Tag: Inequality

Still More on the Piketty Wars

 

Piketty_in_CambridgeResponding to Thomas Piketty’s response (linked here) to the charges raised by the Financial Times, Chris Giles notes that there remain concerns with Piketty’s presentation:

There are a few things on which we agree. First, the source data on wealth inequality is poor. I have written that it is “sketchy” and Prof Piketty says it is “much less systematic than we have for income inequality”. Second, it would have been preferable for Prof Piketty to have used a more sophisticated averaging technique than a simple average of Britain, France and Sweden to derive an estimate for European wealth inequality. Third, the available data suggests a broad trend of reduction in wealth inequality during most of the 20th Century.

There are more aspects on which there remains disagreement. Prof Piketty does not explain the multiple missing data points in his data or tweaks to it; he explains transcription errors as deliberate adjustments to overcome discontinuities in data, but does not provide formulas or an explanation of why these undocumented adjustments should apply to only one data point in a time series; he does not explain why it is consistent to favour household surveys over estate tax records for the US but not the UK; nor why his UK series showing rising wealth inequality differs so materially from his source materials, which show falling UK wealth inequality in eight of the most recent nine decades.

The Piketty Wars Continue

 

shutterstock_130262303Thomas Piketty has now come out with a substantive response to the criticisms issued by Giles and Giugliano in the Financial Times. I am glad that he has done so and I suspect that there is much to chew over in the response, so I will look forward to reading the response of others to Piketty’s defense. For the time being, let me offer the following somewhat random observations (I am not going to comment on every paragraph or sentence in the letter, though I have read it all. I certainly encourage readers to read it all as well):

— Piketty tells us that he “certainly agree[s] that available data sources on wealth inequality are much less systematic than what we have for income inequality.” I am glad he states so; it is nice to establish that the data sources for wealth inequality are sketchy and incomplete. But while Piketty tells us that he is sure the data set can be improved, he also claims that he “would be very surprised if any of the substantive conclusions about the long run evolution of wealth distributions was much affected by these improvements.”

I am surprised that Piketty can admit both (a) that the data set is incomplete and can be improved upon; and (b) that it really doesn’t matter because, supposedly, even after it is improved, Piketty’s conclusions will somehow hold. Admitting the shortcomings should also mean admitting that the “substantive conclusions” in Piketty’s book might be improved by better data sets, but Piketty is unwilling to concede this (obvious) point.

Understanding Paul Krugman on Thomas Piketty

 

Gentle readers, whenever Paul Krugman issues a defense of Thomas Piketty regarding the charges against the latter, by all means, be sure to read that defense. Be sure to consider its merits seriously. Be sure to closely and carefully examine the data Krugman might present in defense of his point and if Krugman actually makes a good point — or several — in defending Piketty, be gracious enough to acknowledge as much.

But of course, let us all remember that thus far, Krugman has failed to issue a serious and persuasive defense of Piketty’s findings and position in light of the Giles/Giugliano findings. And no matter how overwhelming the case against Piketty may become, Krugman may never be willing to admit that he is simply on the wrong side of this debate.

Has Piketty’s Soft Marxism Run Afoul of Hard Math?

 

Is Thomas Piketty’s sprawling best-seller, Capital in the Twenty-First Century, really just a bit of dystopian, neo-Marxist, speculative fiction tarted up with dodgy math? Some free-market types who disagree with the French economist’s controversial analysis and policy prescriptions might like to think so.

But this would be a more reasonable and fair take: extraordinary claims require extraordinary evidence. And Piketty, at the very least, makes a bold claim when he asserts discovery of powerful forces inherent to capitalism driving an “endless inegalitarian spiral” of ever-greater wealth concentration. And he offers mounds of data as support.

The Tragedy of Thomas Piketty

 

PikettyThe latest Pikettian response to Giles’s and Giugliano’s assertions regarding the quality of Piketty’s data and research is to accuse Giles and Giugliano of being “dishonest.” (Hat tip in comments here.) I suppose this means that Piketty’s is employing a classic I-am-rubber-and-you-are-glue defense, but there is little substance to the accusation; at best, Piketty can assert (without evidence) that the flaws found with his data do not change his conclusions, and that other studies find widening inequality “by using different sources.”

The response to this is (a) there is, in fact, plenty to suggest that the flaws in Piketty’s data change his conclusions (see my original post and my follow-up for more on this issue), and (b) just because other studies find widening inequality “by using different sources” does not mean that they are right or that, even if they are, Piketty is justified in finding widening inequality through a flawed data set. It is worth noting that Piketty issued a reply via the Financial Times that sought to address Giles’s and Giugliano’s concerns, but, as Tyler Cowen pointed out, Piketty’s reply “was quite weak. Maybe he’s not to be blamed for what was surely a rapid and caught-off-guard response, and perhaps there is more to come, but it doesn’t reassure me either.”

Beyond all of these accusations and counter-accusations, there is a deeply unfortunate phenomenon at work here. Irrespective of how inclined or disinclined I might have been to believe Piketty’s claims, I wanted to think that he would be a worthy and formidable interlocutor for those on the opposite side of the wealth inequality debate. I had hoped that Capital in the Twenty-First Century would be an influential book on the issue of wealth inequality (though I also hope that it won’t be the only one) — a book that would be good enough to force Piketty’s intellectual opponents to bring their A-games in debating him. In any consequential debate over policy and politics, each side should be represented by serious, smart, well-informed and ethical champions; people who care about the data and what it means. That’s about the only way any of us are going to have a decent and meaningful debate over the consequential issues of the day.

