Summers on Piketty

http://www.democracyjournal.org/32/the-inequality-puzzle.php?page=all

by marojejian • 12 years ago

47 82 12 years ago

selmnoo2• 12 years ago

So why has the labor income of the top 1 percent risen so sharply relative to the income of everyone else? No one really knows.

Really? Isn't this what the bigger half of the book is about? It's because of rentier/patrimonial-capitalism, opportunity not being equally distributed in the system, etc.

alexeisadeski311• 12 years ago

Rentier/patrimonialic income is not labor income.

anigbrowl10• 12 years ago

It's not, but you're going to pay your fund manager a lot more than your gardener even if both exert similar amounts of effort and skill (I picked fund managers because they're notorious for charging a lot of fees despite their inability to consistently outperform markets).

Or to take another example, suppose you're a lawyer. You'll be able to bill a lot more money to rich clients than you will to poor disenfranchised ones, even though the complexity and challenge of your legal work might be identical. This is partly because people usually assume other people are all utility maximizers; eg within the narrower cohort of criminal defense lawyers, public defenders are generally considered to be inferior lawyers because it is assumed that if they were sufficiently good, they would go into private practice and make more money.

bsbechtel2• 12 years ago

Does anyone think his solution of a global wealth tax will actually help lessen inequality? This solution seems simplistic and naive to me, and puts those at the bottom of the ladder at the mercy of these 'global wealth tax collectors' instead of the wealthy. I don't see much difference in these two, other than one group is at the mercy of market demands, and the other is supposedly at the mercy of a democratic populace. Correct me if I'm wrong, but he didn't write anything about actually empowering those at the bottom of the economic ladder, did he? Where are those solutions being offered up?

aetherson• 12 years ago

Well, Picketty does, presumably.

Aside from him, no, I've literally seen not a single person defend the policy suggestion, even among reviewers who are otherwise completely positive on Capital in the 21st Century.

baddox2• 12 years ago

I haven't read the book, but I have heard people say that the global wealth tax is presented by Piketty as an admittedly idealistic suggestion rather than an imminent policy recommendation. From what it sounds like, the global wealth tax would merely tackle inequality directly, even if it meant lowering the quality of life (or slowing the growth in quality of life) among workers.

nugget2• 12 years ago

Read Tyler Cowan's critique of Piketty which was just published today. My favorite bit is near the end, where Cowan reinforces that by Piketty's own admission, the proposed wealth tax would shift up to 75% of national income to the Government: ''Therein lies the most fundamental problem with Piketty’s policy proposals: the best parts of his book argue that, left unchecked, capital and capitalists inevitably accrue too much power -- and yet Piketty seems to believe that governments and politicians are somehow exempt from the same dynamic.''

I took a class from a famous economics professor who had emigrated from the former Soviet Union after its collapse. He made the point one day that there have always been rich and poor - and always will be. In America, the predominant distinction is capital wealth - dollars. In the USSR, it was political power; if you had political power, you had private planes, villas, and servants. At the end of the day, the inequality is always present.

Link: http://www.foreignaffairs.com/articles/141218/tyler-cowen/ca...

mncolinlee2• 12 years ago

Interesting enough, Thomas Paine argued the exact opposite in his famous pamphlet arguing for Social Security. Paine is that American revolutionary you always see quoted at anti-tax rallies. His pamphlet on Social Security shared the same conclusions as Piketty's "Capital" except written two centuries earlier.

"It is wrong to say God made rich and poor; He made only male and female, and He gave them the earth for their inheritance." -- Thomas Paine, On Agrarian Justice

http://www.ssa.gov/history/paine4.html

The Social Security system Paine advocated was more targeted to 21 year olds and was designed to offer everyone opportunity at the height of their lives. While he also theorized keeping the elderly from poverty, it was not the core idea of his plan.

panarky2• 12 years ago

there have always been rich and poor - and always will be

Yes, and Jesus said[1] "ye have the poor always with you."

Likewise, there will always be crime, and disease, and suffering.

But do you agree that extreme inequality is a bad outcome? That putting more and more wealth and power into the hands of fewer and fewer monopolists and oligopolists is toxic to democracy and freedom?

If so, then working to reduce extreme inequality is a noble cause just like reducing crime, disease and suffering is worthwhile.

Even if these maladies will always be with us.

