4 ms·

You can't say the rich have lots of land, then complain about not taking depreciation into account. Land doesn't depreciate. This guy is just searching for reas

by elchief 12y ago

You can't say the rich have lots of land, then complain about not taking depreciation into account. Land doesn't depreciate. This guy is just searching for reasons to dismiss Picketty. Edit: If you didn't read the article: "Rognlie points out that almost all of the increase in the value of capital over Piketty’s timeline comes from land" http://www.accountingcoach.com/blog/why-isnt-land-depreciated http://www.accountingcoach.com/blog/why-isnt-land-depreciate...

Perceval 12y ago
There is a long-standing distinction within classical political economy of differentiating between land, labor, and capital holding classes. Adam Smith, David Ricardo, and Karl Marx among many others make this distinction. Capital holders face depreciation. Land holders do not (at least, not to the same degree). Piketty looks at the asset mix of the rich over time, arguing that the rich have predominantly shifted away from land holding toward capital holding. Pre-WWI most wealth was drawn from land holdings, whereas Post-WWII most wealth is drawn from capital holdings and super incomes. The argument about the reconcentration of wealth from the 70s and 80s through the present ought to be affected if depreciation of capital were much higher than Piketty allowed for in his model—especially since the rich mostly hold capital now. If the wealth increase over time has been coming from land and not capital (which faces depreciation, while land does not), that's an interesting and important fact, because it affects the policy recommendations that flow from Piketty's argument. Piketty's conclusions call for a global progressive wealth tax and a global progressive income tax. What the article points out is that if most of the wealth increase is coming from land, a different type of tax might be the best way to target the concentration of wealth—namely the Georgist land-value tax instead of broader global wealth and income taxes. It doesn't appear that the MIT student is just casting about to find reasons to dismiss Piketty, rather these may be significant insights into the data that affect the overall conclusions that we might draw from it. Just like Piketty, Rognlie should be judged on the quality of his data.
- ThomPete 12y ago
  Discussing his solutions is very different from discussing his evidence. His evidence is sound but that does not mean his conclusions are or need to be. IMO you could throw away the entire last part of the book and still have one of the most important books written about capitalism. Now all we need is someone who write one about technology which is the elephant in the room and why I think Piketty is wrong about his proposals but thats another story.
  - Perceval 12y ago
    I agree that his evidence is sound. But like any other constructed data set, Piketty makes choices about measurement indicators and categories that are open to challenge. The way that he composes his measures of wealth and capital could be more nuanced, if those nuances make a significant difference in the results produced by the models built on top of them. This MIT student seems to be doing just that—arguing that the composition of land and capital in measures of wealth need to be treated with more nuance, and that measures of capital need to take account of depreciation in a different way than Piketty does. I make similar arguments in my dissertation about one of the longest-running, most widely used data sets in my field. Sometimes the categorization of data is misleading in certain ways that elides phenomena that are actually very significant. Piketty's construction of the data set is fantastic work. But it doesn't mean that all the choices he made in constructing and categorizing the data are the best choices that could have been made.
    - ThomPete 12y ago
      You are probably right about that but I don't think better choices would change the result, but thats just my personal opinion.
- rsync 12y ago
  "What the article points out is that if most of the wealth increase is coming from land, a different type of tax might be the best way to target the concentration of wealth—namely the Georgist land-value tax instead of broader global wealth and income taxes." I hate to be Mr. Unintended Consequences, blah blah, but ... Can we stop and imagine for a bit what the world would look like if land owners were forced to build and develop to match rising land values just to maintain their ownership ? Right now we sometimes see long time property owners forced to sell - they cannot afford to live there anymore as property taxes rise, based on the value. Imagine if the buildings themselves (or the farms or the gardens or the parks) could not afford to be there ?
encoderer 12y ago
Hmm... Sure you can? Non-land domestic wealth is still a significant share and his arguments for accelerated depreciation ring true to me.
- elchief 12y ago
  Read the article. "Rognlie points out that almost all of the increase in the value of capital over Piketty’s timeline comes from land"
  - encoderer 12y ago
    Look at the data. Non-land wealth is still huge, and he's arguing the nature of this wealth brings higher depreciation than it once did.
kaonashi 12y ago
Yea, a truly great economics troll would reach for something like the money multiplier, law of diminishing marginal returns, or loanable funds to make such an argument.
- adventured 12y ago
  Or at least touch on the rise of the modern un-backed central bank post Bretton Woods. Rich people can more easily shield their wealth from inflation than middle class or poor people can shield their wages from inflation, leading to a perpetually increasing gap between the two so long as central banks continue to use QE and inflationary schemes to fake economic growth and dilute debt. Average workers earning 1% annual wage increases don't tend to do very well when you debase their currency at over twice that rate. A good economic troll would point that out.
  - kaonashi 12y ago
    QE wasn't/isn't inflationary (and I believe the empirics bear this out), it was a dollar for dollar swap of treasuries for reserves. If anything it is/was the opposite, removing interest income from the private sector and putting it on the FED's books (which get remitted back to the treasury). (ooh, you're goooood)
evanpw 12y ago
A direct quote from Rognlie's article: "Land does not depreciate; all its income is net." This is the worst kind of internet debate: a group of people who haven't read Piketty's book arguing with a group of people who haven't read an article which claims to find problems with it.
mark_l_watson 12y ago
I think many economists want to discredit him because he points out how many of them are paid by special interests. BTW, I liked Capital in the 21st Century - a good dead.
vixen99 12y ago
Fancy searching for reasons to dismiss someone's argument or thesis! That's not playing fair at all.

