tag:blogger.com,1999:blog-4900303239154048192.post2298802334924734844..comments2024-03-06T06:34:42.881-05:00Comments on EconoSpeak: Minnesota Mafia Challenges PikettyUnknownnoreply@blogger.comBlogger8125tag:blogger.com,1999:blog-4900303239154048192.post-52178326178882187822014-04-30T16:13:33.922-04:002014-04-30T16:13:33.922-04:00Dan, that's not right. Look at equation (5), ...Dan, that's not right. Look at equation (5), a household's budget constraint: a is a household's stock of wealth and r is the return on wealth. (Both are endogenous variables.)Tonyhttps://www.blogger.com/profile/09883766296867621703noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-67305080930926973642014-04-29T20:33:25.126-04:002014-04-29T20:33:25.126-04:00The reason why the authors get the result they do ...The reason why the authors get the result they do about the ineffectiveness of estate taxes is because all of the earnings in their model are earnings from labor and there are no earning from capital!<br /><br />http://ruggedegalitarianism.wordpress.com/2014/04/29/cowan-on-piketty-and-science/Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-49967636975057725402014-04-29T14:32:15.973-04:002014-04-29T14:32:15.973-04:00Tony (Smith?) is right that it is Krusell and Smit...Tony (Smith?) is right that it is Krusell and Smith rather than Castaneda et al who have varying discount factors, thus fulfilling the Protestant Ethic model.<br /><br />Kevin,<br /><br />Calibration is a key method associated with the Minnesota approach, and is highly controversial, generally viewed as in competition with structural econometric testing oro time-series VAR-type models, the latter inspired heavily by Sims, who was at Minnesota for a period of time.rosserjb@jmu.eduhttps://www.blogger.com/profile/09300046915843554101noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-68494845358622990362014-04-29T13:00:51.058-04:002014-04-29T13:00:51.058-04:00allied research department at the Minneapolis Fed
...<i>allied research department at the Minneapolis Fed</i><br /><br />Not so much anymore: http://www.startribune.com/business/232695051.htmlJW Masonhttps://www.blogger.com/profile/10664452827447313845noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-44528252048237368572014-04-29T12:22:29.381-04:002014-04-29T12:22:29.381-04:00As Tyler Cowen notes in his update, Piketty commen...As Tyler Cowen notes in his update, Piketty commented on exercises of the kind done by Castaneda et al.:<br /><br />"...one key driving force in these models is naturally the macroeconomic importance of inheritance flows: other things equal, larger inheritance flows tend to lead to more persistent inequalities and higher steady-state levels of wealth concentration. However this key parameter tends to be imprecisely calibrated in this literature, and is generally underestimated: it is often based upon relatively ancient data (typically dating back to the KSM controversy and using data from the 1960s-1970s) and frequently ignores inter vivos gifts. We hope that our findings can contribute to offer a stronger empirical basis for these calibrations."<br /><br />So the calibrated models "predict" outcomes matching suspect data. I'm no expert on calibration, but that doesn't sound like a scientific triumph to me.Kevin Donoghuehttps://www.blogger.com/profile/07534540865029864916noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-4064810358845426982014-04-29T11:39:03.446-04:002014-04-29T11:39:03.446-04:00Just to be clear, Castaneda et al do not assume he...Just to be clear, Castaneda et al do not assume heterogeneity in discount factors, but instead (amongst other things) calibrate the income process so that at any point in time there is a small group of very high earners who have a relatively large probability of dropping to a lower level of earnings. Krusell and Smith (1998) have a simpler income process (employed or unemployed) but do assume heterogeneity in discount factors. In any event, both papers can generate realistic wealth inequality using mechanisms that appear to be very different from the Piketty "r-g" mechanism.Tonyhttps://www.blogger.com/profile/09883766296867621703noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-69688068630337988662014-04-29T02:02:08.248-04:002014-04-29T02:02:08.248-04:00I am not fully clear why Castaneda et al get the r...I am not fully clear why Castaneda et al get the result they do on the ineffectiveness of estate taxes to affect wealth distributions, but it may be something like what Piketty says. The other part may have to do with them not really redistributing that much wealth, although it strikes me that they are a way of stopping, or limiting at least, the emergence of feudal style dynasties.rosserjb@jmu.eduhttps://www.blogger.com/profile/09300046915843554101noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-9257094113310120442014-04-29T00:04:52.689-04:002014-04-29T00:04:52.689-04:00Piketty appears to have anticipated this objection...Piketty appears to have anticipated this objection. pp. 358-9:<br /><br />"The problem with this theory [time preference] is that it is too simplistic and systematic; it is impossible to encapsulate all savings behavior and all attitudes toward the future in a single inexorable psychological parameter. If we take the most extreme version of the model ["infinite horizons"]... it follows that the net rate of return on capital cannot vary by even as little as a tenth of a percent: any attempt to alter the net return (for example, by changing tax policy) will trigger an infinitely powerful reaction in one sense or another (saving or dissaving) in order to force the net return back to its unique equilibrium."Sandwichmanhttps://www.blogger.com/profile/11159060882083015637noreply@blogger.com