[1] http://biblehub.com/kjv/matthew/26.htm#6

bjt• 12 years ago

Judging by the dates on the comments, Cowen's review came out more like a month ago.

tcc2161• 12 years ago

While the famous economics prof's point makes sense, I don't believe inequality has to be inevitable. "The always will be" argument could have been applied to slavery for most of human history, and while it's true slavery remains a problem in the present day (ie human trafficking) it is not now treated as inevitable nor is it officially condoned.

The definition of poverty also shifts ... in North America today everyone has a tv, and probably a computer, all of which could be considered luxury goods at points in the past - no one lives today like the poor of a hundred years ago, but we still have people who we consider poor, and who consider themselves poor.

barrkel• 12 years ago

Of course inequality is always present. That's not an argument against anything.

But does it always need to grow without bound? Is it the same in all countries - and if not, why not? And how does welfare for the worst off change with different amounts of inequality?

yummyfajitas7• 12 years ago

Empowering those at the bottom won't necessarily fix the inequality "problem". If Modi fixes the economy he'll empower those at the bottom. Right now everyone in India is equally poor. Fixing the economy might make this place unequally rich like the US.

I imagine Piketty would consider that a problem if he knew India existed.

If you want solutions for empowering those at the bottom, look to Bryan Caplan rather than Piketty.

http://econlog.econlib.org/archives/2014/05/meant_for_each.h...

anigbrowl10• 12 years ago

Right now everyone in India is equally poor.

Well, that's bullshit. I'm not endorsing Piketty, but you're making even less sense, unless there's a joke I've missed.

I do agree about unrestricted international immigration, such that there's a free flow of labor as well as capital. Unfortunately most people are mercantilist and opposed to the promulgation of global standards that would be required to make this work.

tormeh5• 12 years ago

You think India is equally poor? Uh-huh... There are no equally poor places. It's an American libertarian fantasy construct.

http://www.forbes.com/india-billionaires/list/

selmnoo2• 12 years ago

I imagine Piketty would consider that a problem if he knew India existed.

I have no idea why people keep saying this about Piketty. You know that he's written on India quite a lot, both in the book and seperately where India is the sole subject of his work, e.g.: http://piketty.pse.ens.fr/fichiers/public/BanerjeePiketty200... as well as China: http://piketty.pse.ens.fr/fichiers/public/PikettyQian2009_AE...

baddox2• 12 years ago

I think there are two big issues to think about. The first is a public choice analysis of a potential global wealth tax. It's not enough to talk about a hypothetical economically sound (according to some economist) and perfectly implemented tax; we need to talk about what tax could actually be implemented given what we can surmise about the incentives of government officials.

The second is whether the conceptual idea of a global wealth tax would work even if we assume it could be implemented in the real world in such a way that there are no loopholes or favoritism. Let's also just assume the taxed wealth is somehow simply destroyed, to avoid the potential problem of favoritism in the way the government spends the tax revenue. In that case, it seems to me that it absolutely would reduce inequality. But I think the better question is whether reducing inequality itself is a good thing, because I think there would be other disastrous effects by this tax despite inequality being reduced.

tormeh5• 12 years ago

A universal wage would work. It's no sense in hiding from receiving it, in case that should be a problem. And the money has to come from somewhere, and the poor simply can't pay, so the rich will have to. Not directly, necessarily, but whatever part of the economy ends up having the capacity to be taxated that much must be a sector the rich own.

justincormack2• 12 years ago

I think his idea is "actually empowering those at the bottom of the economic ladder" by giving them cash. Cash is pretty empowering for those who have none.

bsbechtel2• 12 years ago

At the discretion of these 'global wealth tax collectors'...what is their criteria for choosing who is at the bottom of the economic ladder? Falling into a demographic that is sufficient for these tax collectors to retain their power?

timtas5• 12 years ago

If by "giving them cash" you mean put them on an annuity, is there anything more disempowering? If you depend on me to survive, your independence is gone. The only power left to you is to vote for me again.

jokoon• 12 years ago

what's the difference between a wealth tax and a progressive tax ?

dllthomas3• 12 years ago

If your question is primarily definitional: A wealth tax operates on the value. A "progressive tax" typically still operates on the derivative.

loudmax• 12 years ago

One of the main purposes of the wealth tax is not to raise funds. The tax described in the book would be quite low, below 1%. Remember, the rate of return on fortunes over a million Euros (below this, they wouldn't be subject to the tax) is around 5%. So this does little to slow the global concentration of wealth.