What the Piketty Errors Mean

 

PikettyRemember the Reinhart/Rogoff spreadsheet error? In the event that you do not, here is a summary. Those who follow debates between economists will recall that the spreadsheet error led to all kinds of excoriations of Carmen Reinhart and Kenneth Rogoff on the part of liberal economists, who claimed that they were responsible for austerity policies that killed off economic growth. Even Stephen Colbert got in on the act. Their spreadsheet error was considered to be the worst tragedy that befell the planet since that one time when Oedipus and Jocasta had a super-awesome first date.

Of course, the excoriations were vastly overstated, but that didn’t stop intellectual opponents of Reinhart and Rogoff from engaging in hyperbole on a grand scale. Now that Thomas Piketty has been caught making his own significant errors, comparisons have naturally been made between Piketty on the one hand, and Reinhart and Rogoff on the other.

These comparisons fail. Reinhart and Rogoff may have made a spreadsheet error, but there is a very plausible argument that the error did not affect their conclusions, and there was no serious accusation on anyone’s part — not even the most severe critics — that Reinhart and Rogoff engaged in intellectual or scholarly fraud.

Facts Are Stubborn Things . . . As Thomas Piketty Is Beginning to Find Out

 

I have bought Thomas Piketty’s book Capital in the Twenty-First Century, and while I have posted many an item that takes issue with the books claims and conclusions concerning wealth inequality, I do plan on reading Piketty; his book has made quite the intellectual and cultural impact, and although I know what his basic arguments are, I want to be sure that I read the whole of the book to be fully aware of his claims.

But even before reading the book, one can conclude certain things about Piketty, as my previous blog posts indicate. And today, we learn that we may well be able to conclude one more thing still about Piketty, his research, and his arguments: They may be completely wrong. And yes, those words were worth emphasizing.

The Libertarian Podcast: Epstein on Piketty

 

In case you haven’t noticed yet, Professor Epstein’s been on a bit of a tear lately rebutting Thomas Piketty’s new book, Capital in the Twenty-First Century. And there’s only one thing to do when he shifts into that gear: hand him the microphone. In this episode, Richard explains his criticisms of the French economist. It’s 15 minutes of Epstein vs. 700 pages of Piketty — which, let’s be honest, is a fair fight.

 

All You Need to Know About Inequality In Just a Couple of Paragraphs

 

An email from a very wise friend:

It seems to me that inequality is a problem, unjust, wrong only when distribution is undertaken by an agent who should not be favoring one over another—e.g. the parent who favors one child over another. When inequality is the result of an impersonal process, I don’t see the argument. Isn’t justice a matter of getting what one deserves or is owed? How can one deserve anything or be owed anything by an impersonal process? Is it unjust that California has a better climate than New Hampshire? Is it unjust that Magic Johnson earns more from basketball than a fan in the stands?

If You Want “Income Equality,” You’re a Statist

 

Too harsh? Maybe, but let me explain. 

First a qualification: Some people talk about “income equality” as a product of crony capitalism, but they don’t actually support active government intervention to promote greater equality. Those individuals aren’t acting like statists, but they should be aware of the complications that come with adopting the language of the left. The fundamental problem with corruption isn’t that it produces economic inequality, but that it undermines economic liberty and equal justice before the law. This is an important distinction.

How to Respond to Thomas Piketty’s Inequality Alarmism — James Pethokoukis

 

030514inequality1-600x451As with physicist Stephen Hawking’s A Brief History of Time, economist Thomas Piketty’s 700-page Capital in the Twenty-First Century is a bestseller destined to have a steep purchased-to-read ratio. For many on the left, it will be enough to simply know that Piketty’s grand theory of capitalism affirms their preexisting worldview: capitalism drives inequality ever-higher, superrich CEOs don’t deserve their fat paychecks, massive taxes on income and wealth are necessary to avoid an inegalitarian death spiral. For many on the right, it will be enough to simply know that Piketty is a French inequality researcher who teaches at the Paris School of Economics. Let the eye-rolling commence.

But Piketty is a first-rate scholar whose magnum opus is well worth reading, whatever your ideological inclination. His thesis is straightforward. At its center are observations and forecasts about the return on capital, economic growth, and the relationship between the two. Some economists, such as Paul Krugman and Martin Wolf, think Piketty’s probably got the story right. Others, including AEI’s Kevin Hassett, Tyler Cowen, and Joshua Hendrickson, take the other side of the trade.

Yet even if Piketty is wrong, there is reason to believe technology and globalization might sharply increase immobility, as well as boost income and wealth inequality—and lead to long-term wage stagnation for the vast majority of workers. The good news here is that many of the most realistic responses — even Piketty thinks his own end-game policy agenda is utopian — are intrinsically good ones. Since slow economic growth worsens inequality, we should want to pursue policies that might boost birthrates (tax relief for parents) and innovation (remove regulatory barriers to entry).

Member Post

 

That’s right. Not only are “Elite wealth monopolies” the scourge of the present but will, in fact, cause societal apocalypse, reports The Guardian. The study took the factors involved in the collapse of previous civilizations, including the Roman empire, into account: “Population, Climate, Water, Agriculture, and Energy.” Preview Open

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