Digressions&Impressions

On Stigler's Aristotelian Criticism of Samuelson (and a footnote on Hume & Thales)

These considerations therefore show that Wisdom is both Scientific Knowledge and Intuitive Intelligence as regards the things of the most exalted nature. This is why people say that men like Anaxagoras and Thales ‘may be wise [sophoi] but are not prudent,’ [phronimoi] when they see them display ignorance of their own interests; and while admitting them to possess a knowledge that is rare, marvellous, difficult and even superhuman, they yet declare this knowledge to be useless, because these sages do not seek to know the things that are good for human beings. Prudence on the other hand is concerned with the affairs of men, and with things that can be the object of deliberation.--Aristotle, Nicomachean Ethics, 6.7.5 (translated by Rackham) [1141bff].

In the Ethics, Aristotle reports a popular prejudice against Anaxagoras and Thales that they have esoteric and technical knowledge of useless subjects (metaphysics, astronomy, physics, etc.), but lack knowledge of human affairs. Ancient popular opinion seems to have been unmoved by, or unfamiliar with, the idea of (to use some anachronism) technological spin-offs of pure research. Surprisingly enough, in Plato's Theaetetus, Socrates seems to embrace a version of the popular prejudice against Thales [174a]* in order to argue that there is, in fact, a permanent (potential), multi-faceted (political and social) problem for philosophers.

I doubt that Aristotle is endorsing the prejudice against Thales in the passage of the Ethics because, as he reports in the Politics, he is familiar with the story of Thales's ability to make a fortune on his skill at monopolizing olive presses in Miletus and Chios [1259a]. Interestingly enough, in the Politics, Aristotle portrays popular opinion as being confused about the source of Thales's ability to make a fortune and it (public opinion) ascribes it to Thales's ability to use esoteric knowledge about the stars to practical ends. (I have discussed this at greater length here.) And, in fact, in the Politics, Aristotle implies that Greek political elites could create local market monopolies as a source of public revenue "for many states need financial aid and modes of revenue." Given that Aristotle clearly recognizes that consumers have to pay more than they otherwise would under such a monopoly, Aristotle here knowingly sides with ruling elites against at least some of the citizens (and non-citizens).

What does any of this have to do with two Nobel laureates in economics?

As I have mentioned before (recall here, here, and here), in 1943 George Stigler -- then at Minnesota, where Milton Friedman became his office-mate (but Chicago trained and eventually a pillar of 'Chicago economics') -- published a blistering attack on the assumptions behind the "simple technique" of the "new welfare economics" (NWE) in the American Economic Review. Paul Samuelson (then already at MIT which he would turn into the greatest economics department of the next few decades) was one of the named targets and wrote a scathing response. (I believe Stigler and Samuelson had overlapped a bit at Chicago when Samuelson was an undergraduate there.)

The epigraph at the top of this post is also the epigraph to Stigler's short piece. Stigler insists that the normative presuppositions of NWE ought to be different than the assumptions in pure (positive) economics. Stigler argues for greater self-understanding on the part of economists about the essentially political nature of welfare economics when applied to societies. In context, Stigler’s point is meant to warn against two tendencies: first, the tendency to import the representative agent into the pure part of economic analysis; second, the tendency to forget the contentious nature of tacitly assuming that that society’s ends are unified.** Stigler does not advocate removing (controversial) policy ends from economics, but rather advocates transparency about ends ("bringing the existing ends to the surface.") Along the way, he makes fun of economists' hyper-specialization within the academic division of labor. In particular, he insists that economists are overlooking important insights of "modern social theory." (Stigler mentions Wallis, Durkheim, and Parsons among others.)

It would have made my life easier if Stigler had quoted the passage on Thales from Aristotle's Politics. For, from Stigler's vantage point, Aristotle and Samuelson are presenting themselves as policy experts to ruling elites and are assuming consensus over major ends. (Of course, neither Aristotle nor Samuelson ignores class conflict!) 