The main purpose of the tax is to track this wealth. When Piketty did research on the fortunes of the very wealthiest individuals, he had to rely on estimates from Forbes magazine, whose methodology is far from scientific. The idea is that with a better public understanding of where and how wealth is concentrated, we can formulate better policy.

alexeisadeski311• 12 years ago

A wealth tax is "eating the cake."

It's society deciding that we've already done everything worth doing, now it's time to destroy what has been built. Such irrational occurrences are not without historical precedent. Just hope you don't personally have to live through one.

anigbrowl10• 12 years ago

I don't think a global wealth tax is practical, so questions of its desirability are moot. I don't think that an endlessly progressive system of taxation is that desirable either, but on the other hand I think your idea of market constraints are also a bit facile. Of course some people misjudge a market and go bust spectacularly, but most people with a lot of wealth tend to accumulate more.

ISTM that Piketty is reaching for a global wealth tax because he doesn't have anything in his economic modeling toolbox that would do the trick instead, so proposes reducing inequality by fiat. He's right about the problem, without having a good solution.

the problem is not the existence of inequality per se. I am fine with some inequality and consider it is natural for Pareto distributions to emerge in economics, just as in nature the existence of whales and elephants is not the result of a conspiracy against plankton or ants. Indeed, there are abundant examples of unequal distributions in nature, from the lengths of rivers to numbers themselves, ie Benford's law.

However, the distribution of capital is not an entirely natural process, and most people who think it is are handwaving simplistic economic models of perfect competition, infinitely substitutable goods, and so on, and forgetting that these perfect models only exist ceteris parabus, ie 'all other things being held equal.' In reality capital flows through a complex contractual, regulatory, and legislative economic environment that treats different participants differently, interferes with default supply and demand (often for perfectly good reasons), and which in turn can be influenced by the infusion of more capital through political lobbying or plain old corruption. What we often end up with instead of a 'free market' is a 'superstar economy' where capital flows increase disproportionately towards people in the top 1%* of the economy, resulting in much greater inequalities than we would expect in a Pareto model.

There's an excellent book on this trend ion the Entertainment industry called Blockbusters, written by Anita Elberse last year. Here's a salient excerpt taken from http://lefsetz.com/wordpress/index.php/archives/2013/10/16/t... (~1000 wrods, worth your time) with this particular bit pointing out that Chris Anderson's 'long tail' model doesn't seem to be panning out as he predicted or as a lot of digerati and creative types (including myself) hoped that it would:

The same patterns are visible in album sales. …out of a total of 870,000 albums that sold at least one copy in 2011, 13 album titles sold more than a million copies each, together accounting for 19 million copies sold. That’s 0.001 percent of all titles accounting for 7 percent of sales. The top 1,000 albums generated about half of all the sales, and the top 10,000 albums around 80 percent of sales. Deep in the tail, 513,000 titles or nearly 60 percent of the assortment, sold fewer than 10 copies each, together making up half a percent of total sales.

tl;dr while we expected a power-law distribution in economics because we're so used to them from nature, the way our economic system is actually calibrated results in a much more extreme distribution that almost disappears into the axes of the demand graph.

Now this sort of thing is a problem for a lot of creative types, because while we can all leverage the incredibly low marginal costs of digital distribution (hooray), there are often significant fixed costs too, and if you can't spread those out over a sufficiently large number of copies then You Are Fucked because you won't be able to get enough capital to pay those fixed costs.

On the positive side, this works out well for writers: writing is of course time-consuming, but since computers are so cheap these days and most people in the developed world have one anyway, the non-labor cost of producing a literary work is very low. So you can have a runaway hit like 50 Shades of Grey where the author typed up a bunch of sexual fantasies, released the result as an e-book (which turned out to be a great move because it's hard to tell what people are reading on a Kindle, compared to a peperback novel with a lurid cover), and made a fortune. For musicians, it's a bit different; some people are blessed with musical talent, others work hard at it as a craft. But then musical performance has to be recorded or brought to the public, and while that's far cheaper and easier than it used to be thanks to digital technologies, it's not free or super-easy and so you see a lot of people raising money from fans on Kickstarter to record albums or launch a tour (depending on whether the artists are better skilled/equipped to play live or record themselves). These artists need an extra capital infusion because launching a new musical product has some significant fixed costs which are otherwise tough to accumulate from normal operating revenues.

