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‘No Empirical Evidence’ for Thomas Piketty’s Inequality Theory

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Re: ‘No Empirical Evidence’ for Thomas Piketty’s Inequality Theory

#51
post #23

Earlier quoted context omitted.

Piketty isn't really talking about "inequality in material incomes" so much as a theory that a small proportion of dynasties tends to accuulate such a large proportion of national resources that the economy ceases to operate like a competitive market and becomes a means for those holding the majority of the wealth to extract rent from those holding the diminishing remainder. That can be a problem even if you find som…

Nearly every assumption in this argument of Piketty's is flawed. Is it only the rich that have capital? What about human capital? What about creative destruction--the entry of new market players? Don't the rich (and their children) often squander their capital? More to the point: look at the evidence of the many rich people around us. Did they build this wealth by banking on r > g, or by putting idea upon idea and cr…

I'm pretty sure that only a minority of rich people are really in the ideas and creation business. If you live in Silicon Valley it might appear different, but globally speaking, the rich tend to fall into the categories of (a) inherited wealth, (b) upper management, (c) non-hard-science knowledge worker types (finance and lawyers).

Yes, r > g is only an aspect for (a), but the Piketty argument also has to be understood as a warning bell. After all, wealth and the resulting political influence make it easier to ensure that mostly (a)-types ever get into (b)- and (c)-positions in the first place. (And the tendency for this has always existed and exists today, just look at the university system in most countries for evidence.)

Re: ‘No Empirical Evidence’ for Thomas Piketty’s Inequality Theory

#52
post #22

Earlier quoted context omitted.

The danger is where inequality in rates of improvement in material outcomes leads to inequality in moral outcomes. To borrow some rather loaded language, the more the 1% can buy themselves legal advantage, the more unjust the world becomes. If the rate of legal advantage is affected by the absolute difference between the 1% and the 99% (which I'd argue is demonstrably true - beyond a certain point you've got regulato…

I think the historical record is against this. Specifically: before the liberal revolution--the liberal idea that all humans are equal, which was truly revolutionary--it would have been unimaginable for a member of the peasantry to even claim equality with some lord, let alone build a legal case and have it heard. Again, it's far from perfect today, but better on many fronts. I imagine that differences will continue…

> the liberal idea that all humans are equal

This is a misconception and not what the alluded revolutionary idea is quoted by in the declaration of human rights. All humans are created equal, and I'm sure that modifier was put in not by accident, even though I couldn't explain the difference.

Point in case, one conclusion seems to be that humans are precisely not equal to each other, everybody's worth is equally indeterminate. Edit: I am biased to say this because human worth is specifically mentioned in this context in the German Grundgesetz (foundation of the law) where it's called Wuerde (dignity) and encompasses more than the capitalist idea of material value.

Re: ‘No Empirical Evidence’ for Thomas Piketty’s Inequality Theory

#53
It seems to me obvious that it is rich people who own shares and property. Therefore if total income from capital grows faster than total income from labour, the gap between rich and poor will grow.

But I have to admit I don't really understand theory behind the opposite view. In particular, the article says "the data shows changes in the savings rate are likely to offset most of the effects of an increase in capital share of national income".

Is this saying that poor people will save more as capital returns grow, and this mostly compensates poor people for the relatively slow growth in wages?

Re: ‘No Empirical Evidence’ for Thomas Piketty’s Inequality Theory

#54
post #29

Many of these kind of "studies" need the author to have actually witnessed at least one or twice how a person, man,woman, children, opening a trash bag looking for food, and then they'd know how the face of a hungry human being looks like.

What would that fix? A big part of modern, first world ideology is that we think the problem is caring. That if only we understood, or cared, the world would be better. People need to care and understand transgender people, or people who have lacked education, or poor people. That if only they cared, we could fix the problem. Dr Martin Luther King jr gave one of the most needed, most important speeches of all time. H…

It's not a dichotomy.

It's true that there are people who have an "if only people were nice" type of outlook on life, and that is indeed naive. The problem isn't that individual people are nasty, it's that the system is set up in a way that favours negative outcomes for many.

The only way to fix the system is politics, and a necessary condition for getting anything done in politics is for people to care.

That said, I agree with you that less complaining and more actual plans would be great. (And especially if the people who complain would then start supporting plans, even if it means that others call them "bad" words like "commie"...)

