Friday, February 13, 2015

The answer of Piketty to Acemoglu and Robinson

Thomas Piketty has published in the Journal of Economic Perspectives his own views on some of the debates that have emerged as a result of the success of his book, "Capital in the XXI Century." One of these debates has to do with the role of institutions in economic history. Acemoglu and Robinson, the authors of "Why Nations Fail" had argued that the book by Piketty neglected the role of institutions. I already wrote previously that this criticism was very surprising, because to me the French economist does precisely the opposite: institutions are a key determinant of the degree of inequality in his approach, and also a key component of possible remedies to alleviating inequality. Here is what Piketty has to say:
"However I believe that our approaches are broadly consistent and complementary to one another: they differ in terms of specific institutional content, as well as in time and geographical scope, more than in substance. In some of their earlier work, Acemoglu and Robinson mostly focused upon a relatively specific institution, namely the protection of property rights. In their fascinating book Why Nations Fail, they develop a broader view of institutions and stress the distinction between “inclusive” and “extractive” institutions. This broad concept might certainly include the type of institutions and policies on which I focus upon, including progressive taxation of income, wealth, and inheritance, or the modern welfare state. I must confess, however, that seeking to categorize institutions with broad terms like these strikes me as maybe a little too abstract, imprecise, and ahistorical. I believe that institutions like the welfare state, free education, or progressive taxation, or the effects of World War I, the Bolshevik revolution, or World War II on inequality dynamics and institutional change, each need to be analyzed in a precise and concrete manner within the historical, social, and political context in which they develop. While Acemoglu and Robinson (2012) in their earlier book take a very long-run perspective on the history of the planet (from prehistoric times to the “great discoveries” and the formation of the modern world), I tend to focus on the historical periods and countries on which I was able to collect systematic data, that is, on the 18th, 19th, and especially the 20th centuries (an important period indeed for the formation of the modern social and fiscal state)."

1 comment:

  1. Makes sense.

    But the main point of Acemoglu and Robinson is that the claim "using regression evidence to show that Pikettyís central economic force, the relationship between the interest rate and the rate of economic growth, is not correlated with inequality ... This is not to say that a higherris not a force towards greater inequality insocietyó it probably is. It is just that there are many other forces promoting inequality andour regressions suggest that, at least in a correlational sense, these are quantitatively more important thanrg."