Posts Tagged Book Reviews

Pieria: Capital in Piketty’s ‘Capital’

I have a new post on Pieria, where I finally get round to commenting on Thomas Piketty’s Capital in the 21st Century. My focus is on capital itself, how Piketty defines this and whether or not critics such as Jamie Galbraith are right to attack him for his choice of definition:

An important but perhaps under-discussed aspect of Thomas Piketty’s Capital in the 21st Century is Piketty’s definition of capital itself, and the implications this has for his thesis and its critics. Capital is a notoriously tricky to define concept, and many have taken issue with Piketty’s definition and the framework he builds around it. Typically, the implication is that a more Correct understanding of capital leads to vastly different conclusions to Piketty’s, especially with regards to his conclusions on inequality.

The verdict is that Piketty’s definition of capital is a lot more nuanced than critics make out, and typically (though not always) their critique just reflects a pet peeve of theirs, whether this is human capital, the CCCs or what have you. It’s not that Piketty’s definition is ‘correct’, or that it chimes well with other historical usages of the term (such as Marx’s); it’s merely that Piketty’s own definition is sufficient for showing what he wants to show: the dynamics of inequality under capitalism.

I’m also not really sure about Paul Krugman’s contention that Piketty “relies mainly on conventional, mainstream economics” – sure, he uses some mainstream concepts, but begrudgingly, and only as one angle of support for his broader historical, political and statistical analysis. This analysis stands or falls apart from frameworks like the production function, marginal productivity theory or the Solow Growth Model, even if some economists are eager to interpret it entirely within such frameworks. The fact is that while Piketty’s work cannot be construed as purely ‘heterodox’ or ‘mainstream’, it’s definitely far closer to how economics should look in the future: holistic, empirical, and using mathematics only when needed. Hopefully economists of all stripes can recognise this instead of focusing too much on unimportant details.

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On Pieria: Defending Lefty Books

I’m in Pieria, taking a brief look at the (often contentious) debate surrounding three books: The Spirit Level, Chavs, and The Shock Doctrine. It’s split into 3 parts, and you can start here:

Over the past few years, there have been some big hitting books from the left criticising inequality, capitalism and ‘free market’ economics or neoliberalism. Naturally, these books have received a lot of criticism from the right. However, sometimes it seems that this criticism is overzealous: an attempt not merely to question the book, but discredit it entirely, and accuse the authors of various misrepresentations of facts and people along the way. Now, while it’s true that some arguments or ideas are essentially ‘just wrong’, and that some proponents of certain ideas can be intellectually dishonest, the frequency with which these accusations are made is alarming, and I believe they are often mistaken.

These books definitely have their flaws. Jones and Klein are both journalistic accounts, which means that they tend to spin things a certain way (Jones refer to TSL‘s thesis as “irrefutable”, which is obviously an exaggeration’). Wilkinson & Pickett’s case is actually stronger than reading their book would have you believe, and they miss some opportunities to really slam dunk the point home, which I found frustrating. In any case, all 3 books are worth your time and are much better than most of the material dedicated to refuting them.

PS I am now going on holiday for a week, so expect little to no activity.

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Debunking Economics: Closing Notes

This is my final post on Steve Keen’s Debunking Economics, just to close the series and give some thoughts on the book as a whole.

The main aim of blogging Keen’s book was really to provide a platform for people to discuss the numerous inconsistencies (whether purported or real) that have arisen in neoclassical economics over time. Generally a Google of Keen will, predictably, contain outright (often vitriolic) dismissals from economists, coupled with some cheer leading from those on his side. Rarely, in my experience, will you find much substantive discussion of his ideas. Hopefully I’ve communicated these ideas in a (relatively) digestible way, and they can now be discussed openly.

I would encourage people who have enjoyed the series to read the actual book. My presentation of each chapter was necessarily shortened, omitting certain prongs of criticism: discussions of the history of thought; numerical examples; plain leaving out certain parts (for example Keen’s firm simulation model and his discussion of Von Neumann on utility). For this reason, anyone truly interested in Keen’s criticisms should read the book first hand. However, I would not recommend it alone for anybody not already versed in some basic economics and mathematics. Keen does a good job of explaining the concepts he is going to critique, but the fact is that both explaining and ‘Debunking’ Economics perfectly in a single book is simply not possible.

There is a largely superficial criticism of Keen that you will see floating around (so superficial that I am loath to address it formally): that he claims to become sort of mathematical genius blessed with insights that economists have missed for 100+ years. Of course, this is nonsense – there is not a single area in the book where Keen claims outright originality. Every critique he channels was either first noticed, else fully elucidated by, another economist or academic (often neoclassical economists themselves). Keen’s book is a culmination of a century of criticisms, all of which have been swept under the rug or dismissed, often without due justification.

Keen’s approach of critiquing each area on the grounds of internal inconsistency certainly has both advantages and drawbacks. The main advantage is that the critiques are not interdependent, so even if one fails to hold then it can still be shown that there are significant flaws in neoclassicism. The main disadvantage with this approach is that it requires Keen to assume concepts he criticises elsewhere are actually sound. Such an approach is almost bound – by probability – to be hit and miss. Can we really hope to show that absolutely every facet of neoclassical economics is internally inconsistent? In my opinion, Keen’s quest to dismantle neoclassicism from every angle might at times leads him astray from the overall goal. (The approach also necessitates some repetition, and I felt that some of the chapters could have been better arranged – for example, chapters 11 and 15 could surely have been merged).

Nevertheless, the match must be scored to Keen overall. His approach is helpful insofar as it sheds some light into what can often be a ‘black box’ of assumptions and mechanics that comprise many neoclassical models. What is really needed now is for someone to build a ‘ground up’ critique that combines discussion of conceptual errors, contradictions, and empirical irrelevance. Keen does not really talk about conceptual errors, and only really discusses empirical evidence in his section on alternatives. For me, a sustained critique would reject key areas of neoclassicism on various grounds, building up a positive heterodox view based on alternatives along the way. But I understand that was not really Keen’s intent.

I’m sure I will be drawn back to commenting on Keen’s work in the future, hopefully because economists continue to pay attention to it, whether civil or not. But this post concludes my comments on Debunking Economics.

Update: some commenters seem to have interpreted this post as me ending the blog. That is not so! The blog existed for 6 months prior to this series and will continue after it.

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