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I love the classical "he said, she said". The fact is, Piketty's numbers appear to be incorrect. It is no longer remotely close to clear that wealth inequality

I love the classical "he said, she said". The fact is, Piketty's numbers appear to be incorrect. It is no longer remotely close to clear that wealth inequality is going up, particularly at the top, at least from what we see in Piketty's book. The FT corrections show that inequality has not increased in the UK, and different weighting schemes (e.g. population weighting across countries) can completely make his effects vanish. Krugman showed that income inequality, particularly below the 99'th percentile, is going up. Income (including capital income) != wealth. Now maybe other sources prove him correct. If so, this response is far from convincing - why not just cite those other sources? And if that's the case, why did anyone care about his book to begin with? In any case, Piketty is to be commended for releasing his data/methodology. Just think - if he didn't do this, it would have taken years for his errors to be discovered.

barrkel 12y ago
In order for income inequality to not lead to wealth inequality, we need to believe that poor people save more of their income than wealthy people - which seems rather difficult. I think it is clear from other sources that wealth inequality is going up, and the FT is pushing its findings too far.
- bru 12y ago
  >In order for income inequality to not lead to wealth inequality, we need to believe that poor people save more of their income than wealthy people - which seems rather difficult. Yes, but that's actually what the FT refutes (center of 3rd § of the article): > The newspaper concluded there was little evidence in Piketty's original sources to bear out his theory that the richest were accumulating more wealth
- yummyfajitas 12y ago
  In order for income inequality to not lead to wealth inequality, we need to believe that poor people save more of their income than wealthy people - which seems rather difficult. Or that wealthy people achieve diminishing returns on investment as their wealth grows. I.e., my startup might grow 10-fold, but Facebook is unlikely to. Even if you assume Piketty's "r > g" macro-level hypothesis, there are a lot of microeconomic theories completely compatible with it. Not all of them result in increasing inequality. http://www.chrisstucchio.com/blog/2014/piketty_and_inequality.html http://www.chrisstucchio.com/blog/2014/piketty_and_inequalit... (But now we are moving into the topic of Piketty's theoretical weaknesses, which are supposedly irrelevant because his data is so great.) I think it is clear from other sources... [citation needed] And if other sources prove this point, why was Piketty's book such a sensation?
  - anon1385 12y ago
    >I.e., my startup might grow 10-fold, but Facebook is unlikely to. Yes, startups, an investment famous for attracting only small scale investors of small means…
  - foobarqux 12y ago
    What is Piketty's theoretical weakness?
    - praxeologist 12y ago
      See this article, especially toward the end on his understanding of capital: https://mises.org/daily/6736/Thomas-Piketty-on-Inequality-and-Capital https://mises.org/daily/6736/Thomas-Piketty-on-Inequality-an...
      - foobarqux 12y ago
        The main criticism there is that the concept of return on capital is meaningless. I think that is fringe view and I don't find it compelling.
        praxeologist 12y ago
        >I think that is fringe view and I don't find it compelling. That's a vacuous non-argument and appeal to popular opinion. Not compelling as well.
        foobarqux 12y ago
        Many complex systems, hard to describe on a micro level, have straightforward macro statistics. I think return on capital can be described but such statistics even if individual investments are highly variable. Capturing the return is achieved by having a highly diversified portfolio.
    - yummyfajitas 12y ago
      His lack of a clearly stated theory. Ask yourself this question: in a few equations, what is his fundamental claim? What specific data (irrespective of technical details about collecting it) would prove or disprove his theory? The closest he comes to having a clearly stated theory is that "r > g => growth of inequality". That specific claim is completely wrong. http://www.chrisstucchio.com/blog/2014/piketty_and_inequality.html http://www.chrisstucchio.com/blog/2014/piketty_and_inequalit...
mpweiher 12y ago
Piketty's numbers appear incorrect Er...some of his numbers appear incorrect. From this you incorrectly assume that this invalidates the conclusion. It may invalidate the conclusion if the errors are significant. However, what little I've seen so far does not seem to be all that significant. From the fine article: 'Scott Winship, an economist at the right-leaning Manhattan Institute for Policy Research, and notable critic of Piketty's analysis, said the FT's allegations weren't "significant for the fundamental question of whether Piketty's thesis is right or not".' So there seem to be highly qualified sources that say that the differences are not significant. That's not the same as "he said/she said". Do you have any evidence that the errors are significant? You also blatantly mischaracterize Krugman's point: he showed that inequality in capital income is going up, not (just) general income. Capital income has this property that it usually derives from capital (as the name says). So unless there is evidence that the top 1% or so systematically get significantly better returns on the same capital, an increase in capital income let's us include that there is an increase in base capital from which to derive that income. On the other side of the coin, income leads to wealth, and unless you have evidence that high-income people save less of their income than lower-income people, then wealth will diverge. All the evidence I have seen so far (and common sense) say that it is the other way around: consumption saturates, so people with higher incomes actually save more and spend less, at least in relative terms. So both sides of this equation quite trivially show the link between income inequality (especially for, but not limited to capital income) that you deny. So both the FT criticism (= nit-picking in non-substantive details) and your criticism are unfounded, as far as we can tell. Again, if you have some actual substantive evidence that the errors are significant, I'd love to see it.
- QuantumChaos 12y ago
  On Scott Winship, see one of my top level comments (I made two top level comments as I only started investigating this after I posted once). Whatever was printed in the article, he has said on Twitter that he does doubt Piketty's conclusions, and also that the FT allegations are significant.
  - mpweiher 12y ago

barrkel 12y ago

In order for income inequality to not lead to wealth inequality, we need to believe that poor people save more of their income than wealthy people - which seems rather difficult. I think it is clear from other sources that wealth inequality is going up, and the FT is pushing its findings too far.

