Transcript Piketty and Heckman: Why economics needs data

James Heckman 00:00 Data essentially allow us to discriminate among alternative explanations.

Thomas Piketty 00:07 I think theory can be useful but I think sometimes economists spend too much time doing very sophisticated theory without knowing what are the facts that they are trying to explain and understand.

James Heckman 00:23 When Adam Smith was writing The Wealth of Nations many deep ideas that he had came but he didn’t have a body of data.

Thomas Piketty 00:30 When I started as a graduate student I realized that there was actually very little data collection.

James Heckman 00:34 We might observe some fact. Then we want to know well, is this fact an anomaly?

Thomas Piketty 00:38 So we have to measure these things to make proper comparisons to see, you know, when these claims are justified.

James Heckman 00:44 And then the second question would be, even if it’s a repeated finding, what are the mechanisms that give rise to that repeated finding?

Thomas Piketty 00:52 Better data is not going to make the world a peaceful place but at least it can allow us to have a more informed discussion.

James Heckman 01:00 As you try to collect data and you try to use every source of information available to you.

Thomas Piketty 01:07 Go back to the historical data. Collect in a much more systematic manner than what was done before.

James Heckman 01:12 So I’ve looked at data from what are called cross-sections; looking at different individuals, following the same people over time.

Thomas Piketty 01:20 Taxation is always more than taxation. It’s also a way to produce information, you know, to society.

James Heckman 01:25 So you look at multiple sources of data, all of it non experimental.

Thomas Piketty 01:29 It’s a way to produce legal categories, statistical categories, which can then be used by economists and other social scientists.

James Heckman 01:38 And also using economic theory to help organize your thinking.

Thomas Piketty 01:46 The history of income and wealth is not just a pure economic history; it is a political history, or social history.

James Heckman 01:53 Parts of the story may not yet be fully understood and that’s the challenge.

Thomas Piketty 01:58 Instead of just proving sophisticated mathematical theorems in order to impress others we should just, you know, try to collect data, establish facts, and try to learn something.