Re: ‘No Empirical Evidence’ for Thomas Piketty’s Inequality Theory

#55
post #49

Earlier quoted context omitted.

I have no references but common sense. Popper gave the best tool I know to differentiate between proper science and quackery, namely falsification. In order to a theory to be falsifiable, there must be a way to prove the theory incorrect. For example, if I see that the newtonian equation for force, acceleration and mass (F = ma) does not hold, in some circumstances, I am able to falsify the theory. Now, maybe the mos…

Again, is it then also reasonable to dismiss palaeontology as having 0 "scientific content", since it can't use the scientific method either? This is an honest question. (And I am no economist, but afaik, the economists note that "homo economicus" is a simplification. Most every science use simplified models, especially in the first university courses.)

I know nothing about palaeontology. Can you give an example of unfalsifiable claim of palaeontology?

Yes, classical physics is a simplification, but it is a _falsifiable_ simplification, unlike the utility maximizer.

Note that falsifiability has nothing to do with making experiments.

https://en.m.wikipedia.org/wiki/Falsifiability

Re: ‘No Empirical Evidence’ for Thomas Piketty’s Inequality Theory

#56
post #49

Earlier quoted context omitted.

Again, is it then also reasonable to dismiss palaeontology as having 0 "scientific content", since it can't use the scientific method either? This is an honest question. (And I am no economist, but afaik, the economists note that "homo economicus" is a simplification. Most every science use simplified models, especially in the first university courses.)

I know nothing about palaeontology. Can you give an example of unfalsifiable claim of palaeontology? Yes, classical physics is a simplification, but it is a _falsifiable_ simplification, unlike the utility maximizer. Note that falsifiability has nothing to do with making experiments. https://en.m.wikipedia.org/wiki/Falsifiability

Experiments are generally needed to "falsify" claims in physics, chemistry etc. Those are experimental sciences, which can use the scientific method. Mathematics et al can falsify "on paper".

Palaeontology, economics and many other sciences can't do either. Why can you dismiss one out of hand, but not the others?

(I have written this quite obvious point 3-4 times now.)

Edit: Your own wikipedia reference have a link to the "scientific method". You should read it. Well worth the trouble. It is arguable the basis for most everything we know about the world.

Re: ‘No Empirical Evidence’ for Thomas Piketty’s Inequality Theory

#57
post #42

Earlier quoted context omitted.

> It's also not like Piketty's book was peer-reviewed either... Curious, what is exactly a peer-reviewed book? Could you give me some examples of one?

> Curious, what is exactly a peer-reviewed book? Could you give me some examples of one? Here's an article that describes the problems of the lack of fact-checking in books compared to the fact checking that some US newspapers do. http://www.theatlantic.com/entertainment/archive/2014/09/why... > Readers might think nonfiction books are the most reliable media sources there are. But accuracy scandals haven't reformed…

No, I absolutely agree and this is one of the reasons I do not read non-fiction books.

I was just wondering what a peer-reviewed book is.

Re: ‘No Empirical Evidence’ for Thomas Piketty’s Inequality Theory

#58
post #36
post #7

Earlier quoted context omitted.

And scientific content in most economists is zero. It's 80% ideology + 20% math used to prove their point based on ideological assumptions. Which is also why economics and economists managed to ever make 0 predictions for anything more complicated than the most basic of models, and have failed time and again to predict real world outcomes. And then they get in bed with power, as advisors, ministers, etc -- talk about…

> Which is also why economics and economists managed to ever make 0 predictions for anything more complicated than the most basic of models, and have failed time and again to predict real world outcomes. I think present-day economics is at the point where the science of history was at the end of the 19th - the beginning of the 20th century, i.e. most of them still believe that they somehow can predict the future base…

Currently governments are pumping 180 billion [2] per month into the economic system (ignoring what China is doing, and not yet including fresh BoE stimulus, also not including many smaller asset purchase programs by smaller countries, so it could easily be double or even triple that figure, but let's say 200 billion/month as a wild guess and lower bound, and that's disregarding that some very large parts of the economy, like saudi aramco or the chinese steel industry almost as a whole, are pretty much also government intervention, not "real" private companies), with lots of talk of increasing it. For comparison, company profits for all of the US economy are 410 billion per month [1] (and that's a flawed number that's bigger than it should be). The US economy is about 25% of the world economy.

