One of the greatest features of the American government is that even the executive has incredibly limited influence, both on government and society. It is encouraging that, even with a strong personality like President Trump, that holds true – the executive cannot simply bully his corporate enemies into submission. Of course, there is likely still a chilling effect based on the perception that President Trump has real influence on market caps, but at least it is simply rooted in perception and not reality.
Daron Acemoglu and James A. Robinson take on Piketty and, more broadly, the general laws of capitalism:
Thomas Piketty’s (2014) book, Capital in the 21st Century, follows in the tradition of the great classical economists, like Marx and Ricardo, in formulating general laws of capitalism to diagnose and predict the dynamics of inequality. We argue that general economic laws are unhelpful as a guide to understand the past or predict the future, because they ignore the central role of political and economic institutions, as well as the endogenous evolution of technology, in shaping the distribution of resources in society. We use regression evidence to show that the main economic force emphasized in Piketty’s book, the gap between the interest rate and the growth rate, does not appear to explain historical patterns of inequality (especially, the share of income accruing to the upper tail of the distribution). We then use the histories of inequality of South Africa and Sweden to illustrate that inequality dynamics cannot be understood without embedding economic factors in the context of economic and political institutions, and also that the focus on the share of top incomes can give a misleading characterization of the true nature of inequality.
The Economist explains is one of my favorite blogs; highly recommend it.
EVERY weekday The Economist explains a new subject, topical or timeless, profound or peculiar. As the end of the year approaches, we look back at the explanations that have proved most popular with readers during 2014.