Week links (8)
Another edition of the best from the rest in commentary, op-eds and blogs:
(1) Beaudry, Galizia & Portier: "Reconciling Hayek's and Keynes' views of recessions", VoxEU. Can this be done? Apparently it can. Just recall the ideas of Austro-Keynesianism.
(2) Tyler Cowen: "How is income inequality correlated with wealth inequality", MargRev
Source: Marginal Revolution"Wealth inequality and income inequality may diverge for at least three reasons. First, savings rates may differ across societies. Second, locally available rates of return may differ. Third, the ups and downs of mobility may mean high income inequality in a given year but overall lower levels of wealth inequality."
(3) Piketty's very detailed response to the FT at VoxEu. He goes figure by figure, handling one mistake at a time.
"I welcome all criticisms and I am very happy that this book contributes to stimulate a global debate about these important issues. My problem with the FT criticisms is twofold. First, I did not find the FT criticism particularly constructive ... corrections proposed by the FT to my series (and with which I disagree) are for the most part relatively minor, and do not affect the long run evolutions and my overall analysis, contrarily to what the FT suggests. Next, the FT corrections that are somewhat more important are based upon methodological choices that are quite debatable (to say the least)."
(4) The NYT sums up the whole FT vs Piketty debate by telling the reader everything he/she needs to know.
The Piketty quarrels don't stop there however;
(5) Scott Sumner takes his first two punches - at his own blog Money Illusion questioning not only the logic behind Piketty's argument on wealth distribution, but also the supposed straightforwardness of the data he uses (mostly the wage data in 19th century Britain); while the second punch comes from a guest post of his at the EconLog blog, where he discusses Piketty's misunderstanding of Kuznets.
(6) Alex Tabarrok contrasts Piketty's model to Sollow's model on MargRev:
"As g falls Piketty predicts a much bigger increase in the K/Y ratio than does Solow. In Piketty’s model as g falls from .03 to .01 the capital to output ratio more than doubles! In the Solow model, in contrast, the capital to output ratio increases by only a third. Remember that in Piketty it’s the higher capital stock plus a more or less constant r that generates the massive increase in income inequality from capital that he is predicting. Thus, the savings assumption is critical"(7) On the monetary front, the Fed critics have assembled at a conference at the Hoover Institute, where John Taylor, applying his own monetary rule, claims that the Federal Funds rate should have already been higher. WSJ blog.
(8) And finally, an interesting educational text from the WSJ entitled: "The Wrong Way to Treat Child Geniuses". Just a quick note:
"One of the most painful aspects of teaching mathematics is seeing my students damaged by the cult of the genius. That cult tells students that it's not worth doing math unless you're the best at math—because those special few are the only ones whose contributions really count. We don't treat any other subject that way. ...... And losing mathematicians isn't the only problem. We need more math majors who don't become mathematicians—more math-major doctors, more math-major high-school teachers, more math-major CEOs, more math-major senators. But we won't get there until we dump the stereotype that math is worthwhile only for child geniuses."