But a moment's further reflection suggests a more subtle point. Samuelson's NWE is presented in (then) "formidable" mathematical language (see also here and here), and is esoteric in the way that the astronomical science of Thales and Anaxagoras is purported to be. And, Stigler clearly implies in his 1943 AER piece that the mathematical formalism cannot deliver genuine policy advice because "theory and statistics are too weak to yield really defensible estimates of individual gains and losses" and, thus, make compensation a mere "analytical trick." Thus, Stigler believes that Samuelson and his allies are creating the circumstances in which popular prejudice of the sort directed at Thales and Anaxagoras as reported by Aristotle is likely. That is to say, it's not just that the NWE is ignoring other social sciences at its peril, its aim to become the key policy science through its oracular non-transparent appeal to elites -- promising them to deliver the levers by which the economy can be directed [the context is, first, Great Depression, then the planned war-economy] -- will lead to long run social problems for economics absent a better understanding of its role in society.

Ironically, it was one of Stigler's 'Chicago' colleague, who in 1954 created the analytical trick through which economists could dispense with "statistics" to figure out compensation. That colleague was A. Harberger, the intellectual father of the Chicago Boys in Chile (see here for details) with, how to put this delicately, not entirely salutary results. So, Stigler was prescient, but in 1943 he could not have foreseen that he was warning his own school.

I close with more Aristotle:

It is also clear that Wisdom cannot be the same thing as Political Science. (Aristotle, NE, 6.7)

 

On Douglas on Milton Friedman on Gödel

The interaction between the observer and the process observed that is so prominent a feature of the social sciences, besides its more obvious parallel in the physical sciences, has a more subtle counterpart in the indeterminacy principle arising out of the interaction between the process of measurement and the phenomena being measured. And both have a counterpart in pure logic in Gödel’s theorem, asserting the impossibility of a comprehensive self-contained logic. It is an open question whether all three can be regarded as different formulations of an even more general principle.—Milton Friedman (1953) “The Methodology of Positive Economics,” note 3.

In a series of papers (here, here, and here), I have defended Milton Friedman’s methodological sophistication, especially in his 1953 essay. I have not been uncritical. But I have passed over the note above in silence. I have to admit that I have been unsure what the point of the note is (other than a certain kind of name-dropping, it seems to stress that there are no special problems in doing economics relative to other scientific disciplined) in the overall argument, and I have been unable to place the claims contained in it in context of Friedman’s other writings of the time.

The excellent young Spinoza scholar, Alexander Douglas, is underwhelmed by Friedman’s note and makes deserved fun of the part about Gödel in a recent post on his blog. But then Douglas draws a rather far-reaching conclusion that is worth quoting in full. I think draws on a lot of common misconceptions about the nature of Friedman’s economics and its role in the economics profession that are worth debunking not only in order to do justice to the historical actors and the manner in which economics has evolved during the last sixty years or so, but also to remind us that the real story is always more complex (and I hope more interesting) than our images. Douglas writes:

While Friedman’s comment is contained within a footnote making a peripheral point, I believe that its wrongness should cast out a warning beacon across the rest of his work. Nobody who understood Gödel’s theorem would state what Friedman states, even as a throwaway comment. It’s no use arguing that Friedman accidentally wrote ‘logic’ when he meant ‘formal system for arithmetic'; people don’t make slips of the pen on that order. It is thus worrying, first of all, that Friedman should make such bold proclamations about something he doesn’t seem to understand. But it is also worrying that he should lack the understanding. Logic and mathematics are, after all, fairly central to what neoclassical economists do. It is telling that an economic theorist of Friedman’s stature should be deficient in the simple curiosity that would have led him to learn what he needed to avoid such an egregious howler. It reveals something, I suspect, about the dismissive attitude some neoclassical economists take towards other disciplines, even those that lie at the very foundations of the theoretical systems they typically employ.—Alexander Douglas

First, it is worth reminding ourselves that Ernest Nagel’s and Newman’s’ book on Gödel’s theorems appeared after Friedman’s essay (in 1958 according to Wikipedia). This is not to excuse Friedman, but to remind ourselves that during 1948-52 -- the period when Friedman drafted his celebrated essay --, students and advanced scholars even in philosophy were not exposed yet, I think, to a decent introduction to the celebrated results.

