Few graduate students can boast that they are sole authors of a paper in a highly regarded publication; even fewer can say their paper was commissioned based on a blog comment. Alumnus Matthew Rognlie ’10, a current doctoral student in economics at the Massachusetts Institute of Technology (MIT), can lay claim to both.
On March 20 Rognlie presented his research on the rising share of capital income and its role in economic inequality at the Brookings Papers on Economic Activity. The audience comprised experts in the field, including Nobel Prize winner, Robert Solow.
Rognlie admitted that he was “pretty nervous” going into the conference.
“In the end I survived, and it was great to get some very diverse feedback from all the experts in the audience,” Rognlie said. “Overall, I found that researchers in the audience had very pragmatic questions and concerns about the paper; they wanted to know whether it made sense along a few key dimensions, not about some of the more obscure technical details. I think this is a pretty good general reaction, and it’s important for me to keep in mind going forward as I present my work.”
Rognlie’s 32-page paper was borne from a 459-word comment on popular economics blog Marginal Revolution. Last April he posted a response to Paul Krugman’s review of Thomas Piketty’s book, Capital in the Twenty-First Century, in which he critiques Piketty’s dire hypothesis on the future of wealth inequality. Rognlie didn’t know it then, but he would soon be catapulted to fame within the economics community.
The 26-year-old is credited with creating "the most influential critique of the most influential economics book of this century." Still, he is modest about his contribution.
“I’m not sure if I’ve provided the most influential critique of Piketty, but what I’ve tried to do is keep away from the broad, vague themes that often dominate the discussion and focus on critiquing the core analytical narrative that Piketty is providing,” Rognlie said.
In his book, Piketty analyzes data from 20 different countries — going back as far as the 18th century — to answer questions about income inequality and economic growth. His central theory is built upon the argument that the rate of return to capital is greater than the rate of economic growth (r>g). The French economist predicts wealth could accumulate among the rich as the economy slows, thus widening the gap between the rich and the poor.
Rognlie has three main criticisms of Piketty’s book, but his basic argument is that Piketty overestimates the level and persistence of returns to capital. In other words, he does not adequately account for diminishing returns on investments such as property, stocks, and other assets.
“On the central question of the elasticity of substitution between capital and labor, Piketty is at odds with most of the literature in economics,” Rognlie explained. “In light of this, he tries to support his view with facts from recent macro data, but most of his inferences from the data seem to miss the key influences (e.g., the housing sector) and don’t hold up very well.”
When Rognlie isn’t debating influential economists online, he is working to complete his doctoral degree program. The Oregon native has one year left at MIT. His primary interests are macroeconomics, international macroeconomics, and finance. Within those fields, he delves into monetary policy and business cycles, currency areas, and sovereign debt. According to Rognlie, the Piketty discussion and its associated work have “some connections” to his research but also represent a “new area” for him.
Those who remember Rognlie from his days at Duke know that he is a stellar student. He double majored in economics and mathematics with a minor in computer science, and his honors thesis on financial price volatility won the 2010 Allen Starling Johnson, Jr. Best Thesis Prize.
“Matt noted that a certain volatility estimator would be biased for some subtle reason having to do with geometric versus arithmetic means,” said Professor George Tauchen, Rognlie’s undergraduate thesis advisor. “He was right, of course, and I did not understand what he was saying. I still do not, I think.”
Tauchen lauded Rognlie’s Piketty critique for its brilliance, and said it “reads like a piece written by a longtime top-level experienced economist.” He was unsurprised by Rognlie’s newfound recognition.
“I felt sure Matt was bound for great things,” he said. “Before Matt matriculated, I told Professor Whitney Newey of MIT that he was a once-a-lifetime type of student, and Whitney has seen some outstanding students at MIT.”
So what’s on the horizon for the Rognlie?
“I’m hoping to continue doing research in macroeconomics in some capacity, most likely as a research academic, and ideally at a top-notch research department like Duke,” he said.
Economics Department