So given that governments are injecting 12.5% of the worldwide economy by printing money ... unless you were willing to predict 8 years ago that global governments were going to provide this utterly ridiculous level of stimulus, control such a huge portion of total worldwide economic activity in addition to government spending ... you couldn't have seen it coming.

Economic theory works. Issue is, at the moment economic theory is saying that there should be a global trade collapse. There is, but it's impact is masked, because central banks are taking over serious swaths of the economy (by now close to 50% of government bonds, an extremely large market that rivals the global private sector in size).

And of course, it looks a lot like governments fixing the economy has created a feedback loop that requires ever more government control over the economy, and is rapidly increasing (increased from 3% to 12.5% of the global economy in about 6 months, in what very much looks like an exponential increase).

And every month, stopping the collapse requires more money, just like economics theory predicts. Of course, that means for the economy that, barring large scale bankruptcies (which are coming anyway of course), the only data that matters is what governments will do to further disrupt markets.

Accepted economic theory predicts a boom-bust cycle. Every single bust cycle governments worldwide attempt to stop the bust. Every time they try to take control over the market, and every time they use more extreme measures to do so. Every single time they fail, and every time it happens again, they try again. Economic theory will win out, but everybody has to -once again- lose faith in the government first. That's rapidly coming, but not quite here yet. And this means that every time again, everything looks progressively weirder as the bust approaches, and every time again, government interference leads to people questioning economic theory.

Why ? Because the alternative is telling a LOT of people that they're about to lose their jobs, their homes and generally their standard of living. It only tends to be like a 10% worse standard of living for 2-4 years or so (on average), but every time again people refuse to do this. I wouldn't want to be a pensioner in this upcoming cycle though. May God help them, although that was true for past cycles too. Still looking like this one is more serious.

Reality is that today is no different. Governments will lose this battle against the bust part of the cycle just like they've lost this very same battle about 30 times since the Industrial revolution.

[1] http://www.tradingeconomics.com/united-states/corporate-prof... [2] http://www.zerohedge.com/news/2016-07-26/global-central-bank...

Re: ‘No Empirical Evidence’ for Thomas Piketty’s Inequality Theory

#59
post #16

Earlier quoted context omitted.

It is a classic conspiracy theory to say that most of a scientific field is a fraud from (political) ideology. (That is, your statement presupposes most people of the field are either idiots, fanatics or crooks.) I'd be interested if you can back that up? (With non ideological sources, of course.) Edit: Considering the numbers, there are going to be some true conspiracy theories... and mass hypnosis from unverifiable…

I don't think conspiracy theory is the right word for it. The world isn't ever that neat :) His statement, when you refine it appropriately (which is not always done in an online forum), only presupposes that most people of the field who are visible to the public are "either idiots, fanatics or crooks". I wouldn't phrase it quite so strongly (and for what it's worth, the grandparent didn't either), but it's easy to s…

>> I wonder what you would even accept as a "non-ideological source"?

Since no references, which I asked for, have been presented at all, that is not an interesting problem...

>> the grandparent didn't [phrase it strongly] either

Uh, "scientific content in most economists is zero." is not strong?

>> All that said, it's not like the economics profession is an entirely lost cause. There are people like Dean Baker and James Galbraith who manage to occasionally bring alternative voices to the public.

Why do you assume that "alternative voices" are better than the research consensus of a field?

(Yes, I make myself intentionally stupid here. I realize the answer probably is because you like the alternative voices better...? :-) )

>> Since economics is mostly about money, even slightly bending the public's perception on what scientific economic consensus is can have an extreme payoff via influencing public policy.

Certainly you'll find paid research in any field with policy influences. Smoking comes to mind. Please make it likely that most of the [economy] field is corrupt, as the GP argued?

Re: ‘No Empirical Evidence’ for Thomas Piketty’s Inequality Theory

#60
post #2

Umm, send this to peer review. Here's the link to Góes actual paper( http://www.imf.org/external/pubs/ft/wp/2016/wp16160.pdf ) published as an IMF working report which doesn't even have the backing of the IMF/managers/etc. I doubt it'd get published if reviewed. Really, out of the centuries of data they could have pulled in, they chose to use 1980 through 2012? Return on the capital is not ~1%....flawed assumptions,…

Why did they select 1980 - 2012. This is narrow. I'm not an economist but I can see an attempt to compare 12 years of selective data against 200 years of data is suspicious.
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