
Is Piketty All Wrong? - lkrubner
http://krugman.blogs.nytimes.com/2014/05/24/is-piketty-all-wrong/
======
enraged_camel
The Giles quote provided by Krugman is illustrative of his agenda -- or his
delusion:

 _> >The exact level of European inequality in the last fifty years is
impossible to determine, as it depends on the sources one uses. However,
whichever level one picks, the lines in red in the graph show that – unlike
what Prof. Piketty claims – wealth concentration among the richest people has
been pretty stable for 50 years in both Europe and the US.

>>There is no obvious upward trend. The conclusions of Capital in the 21st
century do not appear to be backed by the book’s own sources._

Of course the upper class wants you to believe that wealth inequality has not
been increasing. Of course they want you to believe that things are fine and
dandy. They want you to believe these things because they don't want their
wealth taken away, either via taxes or via revolutions. And Giles is simply
their mouthpiece.

Like Krugman, I'm looking forward to Piketty's defense. But I doubt the errors
are anywhere enough to overturn his conclusions.

~~~
panarky
Piketty definitely needs to respond thoroughly to the errors that Giles found,
and Piketty's response so far is too flippant and superficial. This is serious
stuff and it deserves a serious response.

That said, those who don't want to talk about inequality are prematurely
jettisoning Piketty's conclusions.

A very simple way to measure inequality is the ratio of the wealth of the top
quintile to the middle quintile. It's easy to see how this ratio escalated
over the last 25 years.

[http://houseofdebt.org/2014/05/24/piketty-and-u-s-wealth-
ine...](http://houseofdebt.org/2014/05/24/piketty-and-u-s-wealth-
inequality.html)

Spreadsheet errors notwithstanding, the inequality story is not going away.

~~~
AnthonyMouse
The trouble is that the inequality story is a complete mischaracterization of
the problem and it's very misleading about what the prospective solutions are.
It leads people to believe that the issue is with John McCain owning houses
across multiple states, when the actual problem is with the Koch Brothers
owning Senators across multiple states.

And what's the solution? Everybody says "tax the rich." The problem is that
income taxes doesn't cause their wealth to decrease, they at best cause it to
increase less rapidly. In practice they do nothing (or worse than nothing)
because the biggest companies don't pay them anyway, and it creates a large
competitive disadvantage for companies not large enough to engage in
international tax avoidance, which makes the problem even worse.

Meanwhile any money you manage to raise you can't spend until you first fight
against a bunch of "domestic companies creating American jobs" who want to use
it to fund Deep Water Horizon 2.0 or studies denying climate change or supply
attack helicopters to the North Dakota state police, because aforementioned
billionaires still have a thousand times more money than you with which to
lobby Congress.

The only way to fix any of it is to shut down K Street. Obviously that's a
chicken and egg problem, because K Street is in a good position to protect
itself, but if that's not your end game then you might as well stay home.

~~~
alexeisadeski3
The only solution is to take power out of the hands of politicians.

Get rid of K Street and something worse will take its place.

Get rid of Congresses ability to regulate every detail of the economy and K
Street will have a lot less to lobby for.

~~~
AnthonyMouse
There is certainly something to be said for placing clear limits on what
Congress can do, but it's extraordinarily difficult to set out what they
should be able to do ex ante and get it right. For example, it makes
reasonable sense that the federal government should be in charge of the
national defense, but then Washington is colonized by the defense industry
which allocates itself a budget the size of Sweden's GDP. On the other hand,
state governments have repeatedly demonstrated their ability to be captured by
major industries within the state (e.g. coal in West Virginia, oil in Texas)
and if it wasn't for the EPA those states would be [even more] uninhabitable,
but we only have the EPA as a result of reading the commerce clause quite
broadly. Making environmental regulations isn't specifically enumerated as a
power of the federal government.

I sometimes wonder if the problem isn't one of having _too much_
accountability. If terms were twice as long then politicians could spend half
as much time campaigning and wouldn't have to take as much money from private
interests to stay in office. If federal senators went back to being appointed
by the state legislatures there would be less voting but there would also be
less unwarranted federal interference in state affairs. And so on.

~~~
alexeisadeski3
It's interesting that you bring up environmental issues. Those are especially
tricky, since they deal with the commons: our air and water, which are
typically not privately owned and thus are legally forbidden from being
handled by the free market.

And the military? Well, sure there are issues there. We can all agree on that.

Now, the military and environmental regulation are inextricably linked to the
economy, no doubt about that. And their impact on the economy can be large, no
doubt about that either. But there is so much which the government gets
involved with - and where there is SO much money to be made via lobbying and
influence peddling - which the government really doesn't need to be involved
in.

I guess I'm saying that if the EPA and military corruption were the only
issues we had to deal with, we'd be in a much better space than we are now.

~~~
AnthonyMouse
But those are just examples. You would have the same issue with state-level
regulatory capture with finance in New York, or internet and other utility
providers capturing the states they provide service in, etc. And then there's
antitrust and copyright and other such things that essentially have to be done
at the federal level because they have national scope.

There are certainly things currently done by the feds that could be reasonably
handed over to the states. Social security comes to mind as a big one. But
social spending is hardly the area where moving that out of Washington would
make the largest dent in K Street.

~~~
alexeisadeski3
The point of moving regulation to the states is to foment competition amongst
said states - this should exert downward pressure on corruption, but how much
we don't really know. Certainly we currently have some states which are more
corrupt than others. Which would certainly be an improvement on the status
quo.

Copyright is certainly a popular issue here on HN, and I'm sure K Street makes
a lot of money on it, but again it's like the EPA - something which the
government _has to_ by definition regulate in some way.

In fact, moving Social Security and Obamacare subsidies to the states would
probably put a larger dent in K Street than all of the other issues you've
mentioned combined (military, EPA, copyright, antitrust). You're talking about
trillions in handouts, issues which impact every single citizen, massive
bureaucracies fighting for power.

------
thrownaway2424
The nice thing about Piketty is all his data is right out in the open, on the
web, and not behind some kind of crazy academic journal paywall type of thing.
You don't have to take him or his detractors at face value for anything.

