Unless tax rates are 100% for everybody, we could always be collecting more taxes. We could be collecting less taxes too. What's your point? Raising taxes on the rich will not address the problems driving income inequality... again, people are fixated on the symptoms rather than the disease. Raising taxes on the rich won't fix healthcare, or address the student loan bubble, or bring back jobs lost to outsourcing and automation, or stop shyt like racial profiling or the prison industrial complex. You nikkas are trying to use a hammer to screw bolts.I think we could be collecting more taxes.
We've got more millionaires and people of means...ever.
Capital gains taxes can't be hidden forever
Krugman on Piketty: Why we're in a new Gilded Age
- Thread starter Julius Skrrvin
- Start date
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I don't really understand the inequality arguments cause they seemed to be aimed at inspiring a populist uprising instead of having specific and focused goals...its kinda disingenious IMO...but that may be another topic.
I'm NOT disagreeing with you, but I do think taxes could be higher at the top. I really do.
No single move will help "fix" things but rather a series of coordinated steps. You can't look at one proposal in a vacuum
University economics teaching isn't an education: it's a £9,000 lobotomy
Economics took a battering after the financial crisis, but faculties are refusing to teach alternative views. It's as if there's only one way to run an economy
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- Aditya Chakrabortty
- The Guardian, Thursday 8 May 2014
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The Post-Crash Economics Society at Manchester University has arranged an evening class on bubbles, panics and crashes. Photograph: Jon Super for the Guardian
"I don't care who writes a nation's laws – or crafts its treatises – if I can write its economics textbooks," said Paul Samuelson. The Nobel prizewinner grasped that what was true of gadgets was also true for economies: he who produces the instruction manual defines how the object will be used, and to what ends.
Samuelson's axiom held good until the collapse of Lehman Brothers, which triggered both an economic crisis and a crisis in economics. In the six years since, the reputations of those high priests of capitalism, academic economists, have taken a battering.
The Queen herself asked why hardly any of them saw the crash coming, while the Bank of England's Andy Haldane has noted how it rendered his colleagues' enchantingly neat models as good as useless: "The economy in crisis behaved more like slime descending a warehouse wall than Newton's pendulum." And this week, economics students from Kolkata to Manchester have gone on the warpath demanding radical changes in what they're taught.
In a manifesto signed by 42 university economics associations from 19 countries, the students decry a "dramatic narrowing of the curriculum" that presents the economy "in a vacuum". The result is that the generation next in line to run our economy, from Whitehall departments or corporate corner-offices, discuss policy without touching on "broader social impacts and moral implications of economic decisions".
The problem is summed up by one of the manifesto's coordinators, Faheem Rokadiya, at the University of Glasgow: "Whenever I sit an economics exam, I have to turn myself into a robot." But he and his fellow reformers aren't seeking to skimp on algebra, or calling for a bonfire of the works of the Chicago school. They simply object to the notion that there is one true way to do economics, especially after that apparently scientific method has been found so badly wanting.
In their battle to open up economics, Rokadiya et al have one hell of a fight on their hands, for the same reason that it has proved so hard to democratise so many aspects of the post-crash order: the forces of conservatism are just too powerful. To see how fiercely the academics fight back, take a look at the University of Manchester.
Since last autumn, members of the university's Post-Crash Economics Society have been campaigning for reform of their narrow syllabus. They've put on their own lectures from non-mainstream, heterodox economists, even organising evening classes on bubbles, panics and crashes. You might think academics would be delighted to see such undergraduate engagement, or that economists would be swift to respond to the market.
Not a bit of it. Manchester's economics faculty recently announced that it wouldn't renew the contract of the temporary lecturer of the bubbles course, and that students who wanted to learn about the crash would have to go to the business school.
The most significant economics event of our lifetime isn't being taught in any depth at one of the largest economics faculties in the country. So what exactly is a Russell Group university teaching our future economists? Last month the Post-Crash members published a report on the deficiencies of the teaching they receive. It is thorough and thoughtful, and reports: "Tutorials consist of copying problem sets off the board rather than discussing economic ideas, and 18 out of 48 modules have 50% or more marks given by multiple choice." Students point out that they are trained to digest economic theory and regurgitate it in exams, but never to question the assumptions that underpin it. This isn't an education: it's a nine-grand lobotomy.
