A mere two weeks ago I stated:
“Overall, I seem to be one of the few economists who hasn’t read Piketty’s book yet. I intend to keep it so, not for lack of interest but because of lack of logical necessity. Piketty’s summary does not indicate that it is essential reading unless you are involved in economic statistics.” (this weblog, October 24 2014, and see there for some links to James Galbraith and David Colander)
It is difficult to fully neglect the hype, however. Thomas Piketty visited The Hague, spoke in Dutch Parliament, and I have to be up to date with views of those who run the country.
A relevant quote by Piketty at minute 1.37 of that NOS broadcast:
“The main message of my book is that these issues of income and wealth are too important to be left to economists and statisticians. I am very happy to talk to politicians but, to be honest, I care more about the normal people, and I want to contribute to the democratisation of economic knowledge.”
There was a book signing session too.
It felt impolite not take the ten minutes tram ride, buy a copy of the English book, meet Piketty and invite him to sign that copy, from Thomas to Thomas. So my plan is to skip the deep historical statistics and look at his policy proposals at a later moment. He has the same problem as I have, of writing a proper “a” after the “m”, but perhaps his cause is that he had been doing it too much this day. Incidently, I alerted him to my memo An Economic Supreme Court in the RES Newsletter this fall. The book signing session was after he met Dutch Parliament, so they may need to invite him to return to inform them about his thoughts on reforming the Trias Politica system of democracy.
Addendum on the interview in Paradiso, Amsterdam
Economic advice if economics were no science
The main point is this: My advice is that each nation adopts an Economic Supreme Court, that is based in economic science and is open to the academia and the public, so that Parliament and citizens get better information to base their decisions upon. How does this relate to Piketty’s view ?
Remarkably, Piketty calls economics a “discipline” and not a “science”:
“Economists have a strong responsibility when they pretend that they have a science. Which they of course don’t have. This is a huge joke. Non-economists are also responsible for letting them do that.” (minute 37:40)
Piketty states that these issues (notably on inequality) are too important to be left to others (i.e. economists, and perhaps lawyers). He wants a “democratisation of economic knowledge” that “will allow individuals to make better choices” (minute 39:07). However, who is to determine what “economic knowledge” is ? Later interviewer Joris Luyendijk asks whether Piketty thinks about a market of ideas such that “over time the market takes care of the best idea and that is what we shall do”. Here Piketty protests:
“You don’t want to let others tell you that for technical reasons that there is only one policy that is possible. There is never only one policy that is possible. There are always alternatives.” (minute 39:40)
But how do you know about those alternatives ? Some issues can be very simple but soon you either study economics or find a network of advice that you have to trust. Piketty apparently relies upon the academia and upon the books used in school. But government policy making tends to be quite involved and more complex than a single professor (even Paul Krugman) might be able to handle.
Thus we should hope that Piketty, after thinking it through, would agree with the idea of an Economic Supreme Court:, since it would be open to society and have the same objective of providing quality tested information.
Later on (at 1:05:00) he protests against the use of complex mathematics, and asks for more empirical work. He repeats that later, using the word “discipline” (at 1:12:00). But this abuse of complex math detached from empirical reality precisely happens at the academia, while it would be the Economic Supreme Court that would have the incentive for empirical research to warrant the quality of the information used for policy making.
Environment biggest problem of 21st century
Though Piketty wrote a book about capital in the 19th and 20th century with some “historical perspective” for the 21st century, he still holds that the environment is the major problem for the 21st century:
“I think in many ways the biggest challenge is probably the threat to our natural capital and to the environment. (…) What I talk about in my book in a way is a lot simpler to do than solving this more difficult problem with the environment and our natural capital. So I think that if we are not able to solve this financial problem and these problems that have to do with inequality, how are we going to solve the more difficult environmental problems that are in front of us ?” (minute 1:00:40)
He might appreciate the website by Roefie Hueting and my draft book on the Tinbergen & Hueting approach to Ecological Survival. The environment clearly is an example of where an Economic Supreme Court would eliminate the confusion by politics and special interests. Hueting holds that the discipline of economic statistics might also do the job, but I have my doubts, since policy making differs from the use of statistics. See my weblog text on Hueting, the piano and eSNI.
European political union
Not in his book but in another manifesto, Piketty advises faster integration in Europe, with a Political and Fiscal Union for the Eurozone with a separate own Parliament (minute 47:40). When asked whether “people should take action” – and the person who asked this seems to have thought about pitchfork marches – Piketty points out that the most effective action is to unite Europe (minute 1:14:00). He gives the example that Germany and France may think that they are big but compared to the world players they are quite small.
However, there are strong national tendencies in Europe. Piketty shows him aware of that. In the final minutes, he mentions that there can be nationalistic resistance against globalisation, and he mentions France as an example. In that case the option of European political union evaporates, while the latter is the only good road, in his view, to do something about inequality.
However, when each nation adopts its own Economic Supreme Court (ESC), then such political union might not be needed, and countries can tackle inequality via the co-ordination of the various ESC’s. Thus there is an alternative to the two opposites.
Also, Piketty uses “the new round of trade liberalisation” of TTIP as leverage to arrive at international standards for minimal capital taxation. People would not be inclined to accept new liberalisation if there would be no curbing of inequality. However, he then seems to fall for the rhetoric and framing of TTIP that it would concern “liberalisation”, while Joseph Stiglitz (see later) criticizes TTIP for not creating more competition but reducing it.
Fortunately, the audience in Amsterdam was also aware of the risk of global dictatorship. With capital flowing into the hands of a small elite that cannot be touched by taxation, and with the Western democracies reduced by campaign fund corruption and propaganda – see the Iraq War, as if Saddam Hussein was the same person as Osama bin Laden – it is just a matter of time. Perhaps Joris Luyendijk is a member of the Bilderberg group since he asked more than once whether democracies are not already lost and already subjected to subtle psychological manipulation by the powers that be. As you know, according to proper conspiracy theory, merely asking a question like this is actually a subtle manipulation to bring an audience into submission and have them forget about really critical questions.
Perhaps mindful of the sales of his book, Piketty replied that the possibility of global dictatorship cannot be excluded (minute 1:28:00). If his book sells so well that he could become our world dictator then he likely would try to be a benevolent one.