Second, in 1953 economics was not yet a full-fledged mathematical science in the way it has since become and Friedman was not the representative of those who wanted to make it so (Samuelson, Arrow, Bergson, etc.). He was, despite his life-long admiration of Alfred Marshall, very critical of those who wished to make economics primarily a mathematical science. His 1953 essay is, in fact, a defense of economics as an empirical, data-driven science (or so I have argued); as Friedman writes, “Economics as a positive science is a body of tentatively accepted generalizations about economic phenomena that can be used to predict the consequences of changes in circumstances.”

Third, of his generation, Friedman was not a bad mathematician; at one point he apprenticed to one of the very best mathematical economists of the 1930s (Hotelling); as anybody who has looked at his work from the forties and fifties discovers (including his work for the armed forces), he could be very skilled mathematical economist when he set himself to it. But he was not interested in mathematical rigor as an end in itself nor in introducing more mathematical tools than he thought required for the economic problem he focused on.  (The reader can decide whether this is good or bad.)

Fourth, with some exceptions, economists at The University of Chicago (in the 1940s and 50s) lagged in mathematical hyper-sophistication compared to economists at MIT, Yale, Cambridge, LSE, and even Columbia; the exceptions (Oskar Lange, Abba Lerner, etc.) were not neoclassical economists (Lange was a Marxist, in fact).

Having said that, Friedman’s essay is a defense of the autonomy of economics. And so it’s correct to suggest, as Douglas does, that there is a kind of lack of interest in deep engagement with other disciplines. So, Douglas's insight stands. I have argued that Friedman’s essay is compatible with experimental economics, but that project was still a glimmer in Vernon Smith’s mind then. But the economics that Friedman advocates is also not the imperialistic one familiar from his student Gary Becker; in fact, I believe he was distinctly reserved of Becker’s project through the end of his life, but about that some other time more.

Finally, Ernest Nagel offered a once-famous criticism of Friedman's essay (recall). He keeps a discrete silence on the Gödel’ footnote (I think).

Predicting the Future of the Economy; On Rosenberg on Krugman on Reflexivity and Uncertainty

When combined uncertainty and reflexivity greatly limit the power of maximizing and equilibrium to do useful economics. Reflexive relations between future expectations and outcomes are constantly breaking down at times and in ways that no one can predict—about which there is complete uncertainty. Between them, they make the economy a moving target for the economist. Models get into people’s heads and change their behavior, usually in ways that undermine the model’s usefulness to predict. Which models do this and how they work is not a matter of quantifiable risk, but radical uncertainty. Of course it’s not just economist’s models that get into people’s heads, lots of other models—“metaphors” Krugman calls them—do so and at rates and with reflexive effects that are radically uncertain. And that’s what makes the economy, and human affairs generally, a target moving too fast for anything more than simple models, whether its [sic] in economics, political science, sociology, etc. Between them reflexivity and uncertainty make economics into a retrospective, historical science, one whose models—simple or complex—are continually made obsolete by events, and so cannot be improved in the direction of greater predictive power, even by more complication. The way expectations reflexively drive future economic events, and are driven by past ones, is constantly being changed by the intervention of unexpected, uncertain, exogenous ones. No bubble ever repeats, because people remember them. Regulators engaged in preventing their recurrence are just setting the stage for new and different ones. Dodd-Frank is just an incentive to figure out new ways to exploit regulations. There is room for both uncertainty and reflexiveness in Krugman’s philosophy of economics. For he recognizes that economics has to be a historical science ‘History provides “the real issues and the real experiences that need explaining.” Indeed, his best examples of why history matters incorporate both uncertainty and reflexiveness: “In macro, in particular, you need to know about drastic events”–the German hyperinflation for example….Drastic events, ones no one could see coming—uncertain ones–punctuate economic life. All too often they break up a comfortable predictable reflexive relationship between expectations and reality. They make economics the discipline Krugman thinks it is, like history, one we may look to for lessons but not predictions.’—Alex Rosenberg, “Paul Krugman’s Philosophy of Economics, and What It Should Be”