The Manchester example is part of a much broader trend in which non-mainstream economists have been evicted from economics faculties and now hole up in geography departments or business schools. "Intellectual talibanisation" is how one renowned economist describes it in private. This isn't just bad for academia: the logical extension of the argument that you can only study economics in one way is that you can only run the economy in one way.
Mainstream economics still has debates, but they tend to be technical in nature. The Nobel prizewinner Paul Krugman has pointed to the recent work of Thomas Piketty as proof that mainstream economics is plenty wide-ranging enough. Yet when Piketty visited the Guardian last week, he complained that economists generate "sophisticated models with very little or no empirical basis … there's a lot of ideology and self-interest".
Like so many other parts of the post-crash order, mainstream economists are liberal in theory but can be authoritarian in practice. The reason for that is brilliantly summed up by that non-economist Upton Sinclair: "It is difficult to get a man to understand something when his salary depends on his not understanding it."
Brown_Pride
All Star
I'm not forcing anything through one small problem. The even more ironic part is that when someone brings up inequality as being an issue one of the most common place knee jerk reactions is to accuse someone of being a communist and wanting everyone to have the same amount of money...to be clear i'm not saying you did that i'm just saying it looks like you did.
IMHO income inequality is a problem, at least at the extreme we're seeing it.
IMHO income inequality is required to spur things like innovation and is in general a great motivator. The issue is when that inequality becomes to great bad things occur and then inequalities turns from a motivator into a means of keeping the status quo which in turns stifles things like innovation.
For sure the issue is complex and not likely to be solved completely by tax hikes on the rich...
that being said there is a high probability that tax hikes on the rich WILL BE part of the solution, it has to be. If you're going to reduce the magnitude of the inequality you're going to have to take some of that money from the top and give it to the bottom.
You can HOPE the top sees this requirement and decides, out of their own good will, to do this (...not likely to happen)
Or you/we can do it form them.
We can do it for them via revolution and flat out taking it from them
Or
We can tax and provide incentives for them to do so. (this is my vote)
for sure the solution will be complex, for sure people will fuk it up and attempt to exploit it or use it to their own benefit over others...which imho is the problem with capitalism as we see it today. It promotes corruption and fixing of the game, which ultimately leads to where we see ourselves today and more importantly where we're going tomorrow (IMHO not a good place).
Brown_Pride
All Star
exactly.
The issue with raising taxes is this.
Who sets tax rates? Politicians
Who pays for Politicians? Corporations and the rich
Who decides then how the taxes should be spent? Corporations and the rich
Taxation as we've understood it in terms of an equalizer has always been seen as a tool to take from the rich and give to the poor. The issue with our current system is taxation is actually taking from the rich and the poor to give to the rich. (see prison industrial complex, political lobbies and the masters they serve).
So in one regard taxation COULD help, but in reality, because of who decides what happens to taxes it really doesn't.
Hell even look at food stamps.
We tax EVERYONE for food stamps right? We've proven time and again that:
A. Corporations pay little to no taxes by percentage
B. Individuals who are rich pay little to no taxes by percentage (romney 14%)
C. Everyone else tends to pay 25-40% in taxes.
Now again take food stamps. Everyone is taxed to pay for that, group C moreso...by percentage. Now when "the poor" get all the redistributed wealth what do they do with it? They spend it. Who get's it? Store owners. As there are few SMALL store owners anymore who really gets it? Walmart, Kmart, Target, etc, etc, etc. Who are the suppliers for these stores? P&G, monsanto, etc, etc.
SO..... when we look at the true flow of money, particularly tax money which way does the money really get distributed? It sure the fuk isn't robbing the rich to give to the poor now is it. AND because by percentage group C pays more in taxes there's actually a slow bleed of group C's money which is redistributed to groups A&B.
There's a reason the middle class has gone the way of the Dodo bird and like it or not it's a pretty big fukin problem.
hey breh...you might as well bring up immigration...
Brown_Pride
All Star
i'd rather focus on big fishhey breh...you might as well bring up immigration...
Immigration is a drop in the bucket when placed against the enormity that is our economics and the issues there in that are destroying the world as we know it.
The scary thing is this is the single largest issue facing the globe right now because it is at the root of all other issues...and honestly it always has been.
Money is indeed the root of all issues.
