Frontiers of economic research

Piketty’s two laws

Ton van Schaik, 6 July 2014

Piketty’s book “Capital in the 21st century” has gained popularity with its finding of a growing gap between wage earners and capital owners. This column presents a test to the two main laws in Piketty’s book. The attractiveness of these two laws is in their simplicity, but so is their limitation. Piketty neglects investment replacement and depreciation.

Using happiness scales to inform policy: Strong words of caution

Timothy N. Bond, Kevin Lang, 4 July 2014

Self-reported measures of happiness are growing in popularity as alternatives to GDP. This column presents a novel statistical critique of the validity of comparing such measures across groups. Since monotonic transformations of individuals’ happiness levels can reverse average happiness rankings between countries, no meaningful comparison can be made without assumptions on the distribution of happiness.

Culture: Persistence and evolution

Francesco Giavazzi, Ivan Petkov, Fabio Schiantarelli, 16 June 2014

The persistence of cultural attitudes is an important determinant of the success of institutional reforms, and of the impact of immigration on a country’s culture. This column presents evidence from a study of European immigrants to the US. Some cultural traits – such as deep religious values – are highly persistent, whereas others – such as attitudes towards cooperation and redistribution – change more quickly. Many cultural attitudes evolve significantly between the second and fourth generations, and the persistence of different attitudes varies across countries of origin.

Why GDP just doesn’t add up

Diane Coyle, 9 June 2014

As a measure of economic activity, GDP is imperfect, but no more so than any single indicator of the whole economy. Yet public policy debate about the economy is often focused on GDP growth to the exclusion of other important considerations. This Vox Talk argues the case for a ‘dashboard’ of alternative indicators that, in addition to measuring economic activity, could also capture social welfare, sustainability and the benefits of innovation.

Factual response to FT’s fact checking

Thomas Piketty, 30 May 2014

‘Capital in the 21st century’ has had an extraordinary – and extraordinarily rapid – impact on the global economic dialogue. It has drawn an extraordinary – and extraordinarily rapid – response, including a front-page critique by an FT journalist. In this column, the book’s author responds point-by-point to the critiques. He rejects the notion that he made outright mistakes. Scholars working with old data make judgments and compromises to expand the dataset; disagreements are inevitable – a point that applies equally to the journalist’s ‘corrections’. In any case, the book’s overall analysis is robust to such critiques.

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