~~~
baddox
> The nice thing about Piketty is all his data is right out in the open, on
> the web, and not behind some kind of crazy academic journal paywall type of
> thing.

Is it? I assumed you have to buy the book, which is the oldest incarnation of
a content paywall.

~~~
couchand
Here [0] you'll find a lot of data by Piketty and Emmanuel Saez.

[0]:
[http://eml.berkeley.edu/~saez/#income](http://eml.berkeley.edu/~saez/#income)

------
conistonwater
Piketty's response: [http://blogs.ft.com/money-supply/2014/05/23/piketty-
response...](http://blogs.ft.com/money-supply/2014/05/23/piketty-response-to-
ft-data-concerns/)

Note that, as mentioned in the comments there, it's not clear whether FT gave
Piketty Giles's specific points to respond to. The response was written before
the column was published.

Previous discussion on HN:
[https://news.ycombinator.com/item?id=7793609](https://news.ycombinator.com/item?id=7793609)

------
jerryhuang100
TL;DR: FT used some GB data that even the original agency HMRC no longer used
after methodology change.

For the "Wealth Inequality in Britain 1810-2010" data, FT 'argues that
Piketty’s graphs simply “do not match” his underlying data on the UK, and that
official estimates show no significant increase in the country’s concentration
of wealth since the 1970s.'

(From:
[http://www.slate.com/blogs/moneybox/2014/05/23/financial_tim...](http://www.slate.com/blogs/moneybox/2014/05/23/financial_times_on_piketty_his_data_is_wrong.html))

FT's Giles then used the following data to rebuke Piketty's "overestimation"
of the top 1% & 10% wealth share, as noted in Giles' Excel sheet (not in the
text):

"Data comes from Inland Revenue tables. They are accurately transcribed.
[http://webarchive.nationalarchives.gov.uk/20120403124426/htt...](http://webarchive.nationalarchives.gov.uk/20120403124426/http://www.hmrc.gov.uk/stats/personal_wealth/13-5-table-2005.pdf")

Excel:
[http://interactive.ftdata.co.uk/files/docs/FTPikettyspreadsh...](http://interactive.ftdata.co.uk/files/docs/FTPikettyspreadsheet22May2014.xlsx)

The only problem I have is that the "13-5-table-2005.pdf" is a table before
HMRC made major change to the methodology and its historical tables:

[http://webarchive.nationalarchives.gov.uk/20120403124426/htt...](http://webarchive.nationalarchives.gov.uk/20120403124426/http://www.hmrc.gov.uk/stats/personal_wealth/menu.htm)

HMRC concluded with "... we would no longer be able to produce the marketable
wealth series used in tables 13.3 and 13.4", which the table 13.5 relied on.
And those historical tables (prior 2001) never exist again in the following
years. By the way, HMRC Personal Wealth data only covers partial estates: "For
2001 to 2003 this covers 35% of estates and for 2005 to 2007, 34% and for
2008-10, 31%."

------
yummyfajitas
Krugman is all wrong:

Giles: _unlike what Prof. Piketty claims – wealth concentration among the
richest people has been pretty stable for 50 years in both Europe and the US._

Krugman: Take, for example, the landmark CBO study on the distribution of
_income;_ "

Krugman then shows some graphs about _capital income_ (which is not the same
thing as wealth) which don't clearly demonstrate any change _among the richest
people_. This is fairly typical Krugman, but I hope HN readers are smart
enough not to be duped by this.

~~~
IvyMike
How do you respond to Krugman's next sentence?

> It’s just not plausible that this increase in the concentration of income
> from capital doesn’t reflect a more or less comparable increase in the
> concentration of capital itself.

Also, given that he has this sentence, I don't think Krugman is trying to
deceptively confuse capital income and wealth.

Also, the report that Krugman links to (
[http://www.cbo.gov/publication/42729](http://www.cbo.gov/publication/42729) )
seems to show a significant change (yes, in income not wealth) among the top
1%, which does seem to be a change "among the richest people". How am I
misinterpreting this report?

~~~
yummyfajitas
It is highly plausible. If capital income is increasingly coming from sales of
homes, it will become lumpier (in time) and inequality will go up.

I.e. if 100 people own identical houses but only 1 person sells in a given
year, wealth is perfectly equal but capital income inequality is huge.

~~~
demallien
Not really. If you assume a relatively even distribution of the rate at which
people sell homes. For example, let's take those 100 people and assume that on
average they sell their home every ten years. In any given year, 10 of those
people will sell their homes, realising their capital gains. Now, because you
have 100 people, the average increase will be divided by 10 (100/10). Which is
exactly what you would get if you amortise those capital gains over the ten
years. Large numbers of people smooths out lumpiness of individual income.

~~~
yummyfajitas
If you have 10/100 people selling their homes in a given year, then 10% of
people earn 100% of the capital income. This is true in spite of a _completely
equal_ distribution of wealth. The fact that the 10% number is stable over
time doesn't change this.

Capital income and wealth are simply not the same thing.

------
alexeisadeski3
Probably:
[http://marginalrevolution.com/marginalrevolution/2014/05/wha...](http://marginalrevolution.com/marginalrevolution/2014/05/what-
do-the-piketty-data-problems-really-mean.html)

------
galo2099
[http://en.wikipedia.org/wiki/Betteridge's_law_of_headlines](http://en.wikipedia.org/wiki/Betteridge's_law_of_headlines)

