Sunday, January 24, 2010

Sunday Links

. Sunday, January 24, 2010

For reading while watching the Saints and Colts win:

1. Reconfirm Bernanke. And also here.

2. Global inequality has decreased enormously. Why don't people talk about this more?

3. Clive Crook on the U.S. and European models.

4. Whole Foods founder John Mackey has a LOT of faith in capitalism.

5. European Commission: "Euro imbalances weaken trust in the euro and endanger the cohesion of the monetary union."

6. Mike Rorty on Glass-Seagall, and here, and here.


Emmanuel said...

Young Kindred, the reason why Sala-i-Martin's inequality statistics don't get more attention is because his stuff is methodologically suspect and far more optimistic than everyone else's.

Among others, Branko Milanovic, author of the definitive book on the topic, should get to this latest Sala-i-Martin-ism in due course. For now, take it with a grain of salt like everyone else does (except for the cheerleaders).

Emmanuel, Wizened IPE Buzzard Against Rah-Rah

Kindred Winecoff said...

Thanks for the tip to the Milanovic article. The link to the paper was broken (and I don't have time to read it right now anyway), but it seems to be saying that there is a high probability of measurement error at work. But if so, would that be unique to Sala-i-Martin's analysis? Won't the same problems plague other studies as well? The downsides of Gini and similar measures are also well-known.

I'm not saying that Solow's growth model is exactly right, but is it really so controversial to suggest that there has been *some* convergence since 1970? If not, then inequality will have declined.

So maybe it would be best to conclude that global inequality has declined, just not as much as the cheerleaders claim?

Emmanuel said...

Sala-i-Martin makes assumptions others believe require too much of a leap of faith.

As for reductions in inequality in the general literature, it depends how you measure it.

Thomas Oatley said...

Everyone makes assumptions, Emmanuel. Milanovic, for example, assumes that concepts 1 and 2 are better approximations of true inequality that concept 3 because concept 3 has measurement error. Yet, concepts 1 and 2 are just imperfect measures of what we really care about, which is concept 3. Thus, why is his measurement error less worrisome to you?

I'm not sure why you believe Brankovic is definitive. Have you read
Firebaugh, Glenn. 2003. The New Geography of Income Inequality. Cambridge: Harvard University Press.

Emmanuel said...

Hello Dr. Oatley,

If you read the paper I've linked to above, Milanovic doesn't conclude that Concept 3 is inferior to Concept 2. What he does say are that (a) Sala-i-Martin's version of Concept 3 is nearly indistiguishable from everyone else's Concept 2 and (b) Sala-i-Martin is the most optimistic outlier when generating Concept 3 measurements.

These criticisms still hold. See Milanovic's recent take on inequality using the 2005 PPPs and compare it to Sala-i-Martin's.

Milanovic commands respect from both authors of the left and the right while Sala-i-Martin tends to attract criticism from the former. See our own Robert Wade or Pogge and Reddy also at Columbia. If Milanovic is as close to plain vanilla among economists studying poverty and inequality, Sala-i-Martin is regarded as...chocolate fudge! As always, caveat emptor.

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