I very much agree with Rosenberg’s observations on the tensions in Krugman’s (evolving) philosophy of economics, and I also agree with much of Rosenberg’s emphasis on reflexivity and uncertainty. (No surprise, I have published on both and also done a lot of blogging on them.) But I do offer two (friendly) qualifications on Rosenberg’s analysis. First, I note a lacuna in Rosenberg’s analysis. What Rosenberg calls “radical uncertainty” (or “complete uncertainty”) used to be called “Knightian uncertainty.” It’s typically understood as the doctrine that prevents us assigning probabilities or measures on the likelihood of future outcomes. Rosenberg notes in his piece that Knight and Keynes both embraced versions of radical uncertainty. In Rosenberg’s hands this is an epistemic doctrine. (I mention this because Keynes also recognized a metaphysical version of uncertainty.)

Now, mathematical economists displaced epistemic uncertainty in the post WWII era (the start of which we can conveniently mark with Samuelson’s Foundations). But they did not just pretend it did not exist as a problem. Rather one way they tamed epistemic uncertainty is by treating (or operationalizing) it as a species of randomness. They could then design decision procedures that would allow for, say, the best of the worst outcomes, or (another example) a rational option price, in a stochastic environment—the environment is treated as uninformative and one places so-called ‘bets against nature.’ (The previous sentence is, of course, a gross simplification.) This is not the only way economists displaced epistemic uncertainty; elsewhere I have discussed how Arrow Commodities did so in a general equilibrium framework (see also).

Undoubtedly, Rosenberg, who pioneered the philosophy of economics, knows all of this. But one reason to mention this taming of uncertainty strategy is that the problems associated with it do not turn on reflexivity. Rather, it turns on (to use philosophical jargon) hidden modal features of the mathematical treatment of randomness. For the mathematical tools that operationalize randomness all make assumptions about possible distributions (that are and are not allowed). There are other subtle (defeasible) assumptions about the way the world might built into these mathematical tricks. The point is that if we focus on reflexivity we might miss some of the non-trivial ways that make it so hard to have a predictive social sciences.

Second, it’s not true that reflexivity prevents predictability. We know, for example, that the existence of opinion polling does not necessarily prevent their predictions from coming true. Even if this is due to them being self-fulfilling or self-reinforcing prophecies, the point still stands. We need not be too in awe of Nate Silver’s successes in predicting electoral outcomes; more than half a century ago, Herbert Simon (among others) had offered an analysis that had explained how this could be possible (see also). But we need to be clear about what made this success possible: it requires a data-rich environment, institutional stability, a slow evolution of demographics, and limited alternatives in one’s choice (there are a lot of explicit and implicit barriers to entry in elections). One reason I could make fun of Silver’s World Cup predictions is that it is a data poor environment and the demographics (the players/teams) evolve rather rapidly. So, we should expect that in some circumstances economists should continue to make reasonably fine-grained predictions in relatively controlled environments (say, rent-control in a city with stable demographics and limited new supply of housing).

In  conclusion, my two qualifications do not undercut Rosenberg’s general thrust. But they also generate some chilling possibilities. Computer power is becoming cheap and we are starting to drown in easily available data. This allows, as Oskar Lange foresaw, for massive simulations and modelling. If governments or corporations could limit our options as consumers to the option generated in simulations then barring natural disasters and war, the economy would be predictable. This is not just science fiction tempting to future rulers of Singapore. Whole chunks of the economy are funny hybrids of public/private entanglements (health, education, defense, construction, etc.) or attempts at generating closed corporate networks (cf, Google, Apple, Facebook, etc.).

