
Piketty’s rising share of capital income and the US housing market - cossatot
http://voxeu.org/article/piketty-s-housing-capital-results-new-us-facts
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qwrusz
Based on the first chart. Capital income from housing doesn't matter very much
compared to non-housing capital income (check out how closely that latter is
correlated).

Also capital income from housing actually looks to be declining pretty sharply
for almost a decade?

To the extent housing does matter it looks a lot less volatile than non-
housing capital income.

TL;DR. More people are renting vs buying nowadays. Real estate has been a
relatively good investment since WW2 but stock markets have appreciated more.
Water is wet.

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simonh
Regarding stock market returns, I'm curious if the calculated returns on
stocks as a class properly takes into account failed companies. Take the FTSE
100. If a mid-tier one of those companies fails (Lehman's collapse for
example) the FTSE 100 doesn't lose 1% of it's value. Instead the 101st most
valuable UK company takes it's place. Does anybody know how well measures of
stock market returns take into account effects like this? Or are they measured
on the total market value of all traded equities?

~~~
gphil
It depends on what you are looking at, but generally index returns (such as
the FTSE 100) are calculated as if you are rebalancing your portfolio
periodically to reflect the changing composition of the index over time, which
is what a passive index fund manager would do for you if you were to invest in
a FTSE 100 index fund, for example.

I am not aware of any non-index based stock market performance measures like
what you are suggesting--e.g. if I bought all the stocks in the FTSE 100 index
in 1994 and never rebalanced, what would have happened? I suspect that the
returns would indeed have been a lot worse but I can't say for sure.

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nickff
From what I can see, this data-set and analysis seems to indicate that
investors have been discouraged from investing in productive assets and
investment vehicles by the low interest rates (or IRR). In response, people
are spending more money on luxuries (such as their houses).

~~~
e3b0c
In the long run, this seems to be partly due to Henry George theorem
([https://en.wikipedia.org/wiki/Henry_George_theorem](https://en.wikipedia.org/wiki/Henry_George_theorem)).
Otherwise real estate wouldn't be that exceptional than other asset classes,
as the article suggests.

~~~
tomrod
You have sparked the economist bug in me. I'll be reading on this for months
now: my thanks to you!

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skybrian
Figure 1 seems to show that non-housing capital income is more important than
housing? (Noisier, but also a significant increase.)

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kardashev
Piketty's data was already found to be fraudulent. He skewed it to push his
own political worldview.

[https://www.ft.com/content/e1f343ca-e281-11e3-89fd-00144feab...](https://www.ft.com/content/e1f343ca-e281-11e3-89fd-00144feabdc0)

~~~
epistasis
The Financial Times analysis has already been found to fraudulent, with skewed
accusations so that they can push their own worldview:

[http://www.economist.com/blogs/freeexchange/2014/05/thomas-p...](http://www.economist.com/blogs/freeexchange/2014/05/thomas-
pikettys-capital)

> But increasingly the battle seems to be one over methodological choices and
> data interpretation rather than major data errors or fabrications, as the
> initial FT work suggested.

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kardashev
Your article proves my point. He deliberately altered his data.

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arjie
It's not saying that. The Economist refers to itself earlier¹ saying this:

> All told, Mr Piketty is guilty of sloppiness (certainly in his notation),
> and perhaps of some errors. But there is little evidence, so far, to support
> the serious charge of cherry-picking statistics. Nor have his findings that
> wealth concentration is, once again, rising been fatally undermined.

You claimed that he was being fraudulent, and this is saying the opposite.

¹ [http://www.economist.com/news/finance-and-
economics/21603022...](http://www.economist.com/news/finance-and-
economics/21603022-latest-controversy-around-thomas-pikettys-blockbuster-book-
concerns-its)

