Yes, Brad DeLong has written an aggressive answer to our short note. ....
As an illustration of our points, we provided an example calculation where we assigned values to parameters-Among them the rate of depreciation. DeLong's main point Is that the rate we are using is too high (we use 10% in one place and 8% in another place in the paper where we actually perform some calculations about how the capital-to-output ratio responds to changes in the growth rate in different Assumptions about the saving behavior).
[Bold in the above by HSIB]
It is, however, disappointing That DeLong's main point is a detail in the count Aimed Mainly, it seems, at discrediting us by making us look like incompetent macroeconomists. He does not even comment on our main point; maybe he hopes That his point about the depreciation rate will draw attention away from the main point. Too bad if That happens, but what can we do.Well, we'd say you're on the right track, Prof Krusell; i.e. pointing out just how dishonest DeLong is being.
First: if the net rate of saving remains positive as the economy's growth rate falls toward zero, as Piketty assumes in his second fundamental law of capitalism, the gross saving rate in the economy must approach 100%.Thus Capital becomes the entire economy! Which is true whatever (positive) depreciation rate you use. DeLong has a Phd from Harvard, surely he knows this simple fact.
DeLong ... mentions That Piketty is aware of our main point-that his theory of saving is a non-standard one with implausible implications as growth rates cases-as if we were not aware of this. We have read Piketty's book and papers, and so we of course know that Piketty knows; our note is thus not written for him but instead, as we say in the introduction to the paper, for all of Those Who might be puzzled by the striking result That he DERIVES from his non-standard theory, namely, That the capital-to -output ratio will go to infinity as growth approaches zero.So, Krusell and his Yale colleague Tony Smith know it, Thomas Piketty knows it. Why doesn't Brad DeLong know it?