On Carnap, Luck and Necessity in Samuelson's *Foundations* of Economics

By 1983 we were all, so to speak, mathematical economists...This is as it should be. Soft and hard sciences are cumulative disciplines. We each bring our contributions of "value added" to the pot of progress. In Max Planck's much-quoted words: Science progresses funeral by funeral. Inside tomorrow's physics treatise will be the lasting truths of Isaac Newton and also of the professor who works down the hall from you. Something of the same goes for economics, where often the dance must proceed Two Steps Forward and One Step Back.--Paul A. Samuelson 1998 (1378-9)

Had I remained on the Chicago Midway, I might well have missed out on the three revolutions that remade mainstream economics: the Keynesian Revolution, the Imperfect-Competition Revolution, and the Mathematical-Economics Revolution. Instead I had a front-row seat.--Paul A. Samuelson (1379)

Had I been a strict constitutionalist, I might well have stopped there. The result would have been a shorter 200-page book with one fully integrated theme.--Paul A. Samuelson (1384)

Reading widely, I was a child of my time, but it was the internal logic of the economic puzzles that guided Foundations' growth.--Paul A. Samuelson (1375 [emphasis in original])

The historian of economics, Roger Backhouse, has long been prodding me to pay closer attention to Paul Samuelson, who was the economist's economist for much of the second half of the twentieth century. In particular, in commenting on my work on the pre-history of Kuhnian ideas within Chicago economics, he insisted that I should not underestimate the significance of Samuelson (the very anthithesis of a Chicago economist, despite having done a BA there). And, indeed, in reading Samuelson's reflections on his own achievement on his seminal Foundations of Economic Analysis a half century later, I was struck by the Kuhnian imagery, including his self-presentation as a would-be-revolutionary (rather than "strict constitutionalist") and the focus on how puzzle-solving  (rather than external influences) led to the breakthroughs. 

But I wondered to what degree the evidence from 1998 wasn't itself a consequence of Kuhn's influence. Nudged by Backhouse I was directed to the following passage in Samuelson's Foundations:

[A]t a time when pure economic theory has undergone a revolution of thought—from statical to dynamical modes. While many earlier foreshadowings can be found in the literature, we may date this upheaval from the publication of Ragnar Frisch’s Cassel Volume essay [1933--ES] of only a decade ago. The resulting change in outlook can be compared to that of the transition from classical to quantum mechanics. And just as in the field of physics it was well that the relationship between the old and the new theories could be in part clarified, so in our field a similar investigation seems in order. (Samuelson 1947, p. 284)

So, Samuelson was very explicit about that fact that he was participating in a scientific revolution that was initiated before him. In an "age of specialization," Samuelson thought of himself as the 'last generalist' because after his framework setting work, the end of "upheaval," there would only be a need for esoteric specialist work. In Samuelson's hands the revolution has an air of inevitability.

On Chicago Economics and Samuelson's Technocratic Conception of Economics

Samuelson's exposition is consistently mathematical, and presupposes a knowledge of advanced calculus, higher algebra, and differential equations...I consider this failure to provide translations for the "literary" economist a serious shortcoming of his work. He dismisses translations into words as "mental gymnastics of a peculiarly depraved type." I disagree. There is no depravity, nor is there virtue, in telling other competent economists things in a language they all can understand-there is simply responsibility to the canons of scholarship.--G.J. Stigler (1948) reviewing Samuelson. [HT David M. Levy]

