Saturday, February 01, 2014


May be the next big thing in economics: Capital in the Twenty-First Century by Thomas Piketty; the blurb has links to some reviews. There is also a long review by Branko Milanovic. Some of the influemtial American thinkers seem to disagree: "“Part of his interpretation I do not share. Piketty argues that there is a natural tendency for high inequality in ‘capitalist’ economies (the term capitalist is not my favorite) and that certain unusual events (world wars, the Great Depression and policy responses thereto) temporarily reduced inequality. Then both earnings inequality and inequality between capital and labor have been reverting back to their ‘normal’ levels. I don’t think that the data allow us to reach this conclusion. All we see is this pattern of fall and rise, but so many other things are going on. It is consistent with what Piketty says, but it is also consistent with certain technological changes and discontinuities (or globalization) having created a surge in inequality which will then stabilize or even reverse in the next several decades. It is also consistent with the dynamics of political power changing and this being a major contributor to the rise in inequality in advanced economies. We may be seeing parts of several different trends underpinned by several different major shocks rather than the mean-reverting dynamics following the shocks that Piketty singles out.” according to Acemoglu. More of his and collaborator's views in Democracy vs Inequality "Overall, our results suggest that democracy does represent a real shift in political power away from elites and has first-order consequences for redistribution and government policy. But the impact of democracy on inequality may be more limited than one might have expected). US-centric discussion in Economist's View of Acemoglu-Robinson post. There seems to be problems with decentralization too. According  to a new paper (via Chris Blattman): "We posit that administrative unit proliferation occurs where and when there is a confluence of interests between the national executive and local citizens and elites from areas that are politically, economically and ethnically marginalized. We argue further that although the proliferation of administrative units often accompanies or follows far-reaching decentralization reforms, it likely results in a recentralization of power; the proliferation of new local governments fragments existing units into smaller ones with lower relative intergovernmental bargaining power and administrative capacity" 

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