Paul L. Caron

Saturday, May 31, 2014

Thomas Piketty Responds to Financial Times Criticism: 'If Anything, My Book Underestimates the Rise in Wealth Inequality'

CapitalFollowing up on my previous posts on the new book by Thomas Piketty (Paris School of Economics), Capital in the Twenty-First Century (Harvard University Press, 2014):

Thomas Piketty (Paris School of Economics), Response to FT:

This is a response to the criticisms -- which I interpret as requests for additional information -- that were published in the Financial Times on May 23 2014. ...

I welcome all criticisms and I am very happy that this book contributes to stimulate a global debate about these important issues. My problem with the FT criticisms is twofold. First, I did not find the FT criticism particularly constructive. The FT suggests that I made mistakes and errors in my computations, which is simply wrong, as I show below. The corrections proposed by the FT to my series (and with which I disagree) are for the most part relatively minor, and do not affect the long run evolutions and my overall analysis, contrarily to what the FT suggests. Next, the FT corrections that are somewhat more important are based upon methodological choices that are quite debatable (to say the least). In particular, the FT simply chooses to ignore the Saez-Zucman 2014 study, which indicates a higher rise in top wealth shares in the United States during recent decades than what I report in my book (if anything, my book underestimates the rise in wealth inequality). Regarding Britain, the FT seems to put a lot of trust in self-reported wealth survey data that notoriously underestimates wealth inequality.

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Another criticism is that Piketty's analysis ignores the finiteness of human life. Heirs do not hoard their inherited capital. They spend it. Death halts what Piketty claims will be an exponential accumulation of capital.

Posted by: AMT buff | Jun 10, 2014 12:07:10 PM

I'm surprised Piketty did not address the criticism by four French economists that his use of house prices, rather than their rental values, as capital was incorrect, See their full paper at

These economists conclude that "The capital/income ratio has therefore increased only because of the choice made to measure the value of capital as indexed on the housing price and not indexed on rental price."

Has Piketty responded to this point yet?

Posted by: AMTbuff | May 31, 2014 12:04:12 PM