Paul L. Caron
Dean


Wednesday, December 12, 2018

U.S. Income More Equal Than Advertised

Wall Street Journal, U.S. Income More Equal than Advertised:

Remember the 2014 bestseller “Capital in the Twenty-First Century” by French economist Thomas Piketty? ... The dismal tale of exploding inequality and capitalist failure has been a recurring theme in political chatter ever since. But a new report highlights just how poorly Mr. Piketty’s thesis has held up under further study.

This column should note that some scholars saw problems right from the start. ... Chris Giles of the UK’s Financial Times examined Mr. Piketty’s work and found that “the rock-star French economist appears to have got his sums wrong.” ...

Now a new report from the Urban Institute goes back further, to Mr. Piketty’s influential research with University of California, Berkeley professor Emannuel Saez published in 2003. Stephen Rose writes:

Piketty and Saez’s findings garnered tremendous attention and were cited repeatedly. But many researchers eventually found problems with Piketty and Saez’s approach and developed income inequality measures that led to different findings.

Phil Magness of the American Institute for Economic Research writes today:

In short, the widely reported explosion of inequality in the past three decades is likely a myth, built upon outdated and flawed statistics... Whereas Piketty and Saez show a massive century-long swing of almost 20 percentage points in the income share of the top 10 percent, the adjusted figures show a much flatter curve with a little over half the variation. Inequality still falls and rises under the revised numbers, but at a comparatively subdued rate. Under the adjustments, the top 10 percent income share seldom strays more than 5 percentage points away from a century-long average of about 35 percent. ...

Perhaps we should also focus on ensuring an abundance of opportunity, rather than regarding it as a problem when some people inevitably make more than others.

Piketty

https://taxprof.typepad.com/taxprof_blog/2018/12/us-income-more-equal-than-advertised.html

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Comments

Think tanks funded by billionaires are confident that billionaires aren't as rich as unbiased, tenured academic economists seem to think they are. So let's please stop talking about taxing them more heavily and get back to the business at hand of tax cuts and gutting the social safety net. I mean generating growth.

https://www.atlasnetwork.org/partners/global-directory/american-institute-for-economic-research

Posted by: Think tanks | Dec 12, 2018 1:41:07 PM

Speaking of which, Mr. Magneses's CV reads like a laundry list of organizations funded by the Koch Brothers.
http://philmagness.com/?page_id=579

Posted by: Think tanks | Dec 12, 2018 1:44:58 PM

Piketty and other economists have convincingly responded to these critiques already—something the WSJ and it’s think-tank-based sources curiously neglect to mention. The debate is basically just about wealth inequality in the UK, not income inequality in the U.S.

https://www.nytimes.com/2014/05/31/upshot/everything-you-need-to-know-about-thomas-piketty-vs-the-financial-times.html

https://www.washingtonpost.com/news/wonk/wp/2014/05/30/pikettys-errors-arent-mistakes-theyre-questions-and-he-answered-them/?utm_term=.a5c429d7e58d

https://voxeu.org/article/factual-response-ft-s-fact-checking

https://www.vox.com/2014/5/29/5761578/thomas-pikettys-convincing-reply-to-his-critics

https://academic.oup.com/qje/article/131/2/519/2607097

https://www.peoplesworld.org/article/economists-fight-over-capital-piketty-vs-establishment/


The famous income reporting shift would actually cause Piketty to *understate* income inequality in the US, not overstate it.

https://www.tandfonline.com/doi/full/10.1080/09538259.2017.1255439

If these think tanker counterarguments actually had merit, the think tank crowd wouldn’t be afraid to seriously engage with Piketty. But the think tanks are basically just throwing up noise and distraction, not real substance.

Even CNBC – hardly a left-wing bastion—acknowledged as much.
https://www.cnbc.com/2014/05/01/the-rights-piketty-problemcapital-in-the-twenty-first-centurycommentary.html

Posted by: Piketty and his critics | Dec 12, 2018 2:39:38 PM

Re: Think Tanks: “unbiased, tenured academic economists.” Yes, thank goodness there’s no bias among tenured academics. Perish the thought.

Posted by: Victor Erimita | Dec 12, 2018 5:11:33 PM

This would just result in bureaucrats wasting more money.

Posted by: Actual Lawyer | Dec 12, 2018 6:07:57 PM

The two comments by “Think tanks” are perfect examples of ad hominem arguments.

Posted by: ddh | Dec 13, 2018 12:19:34 AM

Wow, did the same person just write three posts under different names? And yet still manage to be argument free in all three.

Posted by: Conor | Dec 13, 2018 1:47:34 AM