Thoughts on the Thomas Piketty event

As I mentioned in my last post, I had the great pleasure of attending the Thomas Piketty event at this year's American Economic Association annual meeting. I have been reading his latest work, Capital in the Twenty First Century, which has been published to both great acclaim and great criticism. Ever since Thomas Piketty published the book, it has sent shockwaves through the current economic establishment with many rebuttal books written to in response to the ideas that Professor Piketty had presented. (The number of rebuttal books range from sort articles to large pamphlets, if you look at the Amazon website, you'll be able to find several) Within the confines of the academia and outside of it, there has been almost a numinous reception of his work. For the popularity within the outside world, it has created numerous tractable differentials in opinions, from those who love it and those who hate it. Some people have praised it and bought the book in record numbers. There have been many prominent economists who have published great books and papers, but I believe the response that Professor Piketty's book has had a ripple-like effect on the consciousness of the entire economic community. I personally enjoyed this book immensely, even though I don't necessarily agree with much of its content. In this article, I will try to dissect the 2 hour conference and throw in my thoughts about the event itself.

The Thomas Piketty event at the AEA meeting was an immense occasion where the room was packed to capacity, with perhaps about a hundred people extra standing at the sides to witness the presentation featuring other prominent economists such as Greg Mankiw. David Weill, Professor of Economics at Brown University, gave an approving observation and analysis of Thomas Piketty' ideas that were presented in Capital. Based Professor Weill's observations, we can see the wealth of knowledge that the 700+ page book has to offer for both economic researchers and wider audiences beyond. Professor Alan J. Auerbach and Dr. Kevin Hassett had different ideas when it came to Piketty's book. Despite their disagreements with much of Thomas Piketty's theories, they are very impressed by the depth of its analyses, but they feel like certain things about the book were perhaps too unrealistic in terms of its application, especially in tax reform and other related things.

Professor Greg Mankiw, Chair of Harvard University Department of Economics, gave the next lecture on his interpretation of the book and he then gave a thorough lambasting of Piketty's book. He labeled Piketty's book as resorting to the simple promotion of egalitarian policies that lead both of the rich and the poor to sink into destitution. This does not come as a surprise to many economists and voracious readers who knows about Professor Mankiw's defense of the top one percent in his recent article, Defending the One Percent, which was published in the Journal of Economic Perspectives. During this time, there were certain people that heckled Professor Mankiw, with loud cheers of approval on one side of the economic spectrum coupled with disapproving shrugs on the other side. Personally, I am impartial to the views of both conflicting sides as there is much to derive from the analyses on both viewpoints. What's interesting about Professor Mankiw's conclusion is that r>g is not the problem, but that r<g is the problem! This is a particular interesting observation as I believe that Thomas Piketty has the correct observation, but perhaps not the correct response to such taxing issues. (For those interested in a good opinion article that I had read last year, please refer to Tim Worstall's Forbes article.)The excitement in the room grew with the anticipation of Thomas Piketty's talk on the ideas that he had promoted in his book.

Professor Thomas Piketty, Chair of the Paris School of Economics, gave a simple explanation of his 700+ page book, which has reached the absolute apex of its acclaim. It has been on the front page of newspapers, best-selling book lists and other similar journals, with raising him into the public spotlight beyond what is normal for economists. In this presentation, Professor Piketty presented the basic theories in his book with a special focus on r>g in trying to resolve the huge issues that the world faces today. He talked about how its entirely applicable to the study of long-run wealth inequality versus labor income equality, which you cannot utilize r>g to solve. The other point that I derived from his work was the basic model that he had presented, with a strong focus on the reinforcement of more democratic institutions with the certain mechanisms surrounding income and wealth. He postulated that the serious problem of inequality should be tackled through a progressive wealth tax, escalating at each level, which is quite unrealistic in my mind.  I have yet to complete the many sections of the book, as I've only skimmed parts of it, but it'll be exciting to write my second thoughts on the book after going through each section in more detail.

Overall, this session was one of the most exhilarating sessions I've been to in Boston and I've been to a couple of very heated Israel-Palestine conferences. The session was followed by an extremely tense question and answer session, with a particular individual launching a fallacious tirade at both Professor Mankiw and Professor Piketty. I also had the privilege of speaking with Professor Thomas Piketty briefly after the event and I hope to have better questions prepared for him next time.

2015 American Economic Association Meeting

Yesterday was the final day of the annual American Economic Association Annual Meeting. It was definitely a productive couple of days, where I got surrounded by some of the greatest economic minds in the world such as Robert Shiller, Jean Tirole, Joseph Stiglitz, Thomas Piketty, William Nordhaus, Raj Chetty and others. I also managed to meet quite a large number of economists, young and old, which was particularly exciting. There were many things that have happened during this long weekend and here are some of the highlights of the last couple of days.

Day 1- Saturday
The first event I saw was the most jam-packed event that I've ever witnessed, complete with rockstar adulation for Thomas Piketty, who had just written a best-selling book Capital in the Twenty-First Century. It was a pretty cool event, coupled with a Sheraton Boston room filled to capacity and complete with hecklers. I will be writing an entire article on the Piketty event, as it was the most memorable event, alongside the very heated Summers/Mankiw event at the annual conference. From what I noticed, there were a substantial amount of protesters at these headline events, which ranged from student protesters to people with posters and signs. There's an interesting article on the Washington Post that concerns this interesting phenomenon.

