Even Adam Smith Didn’t Trust the Invisible Hand, with Thomas Piketty
Economist Thomas Piketty delves into several common misconceptions about free market economics and argues that strong public institutions are necessary for market regulation.
Thomas Piketty is Professor of Economics at the Paris School of Economics and author of the landmark 2013 book Capital in the Twenty-First Century. He is the author of numerous articles published in journals such as the Quarterly Journal of Economics, the Journal of Political Economy, the American Economic Review and the Review of Economic Studies, and of a dozen books. He has done major historical and theoretical work on the interplay between economic development and the distribution of income and wealth. In particular, he is the initiator of the recent literature on the long run evolution of top income shares in national income (now available in the World Top Incomes Database). These works have led to radically question the optimistic relationship between development and inequality posited by Kuznets, and to emphasize the role of political and fiscal institutions in the historical evolution of income and wealth distribution.
Thomas Piketty: A very optimistic view of how the market works, which sometimes is associated to Adam Smith, is the view that you have self-regulation of the market and that the natural forces, natural market forces can take care of everything, and in particular can ensure that inequality will never increase to such an extent that it becomes socially and economically and politically useless or even dangerous for that matter. Now I think, in fact if you reread Adam Smith or if you try to look at the economic developments throughout history, you see that you cannot expect everything from the market. You cannot just rely on natural forces to solve all problems.
And I think one of the conclusions from the history of political economy and the history of economic growth and inequality is that you need strong public institutions in order to put these powerful market forces in the right direction. Market forces can produce a lot of innovation, a lot of incentives for inventions and entrepreneurship and this is very positive. But it would be a mistake to rely and count on these natural forces to sort of self-regulate themselves. And if you look in particular at the period going up to the financial crisis of 2007/2008, you have a very large concentration of economic gains into a relatively small group of the population. And I think everybody agrees today that this has contributed not only to the stagnation of median household income, but also to the rise of household debt, which in turn put pressure on the financial system and probably did contribute to fragilize the financial system with the consequences that we know in terms of financial crisis, recession, unemployment, which we are now starting to get out of this, but there has been many years of lost growth and a lot of social suffering because of this.
So we need strong public institutions in order to regulate these market forces. And sometimes there's really excessive faith in these forces. There are cycles over history. Probably after the Great Depression, after World War II, people realized that market forces need to be strongly regulated. And then starting in the '70s and the '80s with Reagan and cultural revolution and even more so after the fall of the Soviet Union, we entered in the 1990s and 2000 in a new cycle of sometimes unlimited phase in the self-regulation of markets. And to a large extent we are still in this phase. And I think there's a reaction, a policy reaction to the financial crisis of 2007/2008 has been too limited so far. And this could happen again. We've asked a lot to our central banks in the U.S. and in Europe. And of course it's easy to print billions of dollars or billions of euros to avoid complete bankruptcy of a financial system, which is what happened in the 1930s and which ended up in a complete catastrophe. So it's better to avoid that. But at the same time printing money is not enough to solve the central problem that we need to solve. So the good news is that we avoided a complete bankruptcy and complete depression, but the bad news is that we did not really solve the structural problems which might in the future create new crisis.
In this Big Think interview, economist Thomas Piketty delves into several common misconceptions about free market economics. Piketty argues that strong public institutions are necessary for market regulation. So-called "natural forces" of self-regulation commonly associated with the writings of Adam Smith cannot be relied on to maintain a healthy economic climate. An example of this is the heavy trend toward deregulation that spurred the 2007/2008 financial crisis. Piketty warns that the tepid regulatory response to the Great Recession could very well come back to bite us.
Thomas Piketty is the best-selling author of Capital in the Twenty-First Century.
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The results of this study showed depressive symptoms being highest in adolescence, declining in early adulthood and then climbing back up again into one's early 30s.
- A 2020 Michigan State University study examined the link between teen social networks and the levels of depression later in life.
- This study used data from the National Longitudinal Study of Adolescent to Adult Health, specifically targeting social network data. The results showed depressive symptoms being highest in adolescence and declining in early adulthood, then climbing back up again into one's early 30s.
- There are several ways you can attempt to stay active and socially connected while battling depression, according to experts.
The study suggested that teenagers who have a smaller social circle showed higher rated of depression later on in life.