Then there's movies, the field I work in. This too has been affected by digital technology; in that there's no need to shoot on film any more thanks to digital cameras, and you can also do amazing special effects that would either not have been achievable with practical (physical) methods or which would have been prohibitively expensive. Yay digital. However, the cost of film and the inconvenience of film cameras are only a small part of a typical film budget. You still have to pay for things like actors, propers, locations, food, transport and so on, and where effects are concerned people's expectations of spectacle increase to match the processing power available, so the public wants ever more elaborate effects and ever-higher production quality (eg color-grading that requires a much greater degree of visual consistency through the whole film than used to be the case a few decades ago). So the cost of manufacturing a film product that meets normal commercial expectation is still in the hundreds of thousands, if you get lucky; if your business strategy is to sell it rather than hope for awards and then sell it, you need to spend at least $1 million, a sum which does not grow on trees.

(There are many famous instances of hit films being made on tiny shoestring budgets of only a few thousand $. And occasionally that happens, but: a) they're vanishingly rare; b) they usually take many years to produce; c) the actual cost to get into the theater is always far higher - the low number is what the producers had spent before a movie executive wrote a check to pay for commercial-quality post-production; and d) the shoestring film almost always involves a ton of freebies from friends/relatives/industry insiders. The odds of making a hit film for a few thousand are about as good as the odds of you outdoing Flappy Bird this weekend, ie virtually nil.)

Now getting back to economics, this is a problem for filmmakers because unless you start out rich or have good social capital, it's not that easy to get your hands on $1 million in the first place, and it's more difficult to do so when more and more consumer spending on tickets/DVDs/rentals goes towards blockbuster movies, as there are fewer unit sales over which you can average your fixed costs. This is not to suggest that the pie of consumer movie spending is completely fixed such that if someone who watches my film will necessarily skip yours; but the pie isn't infinite and (more to the point) the acceleration of revenue concentration around blockbusters is greater than the overall sales growth, so blockbusters get larger and larger shares of a slowly-increasing pie. The overall increase is not sufficient to maintain sales growth or even parity for less popular/populist offerings. B-movie film god Roger Corman summed up the problem succinctly here: http://blogs.wsj.com/speakeasy/2010/09/18/film-school-roger-...

What happens in practice is a race to the bottom; because it's increasingly hard to raise funding for a venture of uncertain commercial prospects as the demand tail shrinks and the (externally) perceived costs of production and distribution fall, that exerts downward pressure on wages as a factor of production for films that are not well-budgeted, such that the extremely bimodal distribution of film sales in reflected in wage scales. Rather than resulting in equilibrium (because goods in this market are not easily substitutable), it's far more likely that less successful participants will simply exit the market, which further exacerbates and accelerates concentration.

dllthomas3• 12 years ago

"X isn't bad because it's natural" is dangerously close to a fallacious "appeal to nature". The sense in which it's true, of course, is that it might be unavoidable in the sense that the costs associated with an attempt to change it might be worse. Still, careful.

carsongross2• 12 years ago

The elephant in the room, of course, is Mr. Summer's object of desire, the Fed.

Until the Fed is dealt with and the financial sector is subject to true market forces, it will continue to dominate the economy and produce destructive malinvestment.

panarky2• 12 years ago

This seems to be the prevailing ideology, that all would be solved if only we could achieve perfectly free markets, stripped of regulation, politics and government influence.

This is a thought-terminating cliché[1] that either ends rational argument or results in an evidence-free opinion war.

Naturally, ideology trumped argument here again, as a thread about inequality gets hijacked by utopian economic balderdash.

[1] https://en.wikipedia.org/wiki/Thought_Reform_and_the_Psychol...

carsongross2• 12 years ago

You are projecting: I don't think we need perfectly free markets.

I do think, however, that the Fed is the primary engine of economic inequality and malinvestment, via a fairly straight forward mechanism: early receivership of newly created money and allowing "too big to fail" banks to keep upside while the public pays for the downside.

QuantumChaos• 12 years ago

Actually, Dr. Summers does implicitly mention the Fed, when he says

"Probably the two most important steps that public policy can take with respect to wealth inequality are the strengthening of financial regulation to more fully eliminate implicit and explicit subsidies to financial activity, and ..."

When he refers to implicit subsidies, I believe he is referring to some actions of the Fed in bailing out banks. Apart from direct bailouts, the monetary policy of the Fed was a bailout of a financial sector that was "too big to fail". So I don't think Dr. Summers is skirting around this issue.