The next couple of events that I had attended was much more lower key than the Piketty event, with topics ranging from monetary policy to financial markets to certain presentations on the effects of Chinese urbanization in housing markets. Because of the brevity of these presentations, the models and the statistical data that the presenters were not provided in full detail, but they gave a basic run-down of the information of the articles that they had written previously.

The second most interesting session that I attended during the entire weekend was a panel discussion of the economics of secular stagnation, which featured prominent economists such as Robert Gordon, Lawrence Summers, William Nordhaus and Greg Mankiw. This discussion was extremely heated, with the particular different views especially obvious between the Harvard economists- Professor Mankiw and Professor Summers. Like the Piketty event, there were hecklers and arguments between the two sets of people with sharply, opposing views. This debate was particular interesting to compare the views of those like Professor Summers, that see a continued economic stagnation in advanced industrialized economies and those like Professor Mankiw who are optimistic about its longer term recovery. Based on the information that both sides have advanced have, it set up the mood for a continued discussion throughout the rest of this year. I believe that the recovery might not last long due to the continued drop in oil prices, which might cause an acute financial crisis somewhere else in the world. The most interesting observation that I had conjectured from this particular event was the electric environment that this event had caused and the discussion continued after the event had ended in the hallways and on social media. Many prominent newspapers featured this event, including this article by the Washington Post.

The day ended with Raj Chetty giving the annual Richard T. Ely lecture, which he talked about his recent works in his field of Behavioral economics, even though he doesn't want people to relate his research in that particular way. Overall, it was interesting to see how we can measure behavior and how it connects to coming up with public policy, especially around the results of his research on EITC recipients. Here is the link to his PowerPoint presentation and the link to the video of the electrifying presentation.

Day 2- Sunday
After a large snowstorm from the previous night, I found out that many of the Sunday speakers that I had expected to see, such as Jeff Sachs, Justin Yifu Lin and several others, had canceled their appearance at the annual meeting. The most interesting event I went to during the afternoon was concerning Russia-US relations, of which I had expected to hear Jeff Sachs' new perspective on the current relations. The new reconstituted panel of experts included a couple of policy experts, which included the Harvard Kennedy School Professor, Stephen Walt. As described in my previous articles on this blog, all of them agreed that the new Cold War was counter-productive and based on finance/economics. The panels of experts agreed it was more productive to engage constructively with Russia, which unfortunately means to ignore the needs of countries such as Ukraine and Georgia to be in the North Atlantic Treaty Organization.

The Annual Presidential Address was given by William Nordhaus, who is well known for his work on environmental economics. It was a decently written piece that concerned the Economics of Global Warming. Here's the link to a similar presentation online with the PowerPoint slides listed here. I don't necessarily agree with the point of view that Professor Nordhaus was trying to present, but overall the presentation was done in an impeccable fashion. Also, congratulations to Professor Matthew Gentzkow of the University of Chicago for winning the annual John Bates Clark Medal for being the best economist under the age of 40!

After conversing with several older friends of mine who also happened to be at the meeting, I went to the Annual AEA Humor event, which was hosted by Jodi Beggs, who handles to be a Lecturer at my undergraduate alum mater of Northeastern University. I thought the funniest segment was the "lecture" conducted by Zach Weinersmith on the his particular theory on maximizing the social welfare of the top decile.

Day 3- Monday
The final day of the AEA meeting featured three events, of which two were on macroeconomics and one was on neuroeconomics. The first event on Neuroeconomics had featured two of the most interesting and unique presentations, of one was about the rather ironic Chinese obsession with slot machines and gambling while another was on NFL players' salary/consumption patterns.

The second event was presided by the Chief Economist of the IMF, Olivier Blanchard and featured Nobel Laureate, Joseph Stiglitz. I was quite fascinated by Stiglitz' other research and the presentation of his paper on pseudo-wealth truly fascinated me. The paper argues for the theory that displays certain aggregate demand qualities, which is the creation of appeared wealth for some, which leads to improper amounts of resource allocation in consumer spending. After this effect disappears before a prolonged period of time, there is a main crisis in the dramatic fall in consumption. Overall, the details and the model that Professor Stiglitz puts forward is quite fascinating and presents something entirely new, which is expected from Professor Stiglitz.

The three and final event of the AEA meeting was curated by the newly crowned Nobel Laureate, Jean Tirole, and it pertained to financial constraints and macroeconomic risk. Most of these speakers were from Europe and investigated data that pertained to Europe's situation. Going towards a more complete Eurozone monetary integration is where the European Union is heading towards and these presentations presented certain fixes/problems/solutions. My favorite two presentations were the ones by the researchers from the Barcelona Graduate School of Economics (GSE) and Jean Tirole. The presentation by the two researchers from the Barcelona Graduate School of Economics (GSE) featured interesting models that described the crowding-in and crowding-out processes in managing credit bubbles. I enjoyed their models, so I did some research and I found their research article online. It's quite in depth, but I think the models and the ideas are pretty straightforward. Jean Tirole's presentation was on the current Eurozone monetary situation, which is unraveling. He presented his theory on how to deal with this particular situation, which explains the rationale and several mechanisms of how an Eurozone banking union could need to alter before it could be put in place. For those who are interested in the article, please feel free to read them here.

The 2015 American Economic Association meeting was overall a great experience, where I got to learn a lot about the field and I got to talk with some of the greatest economic minds in the world!