by elchief 12y ago

Perceval 12y ago

There is a long-standing distinction within classical political economy of differentiating between land, labor, and capital holding classes. Adam Smith, David Ricardo, and Karl Marx among many others make this distinction. Capital holders face depreciation. Land holders do not (at least, not to the same degree). Piketty looks at the asset mix of the rich over time, arguing that the rich have predominantly shifted away from land holding toward capital holding. Pre-WWI most wealth was drawn from land holdings, whereas Post-WWII most wealth is drawn from capital holdings and super incomes. The argument about the reconcentration of wealth from the 70s and 80s through the present ought to be affected if depreciation of capital were much higher than Piketty allowed for in his model—especially since the rich mostly hold capital now. If the wealth increase over time has been coming from land and not capital (which faces depreciation, while land does not), that's an interesting and important fact, because it affects the policy recommendations that flow from Piketty's argument. Piketty's conclusions call for a global progressive wealth tax and a global progressive income tax. What the article points out is that if most of the wealth increase is coming from land, a different type of tax might be the best way to target the concentration of wealth—namely the Georgist land-value tax instead of broader global wealth and income taxes. It doesn't appear that the MIT student is just casting about to find reasons to dismiss Piketty, rather these may be significant insights into the data that affect the overall conclusions that we might draw from it. Just like Piketty, Rognlie should be judged on the quality of his data.

ThomPete 12y ago
Discussing his solutions is very different from discussing his evidence. His evidence is sound but that does not mean his conclusions are or need to be. IMO you could throw away the entire last part of the book and still have one of the most important books written about capitalism. Now all we need is someone who write one about technology which is the elephant in the room and why I think Piketty is wrong about his proposals but thats another story.
- Perceval 12y ago
  I agree that his evidence is sound. But like any other constructed data set, Piketty makes choices about measurement indicators and categories that are open to challenge. The way that he composes his measures of wealth and capital could be more nuanced, if those nuances make a significant difference in the results produced by the models built on top of them. This MIT student seems to be doing just that—arguing that the composition of land and capital in measures of wealth need to be treated with more nuance, and that measures of capital need to take account of depreciation in a different way than Piketty does. I make similar arguments in my dissertation about one of the longest-running, most widely used data sets in my field. Sometimes the categorization of data is misleading in certain ways that elides phenomena that are actually very significant. Piketty's construction of the data set is fantastic work. But it doesn't mean that all the choices he made in constructing and categorizing the data are the best choices that could have been made.
  - ThomPete 12y ago
    You are probably right about that but I don't think better choices would change the result, but thats just my personal opinion.
rsync 12y ago
"What the article points out is that if most of the wealth increase is coming from land, a different type of tax might be the best way to target the concentration of wealth—namely the Georgist land-value tax instead of broader global wealth and income taxes." I hate to be Mr. Unintended Consequences, blah blah, but ... Can we stop and imagine for a bit what the world would look like if land owners were forced to build and develop to match rising land values just to maintain their ownership ? Right now we sometimes see long time property owners forced to sell - they cannot afford to live there anymore as property taxes rise, based on the value. Imagine if the buildings themselves (or the farms or the gardens or the parks) could not afford to be there ?

encoderer 12y ago

Hmm... Sure you can? Non-land domestic wealth is still a significant share and his arguments for accelerated depreciation ring true to me.

elchief 12y ago
Read the article. "Rognlie points out that almost all of the increase in the value of capital over Piketty’s timeline comes from land"
- encoderer 12y ago
  Look at the data. Non-land wealth is still huge, and he's arguing the nature of this wealth brings higher depreciation than it once did.

kaonashi 12y ago

Yea, a truly great economics troll would reach for something like the money multiplier, law of diminishing marginal returns, or loanable funds to make such an argument.

adventured 12y ago
Or at least touch on the rise of the modern un-backed central bank post Bretton Woods. Rich people can more easily shield their wealth from inflation than middle class or poor people can shield their wages from inflation, leading to a perpetually increasing gap between the two so long as central banks continue to use QE and inflationary schemes to fake economic growth and dilute debt. Average workers earning 1% annual wage increases don't tend to do very well when you debase their currency at over twice that rate. A good economic troll would point that out.
- kaonashi 12y ago
  QE wasn't/isn't inflationary (and I believe the empirics bear this out), it was a dollar for dollar swap of treasuries for reserves. If anything it is/was the opposite, removing interest income from the private sector and putting it on the FED's books (which get remitted back to the treasury). (ooh, you're goooood)

evanpw 12y ago

A direct quote from Rognlie's article: "Land does not depreciate; all its income is net." This is the worst kind of internet debate: a group of people who haven't read Piketty's book arguing with a group of people who haven't read an article which claims to find problems with it.

mark_l_watson 12y ago

I think many economists want to discredit him because he points out how many of them are paid by special interests. BTW, I liked Capital in the 21st Century - a good dead.

vixen99 12y ago

Fancy searching for reasons to dismiss someone's argument or thesis! That's not playing fair at all.