First this from Krugmnan'a NYRB review of Thomas Piketty's Capital in the 21st Century:
But even those [economists] willing to discuss inequality generally focused on the gap between the poor or the working class and the merely well-off, not the truly rich—on college graduates whose wage gains outpaced those of less-educated workers, or on the comparative good fortune of the top fifth of the population compared with the bottom four fifths, not on the rapidly rising incomes of executives and bankers.
It therefore came as a revelation when Piketty and his colleagues showed that incomes of the now famous “one percent,” and of even narrower groups, are actually the big story in rising inequality. And this discovery came with a second revelation: talk of a second Gilded Age, which might have seemed like hyperbole, was nothing of the kind. . . .
The big idea of Capital in the Twenty-First Century is that we haven’t just gone back to nineteenth-century levels of income inequality, we’re also on a path back to “patrimonial capitalism,” in which the commanding heights of the economy are controlled not by talented individuals but by family dynasties.
A revelation? I'm glad we have economists who now have received it. That', I'm sure, will change everything.
Then, there's this from this morning's NYT about a shift within the so-called "Washington Consensus":
But the newfound attention to income inequality isn’t just another facet of a more liberal, Keynesian economic worldview. The fund’s economists have been producing research that suggests that inequality could make the world economy less stable.
Ms. Lagarde echoes an I.M.F. staff paper issued in January, which suggested that policies recommended by the fund should also be judged for their impact on inequality. “Income inequality can be of macroeconomic concern for country authorities, and the fund should accordingly seek to understand the macroeconomic effects of inequality,” it says.
Jonathan D. Ostry, the I.M.F.’s deputy head of research, and Andrew Berg, another economist at the fund, published a study three years ago suggesting that inequality makes growth less durable: The average stretch of robust growth among relatively equitable industrial countries lasted more than 24 years. In Africa, a much more unequal place, the average was less than 14 years.
A flatter distribution of income, the study concluded, contributes more to sustainable economic growth than the quality of a country’s political institutions, its foreign debt and openness to trade, its foreign investment and whether its exchange rate is competitive.
I often wonder why anybody listens to economists. Their prestige far exceeds their usefulness. They exemplify the worst kind of rear-view mirror thinking. They are exceedingly conventional and reactive, and have little real insight to deliver that people don't already know from their knowledge of about history and human nature. There's this pretense that somehow it's scientific and objective, but it just isn't. Whenever you hear some economist spouting off, ask what his politics are. That will be a clearer indication of his thinking. Economics is not science; it's ideology.
Even Keynesianism was legitimated only as an ex post facto explanation for what happened in a kind of ad hoc experimental way in the U.S. during the 1930s and 40s. It was easily supplanted by voodoo economics and Laffer curvers when it seemed unable to explain the stagflation of the 1970s.
Economics as a discipline ought to be demoted to a subdiscipline within university history departments. Let them gather their statistics, but make them stay away from theories that have the patina of a-political or "scientific" authority. The idea of giving the Nobel prize to economists is more an indicator of elite conventional thinking than it is about any economist having real objective insight into the world as it really works. It's about as silly as giving the peace prize to Henry Kissinger or Barrack Obama.
So I post this about Piketty or the IMF not because it's startling news, but because it's an indicator of a shift within the precincts of elite thought. The establishment is worried about instability. Who'd of thought? Would that working and middle class folks in this country would give it more cause for worry. That's the only thing that will ever change their thinking further. It's the only thing that will create the conditions for the emergence of an economics that represents their interests rather than those of the One Percent. But let's not fool ourselves that it's anything more than a political ideology that seeks to bend theory to serve one set of interests rather than another.