation power, etc. to be taxed and use this to redistribute economic gains.

But what happens is that instead the burden of these taxes fall onto the shoulders of non-management workers in the firms and the people who buy what the firm produces. Because the incidence of a tax is indirectly distributed by a mechanism which depends itself on the negotiation power of the actors in the system.

That is the exact opposite group of the original intention (you'd want the burden to be as much as possible on managerial staff and shareholders -- eg. the people running the corporations). Also, the tax is distortionary and incentivizes all sorts of unproductive practices.

Of course, the tax would have to be replaced with something. That something should target the people owning and running the companies to make sure the tax burden is actually bore by them.

Consumption taxes can do that.

    > the rise of the low-paid 'gig' economy and under-employment; fewer high paid jobs all demanding workers with ever higher levels of education (unattainable-for-many)
What you'll see with automation is a polarization of the labor market [1]. So what you said is not false, but not spot on. There are going to be more of both low and high paying jobs, and fewer middle paying jobs.

    > A crisis is brewing. They leave us no option but to make changes.
Things are better than they've ever been, on average.

I don't think we should make any sweeping revolution, but smart, targeted changes. Of course, not all of those are pollitically feasible (imagine politically advocating for a 0% corporate tax replaced by a consumption tax and targeted taxes on shareholders and CEOs/board members).

[1] http://economics.mit.edu/files/9835

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