Tuesday, June 10, 2014

Another arrow for the Economics of Piketty

From the quiver of former Bain capitalist Ed Conard;
What puzzles me is how Piketty, after apparently recognizing [Simon] Kuznets’ failure to see the circumstantial nature of his not-so-universal “truth,” failed to recognize the circumstantial nature of his own supposed “law [that income equality was a 'U' shaped phenomenon].” Businessmen and chess players recognize something frequently lost on economists: “universals” are predominantly probabilistic generalizations that are dependent on the likelihood of the circumstances that make them true. A queen, for example, is more valuable than a pawn because in most circumstances it is so. Nevertheless, there are cases where a pawn is more valuable. Except in the hard sciences, generalizations may help to guide our decisions, but circumstances ultimately determine the truth.
Unusual for a businessman, Conard is conversant with the academic literature;
Scott Sumner offers a clue to Piketty’s naiveté. Sumner complains that Piketty sees Kuznets’ theory as intentionally crafted propaganda—“a product of the Cold War,” according to Piketty–rather than a well-intended theory that unwittingly overlooked the circumstances that made it true. After rereading Kuznets, Sumner concludes, “Nothing could be further from the truth. If anything, Piketty himself seems more like the scholar who makes excessive claims for his model.”
As well as a formidable debater.

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