Even extremely well informed readers do not always recognize the significance of the books they review; or if they do, they may wish to suppress it in the hope to prevent a certain outcome. George J. Stigler, one of the leading Chicago-Economists of the 20th century (Nobel 1982), insists at the start of  his 1948 review of Paul Samuelson's Foundations of Economic Analysis that "much of [the] subject matter is currently of much diminished interest." Samuelson's (1947) Foundations is the book that (together with Samuelson's textbooks that followed) brought together the formal languages and techniques that created the mathematical 'revolution'* and its accompanying technocratic ideal which has been its self-image of economics since. (This is not to deny later contributions by Arrow, Debreu, McKenzie, etc.) After Samuelson (Nobel 1970) -- by his own lights "the last 'generalist' in economics," -- economics became an esoteric field for specialists and specializations. 

Stigler's review was not very influentual (most citations to it are by recent scholars) and is less known than, say, Boulding's [see this essay by Khan]. Even so, Stigler review is instructive because it articulates a number of themes that become distinctive of 'Chicago' (and, thus, a crucial feature of the intellectual edifice what is often known as 'neo-Liberalism.') Before I elaborate on that, Stigler's review is at its best when it explains Samuelson's methodological strategy. One often hears that mathematical economics is not empirical (as well as not realistic). But as Stigler notes (correctly), "The leitmotiv of Samuelson's treatise is the search for meaningful theorems, that is, theorems which are in principle capable of empirical contradiction" (either introspectively** or by way of social scientific data). In the context of commenting on Samuelson's empirical methodology, Stigler asks, 

what if the theorem is contradicted by observation? Samuelson says it would not matter much in the case of utility theory (p. 117); I would say that it would not make the slightest difference. For there is a free variable in his system: the tastes of consumers. These tastes are not observationally (or operationally) defined, so any contradiction of a theorem derived from utility theory can always be attributed to a change of tastes, rather than to an error in the postulates or logic of the theory.

 

On Keynes, Chicago Economics, and Social Engineering

"It is quite another thing to conclude that therefore ends of good policy are beyond the realm of scientific discussion. For surely the primary requisite of a working social system is a consensus on ends. The individual members of society must agree upon the major ends which that society is to seek. If any large share of the population actively disagrees with the society's ends, and in particular if it believes that the system is unfair by the group's criteria, the social system will surely disintegrate, probably with violence.

This is almost axiomatic in modern social theory…

At the level of economic policy, then, it is totally misleading to talk of ends as individual and random [as new welfare theorists do—ES]; they are fundamentally collective and organized.

If this conclusion be accepted, and accept it we must, the economist may properly exceed the narrow confines of economic analysis. He may cultivate a second discipline, the determination of the ends of his society particularly relevant to economic policy. This discipline might be called, following J.N. Keynes, applied ethics.7

7 See his Scope and Method of Political Economy (4^th edition: London 1930) especially chap. II. I did not realize how neglected this excellent book has become until, when I recently referred to it, several friends expressed surprise that I did not know Keynes's middle name was Maynard! –GJ Stigler (1943) "The New Welfare Economics" American Economics Review, 33(2): 357-8.

At the very start of his famous (1953) methodology paper, Milton Friedman calls attention to a three-fold distinction he inherits from the logician-economist, J.N. Keynes (yes, father of that more famous philosopher-economist, J.M. Keynes): "In his admirable book on The Scope and Method of Political Economy, John Neville Keynes distinguishes among "a positive science ... a body of systematized knowledge concerning what is; a normative or regulative science...[,] a body of systematized knowledge discussing criteria of what ought to be...[,]an art... [,] a system of rules for the attainment of a given end"; comments that "confusion between them is common and has been the source of many mischievous errors"; and urges the importance of "recognizing a distinct positive science of political economy."* Friedman admits that he is primarily interested in articulating the nature and methodology of positive economics, and along the way he wishes to argue that "positive economics is in principle independent of any particular ethical position or normative judgments." (By contrast, according to Friedman normative economics presupposes positive economics.) In what follows, I accept these distinctions by stipulation.