bru 12y ago
>In order for income inequality to not lead to wealth inequality, we need to believe that poor people save more of their income than wealthy people - which seems rather difficult. Yes, but that's actually what the FT refutes (center of 3rd § of the article): > The newspaper concluded there was little evidence in Piketty's original sources to bear out his theory that the richest were accumulating more wealth
yummyfajitas 12y ago
In order for income inequality to not lead to wealth inequality, we need to believe that poor people save more of their income than wealthy people - which seems rather difficult. Or that wealthy people achieve diminishing returns on investment as their wealth grows. I.e., my startup might grow 10-fold, but Facebook is unlikely to. Even if you assume Piketty's "r > g" macro-level hypothesis, there are a lot of microeconomic theories completely compatible with it. Not all of them result in increasing inequality. http://www.chrisstucchio.com/blog/2014/piketty_and_inequality.html http://www.chrisstucchio.com/blog/2014/piketty_and_inequalit... (But now we are moving into the topic of Piketty's theoretical weaknesses, which are supposedly irrelevant because his data is so great.) I think it is clear from other sources... [citation needed] And if other sources prove this point, why was Piketty's book such a sensation?
- anon1385 12y ago
  >I.e., my startup might grow 10-fold, but Facebook is unlikely to. Yes, startups, an investment famous for attracting only small scale investors of small means…
- foobarqux 12y ago
  What is Piketty's theoretical weakness?
  - praxeologist 12y ago
    See this article, especially toward the end on his understanding of capital: https://mises.org/daily/6736/Thomas-Piketty-on-Inequality-and-Capital https://mises.org/daily/6736/Thomas-Piketty-on-Inequality-an...
    - foobarqux 12y ago
      The main criticism there is that the concept of return on capital is meaningless. I think that is fringe view and I don't find it compelling.
      - praxeologist 12y ago
        >I think that is fringe view and I don't find it compelling. That's a vacuous non-argument and appeal to popular opinion. Not compelling as well.
        foobarqux 12y ago
        Many complex systems, hard to describe on a micro level, have straightforward macro statistics. I think return on capital can be described but such statistics even if individual investments are highly variable. Capturing the return is achieved by having a highly diversified portfolio.
  - yummyfajitas 12y ago
    His lack of a clearly stated theory. Ask yourself this question: in a few equations, what is his fundamental claim? What specific data (irrespective of technical details about collecting it) would prove or disprove his theory? The closest he comes to having a clearly stated theory is that "r > g => growth of inequality". That specific claim is completely wrong. http://www.chrisstucchio.com/blog/2014/piketty_and_inequality.html http://www.chrisstucchio.com/blog/2014/piketty_and_inequalit...

mpweiher 12y ago

Piketty's numbers appear incorrect Er...some of his numbers appear incorrect. From this you incorrectly assume that this invalidates the conclusion. It may invalidate the conclusion if the errors are significant. However, what little I've seen so far does not seem to be all that significant. From the fine article: 'Scott Winship, an economist at the right-leaning Manhattan Institute for Policy Research, and notable critic of Piketty's analysis, said the FT's allegations weren't "significant for the fundamental question of whether Piketty's thesis is right or not".' So there seem to be highly qualified sources that say that the differences are not significant. That's not the same as "he said/she said". Do you have any evidence that the errors are significant? You also blatantly mischaracterize Krugman's point: he showed that inequality in capital income is going up, not (just) general income. Capital income has this property that it usually derives from capital (as the name says). So unless there is evidence that the top 1% or so systematically get significantly better returns on the same capital, an increase in capital income let's us include that there is an increase in base capital from which to derive that income. On the other side of the coin, income leads to wealth, and unless you have evidence that high-income people save less of their income than lower-income people, then wealth will diverge. All the evidence I have seen so far (and common sense) say that it is the other way around: consumption saturates, so people with higher incomes actually save more and spend less, at least in relative terms. So both sides of this equation quite trivially show the link between income inequality (especially for, but not limited to capital income) that you deny. So both the FT criticism (= nit-picking in non-substantive details) and your criticism are unfounded, as far as we can tell. Again, if you have some actual substantive evidence that the errors are significant, I'd love to see it.

QuantumChaos 12y ago
On Scott Winship, see one of my top level comments (I made two top level comments as I only started investigating this after I posted once). Whatever was printed in the article, he has said on Twitter that he does doubt Piketty's conclusions, and also that the FT allegations are significant.
- mpweiher 12y ago