I would further guess that the author would advocate a return to more conventional neo-Keynsian monetary policy, as opposed to the highly interventionist policies pre and post financial crisis. Which might still not satisfy your desire for "true market forces", depending on what you meant.

alexeisadeski311• 12 years ago

At a time when taxes are obscenely high - at least in the US - the discussion should be of massive cuts, not new taxes. Alas, I am not optimistic. People have suffered for generations under horrific conditions. No reason it can't happen here.

Or to be more precise: No reason it can't happen here again. Don't forget slavery and Native Americans.

EDIT: Moved this from a sub post to here:

A lot of people are evidently misinformed about the state of US taxation. Since several have responded to my previous post with similar statements, I'll just take the top post and address the whole issue in one go.

1. The US has low tax rates relative to the rest of the world

For low earners, yes. For high earners no.

Re low earners: Federal income tax is low, SS contributions are moderate, but - and this is key - sales taxes (VAT) are extremely low, excise taxes on fuel are extremely low, and import duties are generally extremely low. Car registration, government fees, etc are all generally moderate to extremely low.

Re high earners:

a) Income taxes are extremely high. See http://en.wikipedia.org/wiki/List_of_countries_by_tax_rates , sort by "Individual (max)", and note that only France, Belgium, Sweden, and Aruba are higher.

b) Corporate tax is extremely high. Note that many will correctly state that some corporations are able to avoid some of the corporate tax. This is true, though overstated if you only follow what the NYT reports. For domestic US corporations doing business only in the US, their effective corporate rate will range between 35% and 45%, depending on their state.

e) Estate taxes. We pay 50% of our net worth upon death on all assets transferred to our descendants. A truly morally repugnant tax, this one. Passing on our advantages and earnings to our children is a great joy to many people.

d) Tax enforcement is insanely strict. Prison sentences and hefty fines await those who transgress.

e) We can't leave: American citizens pay tax to the US government even if they reside elsewhere. If we give up our citizenship, we must pay the US government between 30 and 40% of our net worth. The US is the only OECD nation to do this.

2. US taxes are lowest they've been since XX!"

This is true for low and middle earners, whose current tax rates are very low. Not true for high earners. The US tax code is the most progressive in the OECD.

The last tax reform was under Reagan. He traded high tax rates with lots of loopholes for moderate tax rates with few loopholes. Since then, the few loopholes have largely been closed (with exceptions, such as the popular middle class* home interest deduction) whilst rates have risen substantially.

See the wiki link above: top US income tax rates are the fifth highest in the world.

3. Overall US taxation is low!

As detailed above, the US taxation regime is the most progressive in the OECD. But taxation is still not low. At 34% of GDP[1], it's higher than Canada and only 5 points lower than the UK. 11 points less than France.

[1] http://www.usgovernmentrevenue.com/total

jonhinson• 12 years ago

At what rate do taxes cross the threshold of being obscenely high?

justincormack2• 12 years ago

Apparently somewhere under 26.9% of GDP.[1]

[1] https://en.wikipedia.org/wiki/List_of_countries_by_tax_reven...

tormeh5• 12 years ago

Well, American taxes are rather typical. A bit on the low side, but not much. What is atypical is the very low return American citizens see on that tax. Some of that is just because of high defense spending but the rest is a product of a completely inane government. One could argue that given the rate of return, American taxes are quite high.

mikeyouse3• 12 years ago

....

The US has some of the lowest taxes in the developed world:

http://i.imgur.com/R9nM7oZ.png

mncolinlee2• 12 years ago

This is obscenely wrong. Federal income taxes in the United States are at the lowest they've been since WW2 for most deciles.

alexeisadeski311• 12 years ago

Edit: moved.

mikeyouse3• 12 years ago

You're still way off base. The only thing that matters is effective tax rate.

a) Income Taxes -- Here's the comparison of taxes on $100k in income: http://i.imgur.com/GR9czuF.png - USA has the 53rd highest effective rate. $100k too low? We actually move down to 55th if you look at the same chart for $300k in income: http://i.imgur.com/2hb7iuB.jpg

b) Corporate Taxes -- Some of the lowest effective rates in the OECD: http://i.imgur.com/ZdPCL9C.jpg

c) Estate Taxes -- "We pay 50%" -- No 'we' don't. The tax doesn't apply at all if you leave your money to a spouse, farms and other small businesses are exempt as assets, only assets over $5.3 million have any tax applied at all, and the rate is 40%. $5M estate when you die? Tax rate = 0%. $6M estate? Tax rate = 4.7%.

d) Tax enforcement is strict? Come on. The vast majority of tax cases ended up with the 'guilty' party settling and paying back taxes. A few end up with penalties on top (most penalties are negotiated away for prompt payment). The only people imprisoned are those willfully engaging in tax fraud.

