Thursday, March 26, 2015


Comments on Brad Delong's comments on Piketty and C21C. 

Brad Delong: "Now everybody has their complaints.

Everybody has 10-20% of the argument that they disagree with, and perhaps another 10 to 20% that they are unsure about. But it is a different 30% for everybody. There is not consensus but majority agreement that each piece of the book is roughly correct. And so there is rough near-consensus that the argument of the book is, broadly, right."

--- Brad Delong is here implying that he is at least 60% on-board with what Piketty writes in "C21C", and up to 90% agreement in some passages. That's pretty good, e.g. Chairman Mao said that Stalin was 70% good, so if Piketty is from 60% to 90% good, and "C21C" is on average 60+90 /2 = 75% good, according to the self proclaimed neo-liberal Brad Delong, then Piketty's work is laudable and commendable.

Brad DeLong: "what are the serious complaints":

Brad Delong: "That Piketty has no real theory of what determines the rate of profit, and so doesn't have a real theory of wages either."

--- What makes politicians decide the distribution schemes and legislation's that they do? What makes voters vote for different politicians? We're not there yet, although a few biologist, a few more neurologists and even more psychologists think they have some decent broad theories of what makes people induce the economic distribution percentage-properties that the economy has.

Brad Delong: "That Piketty tacks back-and-forth between a market value--the capitalized current value of all claims on income that are not brow-sweat-- and a physical quantity conception of capital in a way that is not legitimate. That leads his argument astray in places, particularly in that it hides the fact that the capital accumulation that makes the rich so much richer also strengthens, or ought to strengthen, the bargaining power in the labor market of the not-so-rich, and so increased relative immiserization of the masses goes along (or ought to go along) with increased absolute prosperity."

--- Mr. Delong, the agents in the labor market of the not-so-rich are not Bayesian agents. What you are speaking of happened in the Nordic countries, and to a smaller degree some other places, but not in the US, as we can observe...! And it is not a logical sequitur what you assume.

Brad Delong: "That Piketty's framework conceptualizes the issues in an unclear and counterproductive way by speaking of "tendencies" that can be counteracted, rather than doing the normal MIT economics thing--calculating a steady-state equilibrium growth path to which the economy converges over time, and then calculating how that equilibrium steady-state growth path can and does jump in a comparative-statics should the background economic conditions that determine where it is located shift."

--- There is no equilibrium on a macro level, has not been for very long time. And what you are talking about is way too useless, futuristic and philosophical a task, we might have a, (conceptually speaking), an "equilibrium" or a macro economic balance in 200 years. Then most of the world or the US should have, approximately the political economy that Norway has today...! :-} 

Brad Delong: "That Piketty wants to assume that the rate of profit has a floor below which it will not fall--and so increased capital accumulation certainly reduce the labor share of income and may lead to little or no trickle-down to real wages from the increased productivity that ought to flow from increased wealth accumulation--but this argument needs to be spelled out."

--- But we don't know what that is, or Piketty does not know what it is, and it will fall in the future. It is certainly above 0%.

Brad Delong: "That the true historical drivers of the process are not the rate of profit r and the growth rate of the economy g that Piketty speaks of, but rather (1) the economic destruction of the relative wealth of the old European aristocracy as its landed rents collapsed under the impact of competition from the new regions of European agricultural settlement in the New World; and then (2) the rise of urban landed wealth in the form of location as population growth and economic density have outran transportation technologies, and congestion has become a first-order economic cost."

--- The true historical drivers of any process that is related directly or indirectly to the economy the last 13000 years, is the anthropogenic causes.

Brad Delong: "the nonserious complaints":

"That Piketty's argument that the rate of profit has a floor needs to be spelled out. this is essentially (3) in a different form: the argument that accumulation might lead to more wealth equality but less income inequality and much higher real wages is a serious and important one. Piketty does not believe it. But what I see as his failure to deal with it head-on and convincingly is the biggest hole in the book."

 --- If that happens, or if any scenario happens in the future, it will be an anthropogenic economic scenario, the (political) (macro) economy is not just decisions made by the board members of corporations&firms, and the labor agents, but mostly by the politicians in the national assemblies around the world.
How probable is it that most Geo-economic-jurisidictions will become social capitalistic in the future? Brad Delong, do you foresee the Scandinavian Model of Capitalism in the near or far future??


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