Neither Stigler nor Friedman, follow Keynes slavishly (recall this post, too). In particular, in the passage quoted at the top of this post, Stigler offers a world-historical innovation over Keynes that will have far-reaching consequences in economics and the way it understands itself as a policy science. In Keynes, "applied ethics" (that is, normative or regulative economics) is the business of philosophers not economists. And one of the main reasons it is the business of philosophers (and not economists) is that Keynes does not expect consensus over the ends of society to emerge. As he writes, "There is a further reason why a positive science of political economy should receive distinct and independent recognition. With the advance of knowledge, it may be possible to come to a general agreement in regard to what is or what may be in the economic world, sooner than any similar agreement is attainable in regard to the rules by which economics of individuals and communities should be guided. The former requires only that there as to the facts; the latter may be prevented by conflicting ideals." (50-51) So, Keynes's proposed strategy is to remove (applied) ethics as much as possible from economics so that economics can quickly hasten to become a mature (in a proto-Kuhnian sense) science.

Piketty's Modal Economics, or where ideology and historical data meet

The history of income and wealth is always deeply political, chaotic, and unpredictable. How this history plays out depends on how societies view inequalities and what kinds of policies and institutions they adopt to measure and transform them. No one can foresee how these things will change in the decades to come. (Piketty, Capital 35)

In fact, neither economic liberalization that began around 1980 nor the state interventionism that began in 1945 deserves such praise or blame. France, Germany, and Japan would very likely have caught up with Britain and the United States following their collapse of 1914-45 regardless of what policies they had adopted (I say this with only slight exaggeration.) The most one can say is that state intervention did no harm. Similarly, once these countries had attained the global technological frontier, it is hardly surprising that they ceased to grow more rapidly than Britain and the United States or that growth rates in all of these wealthy countries more or less equalized....Broadly speaking, the US and British policies of economic liberalization appear to have had little effect on this reality, since they neither increased growth nor decreased it. (Piketty 99)

The first quoted passage urges us to take political control ("transform") over our economic destiny (see also p. 234 where Piketty endorses the claim that "political forces were central.") In Piketty's book 'chaotic' tends to be used to describe unstable, ad hoc political decision-making in context of great disruptive, social upheaval (war, inflation, "shocks," etc.). (His 'chaotic' is unconnected to the stochastic view of randomness beloved by mathematical economists.) It's precisely because politics has an influence on the economy that the world becomes unpredictable. The italicized passage is the central dogma of the political historian's craft.*

Yet, in the second quoted passage, Piketty embraces a form of technological determinism on growth in which much macro-policy has no discernible influence at all on growth. I am not claiming that the two passages contradict each other. For, Piketty's position seems to be that (a) macro-economic policy is largely impotent on growth; (b) governments can make macro-economic mistakes (embrace too much autarky; embrace too much capital liberalization (71);+ (c) governments can impact the distribution of wealth; (d) ensuring the diffusion of technology and education is key to long-term growth (71;  572; see also the emphasis on productivity at 234). So, while governments can invest in education (307), the impotence of traditional macro-economic policy on growth is also emphasized in the conclusion: "countries at the world technological frontier--and thus ultimately for the planet as a whole--there is ample reason to believe that the growth rate will not exceed 1-1.5 percent in the long run, no matter what economic policies are adopted." (572)

Clearly, the crucial concept in Piketty's analysis here is the 'technological frontier.' Amazingly enough I have just quoted two out of four mentions of the term in the whole (long) book, and these are the most detailed descriptions of it. Curiously, the term is introduced on p. 97 without a footnote or explanation. It is one of the few places in his book where Piketty assumes a background in economics in his reader. But its meaning is clear from context: (i) a country's (world's) technological frontier clearly limits the possibilities for growth. (As we philosophers like to say, it's a modal concept.) And (ii) growth can be faster toward the frontier than being on the frontier, where a "relatively slow pace" is "characteristic" (97).