2. High earner tax rates -- This is so wrong. High earner rates are at the same level they were in the 80's and 90's: http://i.imgur.com/fklDml0.png --- But most importantly, the '1%er' incomes have risen dramatically. If we were in a truly progressive tax system, shouldn't tax rates increase as incomes do?

3. Make sure you're comparing apples to apples.. the OECD and Heritage (who are no fan of taxes and would have every incentive to make the US look worse) show a completely different story than the one you're providing: http://en.wikipedia.org/wiki/List_of_countries_by_tax_revenu...

They show the US at 26.9% of GDP for 2012, Canada at 32.2%, the UK at 39.0%, and France at 44.6%. If you've ever spent time in any of those countries, you'd surely see how absurd it sounds to indicate that we're taxed more than they are.

As for 'We're only 5 points lower than the UK'. Even if that was true, only 5 points would mean almost a trillion dollars in additional tax.

alexeisadeski311• 12 years ago

a) We're talking about people with annual incomes in the tens and hundreds of millions. Their effective rate in a state like CA will be in the 40s or 50s.

b) The low effective rates published by the GAO and others are well known to be utterly false. Here's a primer: http://tax.org/TAXCOM/TAXBLOG.NSF/PERMALINK/MSUN-99DKXS?OPEN...

c) Again, we're talking about estates worth billions. 50% effective.

d) Talk to some tax accountants in other nations to get a feel for how strict US tax enforcement is. The differences are glaring and obvious. It'll also dispel any notions you had about the US tax rates being lower in practice.

2. Effective rates are higher due to closed loopholes and tighter enforcement and the inability to leave the US with ones assets.

3. I've lived in several different nations. You may be interested to know that, for example, the US government spends more on public healthcare per person than does the UK.

anigbrowl10• 12 years ago

You're right about top marginal rates being high, but you seem to have overlooked the vast number of available deductions. I would be quite happy to see a lower top rate of tax there weren't so many ways of avoiding it.

acr25• 12 years ago

Ah, I remember summers on Piketty. The fresh seafood, the smores, the fireworks. Ferry horns in the distance. And, oh yeah, the global wealth tax.

nopinsight• 12 years ago

The impact of technology on inequality is already quite pronounced in a number of occupations. For example, many after-school teachers in Asia are now outcompeted by star teachers enhanced by video and computer-aided teaching platform.

For example, I suspect we will soon see the rise of educator superstars who command audiences of hundreds of thousands for their Internet courses and earn sums way above the traditional dreams of academics.

This is already happening in Asia. A South Korean tutor makes $4 million a year. A tutor in Thailand built and owned an 18-story tutoring center in a downtown area.

[1] http://www.forbes.com/sites/jamesmarshallcrotty/2013/08/11/s... [2] http://image.soidb.com/bangkok/zm/105100922_01.jpg

elchief2• 12 years ago

Larry's opinion is irrelevant. If you call yourself an Economist, and missed the bubble+collapse, you should resign, and stop talking.

"Summers oversaw passage of the Gramm-Leach-Bliley Act, which repealed Glass-Steagall, permitted the previously illegal merger that created Citigroup, and allowed further consolidation in the financial sector. He also successfully fought attempts by Brooksley Born, chair of the Commodity Futures Trading Commission in the Clinton administration, to regulate the financial derivatives that would cause so much damage in the housing bubble and the 2008 economic crisis. He then oversaw passage of the Commodity Futures Modernization Act, which banned all regulation of derivatives, including exempting them from state antigambling laws."

...

"Rajan warned that this bonus culture rewarded bankers for actions that could destroy their own institutions, or even the entire system, and that this could generate a "full-blown financial crisis" and a "catastrophic meltdown."

When Rajan finished speaking, Summers rose up from the audience and attacked him, calling him a "Luddite," dismissing his concerns, and warning that increased regulation would reduce the productivity of the financial sector."

anigbrowl10• 12 years ago

I also disagree with Summers over these things, but lack of foresight in some areas doesn't invalidate his opinions on everything else. Take it with a pinch of salt, by all means, but he's not an idiot.

elchief2• 12 years ago

Would you go to a "good boat design" talk by the designer of the Titanic?

timtas5• 12 years ago

A good analysis of Piketty by some real economists: https://www.youtube.com/watch?v=aL90pISm7Y8

Summers on Piketty

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