Sunday, July 6, 2014

Why Is Macro So Hard? The Influence of the Book No One Actually Reads

Thomas Piketty’s Capital In the 21st Century has been a bestseller in America since its translation came out in the spring. It’s being widely touted as the most important book in macroeconomics in decades.

It’s arguable that this is all a load of BS. It turns out no one is actually reading it.

Here’s how we know. When someone buys a book for their Kindle, they can highlight passages. Part of what you agree to when you buy a Kindle is that Amazon can keep track of those highlighted passages. The most frequently highlighted passages are actually shown towards the bottom right of a book’s webpage on Amazon.

For most books, these passages occur throughout the book. And a good sign that people finish the book is that there’s a heavily highlighted passage towards the end.

The thing is, of the 5 most heavily highlighted passages in Piketty’s book, the last one occurs on … page 26. Not one of the top 5 passages occurs in the last 670 or so pages.

There’s actually theory in statistics about the distribution of what are called record values. That isn’t applied here, but having some exposure to it, I’d estimate that 99.9% of readers never get past page 50 before abandoning the book. For example, suppose that (way back when) people started recording the time it took to run a mile, and kept track of each successive record: if the record times stopped going down once they hit 7 minutes … you might conclude a lot of things, but a pretty obvious possibility would be that no one is running that distance at all.

Having said that, the author of the article is a professor of mathematics at Wisconsin, and no doubt knows precisely the implication of their work.

In short, we have a hugely influential book, which people are claiming gives them a firmer foundation in macroeconomics to apply to policy questions, that they aren’t actually reading.


BTW: At the time that I write this, I am well past page 100 in Piketty. I’ve highlighted many selections on my Kindle.

Below, I’ve cut and pasted what are currently those 5 most heavily cited passages:

  1. When the rate of return on capital exceeds the rate of growth of output and income, as it did in the nineteenth century and seems quite likely to do again in the twenty-first, capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based.

    4078 Highlighters

  2. When the rate of return on capital significantly exceeds the growth rate of the economy (as it did through much of history until the nineteenth century and as is likely to be the case again in the twenty-first century), then it logically follows that inherited wealth grows faster than output and income.

    2688 Highlighters

  3. Knowledge and skill diffusion is the key to overall productivity growth as well as the reduction of inequality both within and between countries.

    2667 Highlighters

  4. The sharp reduction in income inequality that we observe in almost all the rich countries between 1914 and 1945 was due above all to the world wars and the violent economic and political shocks they entailed (especially for people with large fortunes). It had little to do with the tranquil process of intersectoral mobility described by Kuznets.

    2276 Highlighters

  5. Over a long period of time, the main force in favor of greater equality has been the diffusion of knowledge and skills.

    2273 Highlighters

I have a Kindle 2, in which there are no pages, only locations (these are approximately a longish sentence each). Piketty is 13,605 locations long. A page in the hardcover edition of the book is about 19 to 20 locations; the biggest “page” I can show on my Kindle is about 11 locations.

  • # 1 is from location 88 (0.6% of the way through the book, and I have the second half of that quote highlighted)
  • # 2 is from location 547 (4.0% of the way through the book, and yes I have that one highlighted)
  • # 3 is from location 458 (3.4% of the way through the book, and I don’t have anything on that “page” highlighted
  • # 4 is from location 340 (2.5% of the way through the book, and I don’t have anything on that “page” highlighted)
  • # 5 is from location 480 (3.5% of the way through the book, and I don’t have that passage highlighted, but I do have two others on that “page”)

To put that in perspective, that’s like getting a text for a class that has they typical 15 chapters in it, and when the books are sold back to the bookstore at the end of the semester, they notice that no one highlighted anything after the first chapter. What would you conclude about a class like that? For my part, I’d conclude that the material wasn’t very interesting, the students weren’t trying hard, and no one was doing quality control to make sure they did.

Currently, I’m at location 1921, and I’ve highlighted 123 passages in the book. And yet I match up with 1.5 out of 5 of the most popular highlighted passages.

It’s a rough conclusion, but an academic macroeconomist, preparing to use the text in an advanced undergraduate class, doesn’t find interesting or worthwhile well over half of what the general reading public does.

I hate to sound elitist, but this doesn’t bode well for the public’s ability to understand macroeconomics even when guided by a book that’s quite readable. I think this is prima facie evidence that the intellectual baggage people bring with them to macroeconomics is huge.

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