Credit: asiandelight/Shutterstock<p><a href="https://www.eurekalert.org/pub_releases/2020-09/msu-tsn093020.php" target="_blank" rel="noopener noreferrer">A 2020 Michigan State University study</a> examined the link between teen social networks and the levels of depression later in life. The results of this study suggested teens who have a larger number of friends in adolescent years may be less likely to suffer from depression later in life. These findings were especially prominent in women.</p><p>This study used data from the National Longitudinal Study of Adolescent to Adult Health, specifically targeting social network data. This data asks students to select up to 5 male and 5 female friends and indicate how often they felt depressive symptoms. </p><p>MSU Sociology Assistant Professor Molly Copeland and lead author Christina Kamis (Sociology doctoral candidate at Duke University) published the study in the Journal of Health and Social Behavior in September. </p><p><strong>Female teenagers may struggle more with depression during their teen years but show fewer depressive symptoms later in life.</strong> </p><p>For female adolescents, popularity can lead to increased depression during their teen years. However, this ultimately may lead to lasting benefits of fewer depressive symptoms later in life. "Adolescence (is) a sensitive period of early life when structural facets of social relationships can have lasting mental health consequences," Copeland wrote, adding that "compared to boys, girls face additional risks from how others view their social position in adolescence."</p><p>Throughout this study, men showed no association between popularity and depressive symptoms, however, they did show benefits from naming more friends. As for why this is, Copeland has a theory: perhaps the expectations on young girls (compared to young boys) as well as the roles that lead to popularity can create a kind of stress and strain felt more prominently by girls than boys. </p><p>While this does create more difficult teen years for young girls, the stress and strain may lead to giving these girls a psychological skillset that benefits them later in life, allowing them to deal with stressful situations more easily.</p><p>The study also suggested that teenagers who have a smaller social circle showed higher rates of depression later on in life. </p><p><strong>Results from both men and women followed a U-shaped trajectory of depressive symptoms.</strong></p><p>The results showed depressive symptoms being highest in adolescence and declining in early adulthood, then climbing back up again into one's early 30s. This was particularly more noticeable in women, who showed a steeper decline in symptoms between the ages of 18-26, followed by a more rapid increase in symptoms in their early 30s. </p>
How to stay social while battling depression<img type="lazy-image" data-runner-src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yNDQ1MjA3MC9vcmlnaW4uanBnIiwiZXhwaXJlc19hdCI6MTYxNDMyNDY1N30.e1ULIJ5QYXh4H1SGUPUTJqYBCnX2XWp6InjPRr-2Bdw/img.jpg?width=1245&coordinates=0%2C22%2C0%2C22&height=700" id="832fd" class="rm-shortcode" data-rm-shortcode-id="b360bb24fb8d6025680bfffb52fd5982" data-rm-shortcode-name="rebelmouse-image" alt="depression support group illustration" />
Attending support groups, planning activities with family or even just a weekly phone call to a friend can help alleviate depression.
Credit: Mascha Tace/Shutterstock<p>Although maintaining relationships can help you cope, it can also be one of the most difficult things to do when you're experiencing depression.</p><p>As Dr. Jennifer L. Payne (an assistant professor/co-director of the Women's Mood Disorders Center at Johns Hopkins Hospital in Baltimore) <a href="https://www.everydayhealth.com/hs/major-depression/staying-socially-active-with-depression/" target="_blank" rel="noopener noreferrer">tells Everyday Health</a>: "One of the common symptoms of depression is social isolation." </p><p>Payne goes on to explain that you can "soak up some energy" by simply being around other people, moving around, and staying active.</p><p><strong>Creating a daily schedule and planning activities ensures action. </strong></p><p>While it may be easy to turn down last-minute plans, it's more difficult to cancel plans you've already committed to with friends and family. While it's important not to overwhelm yourself with a packed schedule, creating a minimal daily schedule that involves seeing friends and family or doing activities that you've previously enjoyed can ensure you stay active and often makes you feel more accomplished at the end of each day. </p><p><strong>Support groups and social networking with people who understand. </strong></p><p>While depression can very easily make you feel isolated and alone, surrounding yourself with others who may be struggling with depression as well can help in multiple ways. You will have peer support from people who relate to how you're feeling plus the added benefit of being around people, which can raise your spirits. </p><p><strong>Keeping a journal (and setting goals) can help you feel accomplished. </strong></p><p>Keep a thought journal and detail certain daily or weekly goals (such as a plan to call a friend on Monday or to visit your local coffee shop for a change of scenery on Thursday). These small, achievable goals not only get you out of the house and/or interacting with others, but they also provide a sense of accomplishment and satisfaction once they are complete. </p><p><strong>Random acts of kindness, such as volunteering, will make you feel good. </strong></p><p><a href="https://bigthink.com/mind-brain/kindness-benefits-james-doty?utm_term=Autofeed&utm_medium=Social&utm_source=Twitter#Echobox=1596517476" target="_self">Being kind is good for your health</a> in many different ways. Doing something nice for others can boost your serotonin levels. Serotonin is a neurotransmitter that is responsible for feelings of satisfaction and well-being. Similar to exercise, kindness, and altruism can also release endorphins, creating a <a href="https://www.quietrev.com/6-science-backed-ways-being-kind-is-good-for-your-health/#:~:text=Kindness%20releases%20feel%2Dgood%20hormones&text=Doing%20nice%20things%20for%20others,as%20a%20%E2%80%9Chelper's%20high.%E2%80%9D" target="_blank" rel="noopener noreferrer">temporary sense of euphoria</a> that can help combat depressive symptoms. </p>
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