4. Piketty conflates wealth and capital -- Varoufakis agrees
Varoufakis and Mazzone points:
1. Piketty is helpfully bringing inequality into established mainstream of economics profession. In neoclassical economics there is no place for inequality due to Utility Theory. This solves the disconnect between what most Americans thought and how economics has been practiced.
2. Inequality was banned from neo-classical economics because it uses a Utilitarian model where utility justifies all levels of inequality based on intelligent consumer preference and that one's output cannot be compared to anyone else's outside of this ranking.
3. Piketty finally made it so that the economics can say something about inequality after all.
4. (Andy/Yanis) Piketty offers no theoretical basis for inequality (In Piketty's defense, it should be noted that he says his book is as much a work of history as economics. It would be interesting to see an historical critique of Piketty then, not just economic critiques), but Varoufakis says the theoretical construct is consistent with neo-classical textbook, but it can be disregarded eventually because it has no substance: 3 laws.
a. Law 1 is a tautology r>g (capital grows faster than national product)
b. Law 2 based on assumption that can't hold in reality
c. Law 3 is trivial
5. Conclusion is weak, just a wealth tax with no distinction between capital, labor and land wealth.
6. Very few read all the way through Piketty's book (Amazon reviews confirm this "early pages" bias).
7. Paul Krugman praised the book, though he should know better (Andy). Krugman is an academic economist who sees the world as a single sector economy model (Yanis) and is coached in terms of the IS-LM model (Investment Saving-Liquidity Preference Money Supply) -- a macroeconomic tool that demonstrates the relationship between interest rates and real output, in the goods and services market and the money market. IS-LM acts as if there is only one "capital good" (Yanis) and it just an interplay between availability of money vs. other capital goods. Returns to capital are not difficult to envisage in one-capital good model. This model does not need money, only trade.
8. Neoclassical models not capable of "handling money." It is too complicated a concept. The models predict anything is possible and so are "useless" and not predictive.
9. (Yanis) Krugman uses his simply IS-LM model to do good things. Piketty much less interested in changing the world than Krugman, more a describer. Both Krugman and Picketty share an over-simplified view of capitalism.
10.What policy prescriptions can you take from Piketty? (Andy). There's no bargaining power in Piketty's formulation because we're all "cogs in the machine" (e.g. The Matrix). This is not capitalism (Yanis). Piketty assumes prices are given and the "market" has determined them to everyone's satisfaction.
11.(Andy) Piketty says tax all wealth, including money (which is most wealth these days, at least on paper), and he doesn't disaggregate it (e.g. Land, true Capital),
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