Facts less than meets the eye
On June 16th Professor Steven Durlauf from the University of Wisconsin-Madison presented his paper “Capital in the Twenty-First Century: A Review Essay” to an audience of scholars at the 11th joint Research Seminar on Diversity and Development of the International Center for the Study of Institutions and Development HSE and NES Center for the Study of Diversity and Social Interactions.
On June 16th Professor Steven Durlauf from the University of Wisconsin-Madison presented his paper “Capital in the Twenty-First Century: A Review Essay” to an audience of scholars at the 11th joint Research Seminar on Diversity and Development of the International Center for the Study of Institutions and Development HSE and NES Center for the Study of Diversity and Social Interactions. Professor Durlauf’s paper provides a critical review of economist Thomas Piketty’s now classic book Capital in the Twenty-First Century. In his presentation, Professor Durlauf praised the general research agenda on inequality that has been reenergized by the work of Piketty and his co-authors, while at the same time offering trenchant criticism of the book itself. Professor Durlauf’s goal is not to undermine the findings, which he believes are correct, but to provide a stronger case in favor of Piketty’s underlying argument about growing inequality.
Methodologically Professor Durlauf argues that the evidence in the book is problematic, because of strong assumptions about long run historical economic phenomenon and its inability to distinguish between wealth and capital. These issues are compounded by identification problems, which cast the causal inferences derived into question. Together, these methodological issues challenge both the stylized facts of the book and some of its conclusions. Theoretically, Professor Durlauf identified problems with Piketty’s broader theoretical framework, as well as the micro-economic claims it rests on. Taken together, this results in an incoherent view of income distribution. Finally, Professor Durlauf discussed the policy recommendations made by the book, the objectives behind them, and their potential efficacy. Professor Durlauf argues that the lack of clear normative underpinnings, weak descriptions of state of the art economics research and inattentiveness to political constraints make the recommendations easily dismissible. He then briefly identified several potentially more viable solutions.
The paper presentation was followed by a robust question and answer period in which seminar participants and Professor Durlauf discussed the specifics of the review article, as well as more general issues surrounding Capital in the Twenty-First Century. In particular, audience members asked him to clarify his position vis-à-vis other prominent review pieces on the book, as well as on some of the specifics of his arguments in light of recent findings both in Russia and abroad.