Christopher Pissarides

A profile of the Nobel laureate.

More Piketty Readings

1. Jim Hamilton
2. Per Krusell and Tony Smith
3. James Galbraith
4. Update: Debraj Ray
5. Update: Larry Kotlikoff
6. Update: Jason Furman
7. Update: Francis Diebold
8. Update: Ben Mathew
9. Update: Mervyn King
10. Update: Matt Rognlie

The FT takes on Piketty

The Financial Times headline: Piketty findings undercut by errors.
Update: Piketty responds to the FT.

David Autor on Inequality

From a recent interview of the MIT economist (discussing this article):

Q. You are focused on inequality among the so-called “99 percent,” not between the 1 percent and the 99 percent. Why?

A. There’s a real national debate about the significance and causes of inequality. This public debate is dominated by the discussion of the top 1 percent. And the top 1 percent is important, but focusing on the top 1 percent conveys the message that the game is all rigged, that if you’re not in the elite stratum, there’s nothing to shoot for. And that’s just not the case. The growth of skill differentials among the other 99 percent is arguably even more consequential than the rise of the 1 percent for the welfare of most citizens. 

Here’s a concrete way to see it: The earnings gap between the median college-educated two-income family and the median high school-educated two-income family rose by $28,000 between 1979 and 2012. This [shift] — which excludes the top 1 percent, since we’re focusing on medians — is four times as large as the redistribution that has taken place from the bottom 99 percent to the top 1 percent of households in the same period.

Improving Econ 101

Noah Smith says introductory economics needs to be more empirical. I understand his argument, and have some sympathy with it, but I wonder if the substantial change he seems to be proposing is practical.  Economists usually do empirical work with statistical tools that most college freshmen have not yet learned. 

We teachers of introductory economics can and should explain where and why economists disagree. That is part of helping students develop their critical thinking skills.  But I doubt students are in a position to try to evaluate the competing empirical work that shapes the differing views.

In the end, introductory economics is just that: an introduction to the economist's way of thinking.  That means giving students basic concepts--comparative advantage, supply and demand, market efficiency and market failure--that will make them more perceptive readers of the newspaper.

In Inequality Back to the 1920s Level?

Not really, says Gary Burtless, though some pundits would have you think otherwise.

A Defense of High Frequency Traders

By Cliff Asness et al.  Very cogent, in my view.  The bottom line:

In summary, we don't believe HFT profits are excessive or excessively consistent. We censure illegal front running as strongly as anyone, but it has near nothing to do with HFT per se. Canceling orders in the process of providing liquidity is key to any sort of market making, whether HFT or not. We support the right of HFTs, or anyone, to try to guess the direction of the market, using order flow or any other public information. We not only support the right, we celebrate the successful exercise of that right as it adds to public welfare by making markets more efficient and lowering the cost of investing. Lastly, we believe markets are "rigged" in favor of, not against, retail investors.

More on Piketty

1. A comment that questions the historical trends in the capital-income ratio.
2. A comment that questions the proposed tax on wealth.
3. Update: And here is a long commentary from Xavier Sala-i-Martin.  Use the Google translate button near top right to translate into English.

Summers on Piketty

One of the best reviews of the book I have seen.

A Visit to Dartmouth

I will be talking at a public event, along with Jared Bernstein, at Dartmouth on Monday.  If you are in the area and want to attend, information is available here.

Alan Krueger

The Princeton Alumni Weekly profiles the former CEA chair.

Rogoff on Piketty

Here, via Project Syndicate.  A tidbit:

Would Piketty’s followers be nearly as enthusiastic about his proposed progressive global wealth tax if it were aimed at correcting the huge disparities between the richest countries and the poorest, instead of between those who are well off by global standards and the ultra-wealthy?

An Interview with Mark Gertler

Words of wisdom from the NYU macroeconomist.

Very Sad News

A friend at the University of Chicago reports to me that Gary Becker died last night.  He was 83.

Gary was one of the greatest economists of the past half century. You can read about his contributions here.  I did not know him well, but based on every interaction I had with him, it seems that he was a truly nice man as well as a path-breaking scholar.  He will be missed.

Update: The Times obituary.

Media Slant

Click here to read my column in Sunday's NY Times.

VHA Revisited

Advocates of government-run healthcare often point to the veterans health system as a prototype.  For example, Paul Krugman wrote a while back:

that brings me to Mitt Romney’s latest really bad idea, unveiled on Veterans Day: to partially privatize the Veterans Health Administration (V.H.A.).  What Mr. Romney and everyone else should know is that the V.H.A. is a huge policy success story, which offers important lessons for future health reform.

So this story from CNN (hardly a right-wing news source) caught my eye:

At least 40 U.S. veterans died waiting for appointments at the Phoenix Veterans Affairs Health Care system, many of whom were placed on a secret waiting list.  The secret list was part of an elaborate scheme designed by Veterans Affairs managers in Phoenix who were trying to hide that 1,400 to 1,600 sick veterans were forced to wait months to see a doctor, according to a recently retired top VA doctor and several high-level sources. For six months, CNN has been reporting on extended delays in health care appointments suffered by veterans across the country and who died while waiting for appointments and care.

Maybe privatization would solve the problem.  If veterans had vouchers that they could take to competing healthcare providers, they would likely not have had to wait as long.

More Competition

Steve Cecchetti and Kim Schoenholtz are blogging, mainly on issues related to money and banking. 

The blog seems meant to complement and promote their textbook.  Who would ever think to use a blog for such a purpose?

British Healthcare Fact of the Day

"In Britain, even though they're already paying for the National Health Service, six million Brits—two-thirds of citizens earning more than $78,700—now buy private health insurance. Meanwhile, more than 50,000 travel out of the U.K. annually, spending more than $250 million, to receive treatment more readily than they can at home."

Source.