Thus, nihilismi'd rather focus on big fish
Immigration is a drop in the bucket when placed against the enormity that is our economics and the issues there in that are destroying the world as we know it.
The scary thing is this is the single largest issue facing the globe right now because it is at the root of all other issues...and honestly it always has been.
Money is indeed the root of all issues.
U can't really call creating a catch 22 (give us your money or we will just take it) a "compromise". That's like a nikka running up on you with a gun like 'u can give me yo shyt, or u can give me yo shyt and leave with some bullets.... im basically giving u a deal here
Your line of thinking is dependent on the implication that income and wealth are fixed quantities that can only be moved around by brute force redistribution. When in fact it's not that simple, at all. Take this idea for example. I did the math. We spend enough on the military to make college damn near free. Without changing anything in the tax code, but just changing our priorities, we could educate the country and free future generations from the shackles of student loan debt (at least for kids in school or going to school in the future). That will free up money for them to build their own wealth and spend on other things that will help the economy more than govt backed debt. Healthcare is not much different. We spend about 20% of our GDP on healthcare and are getting shyt back. A properly configured, corruption free single payer program (i.e. expanding Medicare to the whole country) would probably require more taxes, but being that it would benefit the poor and middle class more I don't think it would be fair to make the rich pay for it- especially since the savings from a huge, centralized insurance plan would far outweigh that added cost. One of the biggest causes of bankruptcy for people is medical expenses- creating a medical system that incentivizes preventative care and good lifestyle choices seems like a more logical choice than forcing the rich to shoulder the costs of the unsustainable status quo...
Capitalism doesn't promote exploitation and corruption, human nature does. Every ideology is useless in practice, including yours, without careful architecture to account for all facets of human nature.
I think they do too. I think taxes could be higher at the bottom and in the middle as well. I think taxes could be lower too. Anything is possible. The question I keep asking is, given that most of the problems Americans are facing today have nothing to do with taxes, why do people keep insisting that higher taxes are the solution? Why should taxes be higher at the top? How will that fix all the skyrocketing costs keeping people at the bottom from acquiring wealth?
Last edited:
Brown_Pride
All Star
We are very far from that. People start taking shyt when they are starving and dying. As broken as the American system is, from that POV the average American is very OK. Revolting sounds cool but it only makes sense when you have absolutely nothing to lose which is far from the case for the avg American.
Again, slapping the MIC with high taxes won't change shyt... it's the abuse of power that is the problem. If you de-incentivize their conflicts of interest (i.e. more profits for more prisoners), they will back off and lose their power naturally, rather than hopefully from roundabout punitive measures.
And yes money at an instant is fixed, but it can be created and destroyed. Ask anyone who had Lehman stock in 2008. It works the other way too. So treating income/wealth like a fixed quantity is just the wrong approach, period. It's highly dynamic.
Again, money is only finite in an instant. The total sum of money in existence is constantly changing due to amounts of it always being created and destroyed. Hell, the income inequality problem is partially due to the overcreation of money by the Fed, pumping up assets. So put that 'money is finite' thing to bed. It's wrong.
But everything has the potential for corruption. "The rich" already pay the highest tax rates in the country by a landslide. But look closer. People demonize the 1%. But someone at the bottom of the 1% is "only" making $350K a year. Good money but hardly "buy a congressman off" money. Someone at that income level is paying damn near 30% in federal taxes. But then someone like Warren Buffet, making hundreds of millions a year, might pay half of that. Even though we have a "progressive" tax system. So people really have to pay attention and know what they are talking about, before offering up "solutions". Like I said before I think all income should be taxed the same at similar rates for everyone but the poor.... so I would pay the same ~20% rate as someone making hundreds of millions. That's really the only "fair" way to do taxes.
The Piketty Controversy Has Economics Bloggers Debating Over 4 Issues
REUTERS/Charles Platiau
French economist and academic Thomas Piketty, poses in his book-lined office at the French School for Advanced Studies in the Social Sciences (EHESS), in Paris May 12, 2014.
What’s at stake: While everyone praised the data collection effort behind the bestseller book “Capital in the 21st century”, Chris Giles of the Financial Times has dug up data-entry errors and dubious adjustments, which appeared unexplained in the book. While Piketty appears confident in his response to the FT that the overall conclusions of his book are robust, he hasn’t yet provided a point-by-point response to the questions raised.
Piketty, Reinhart and Rogoff
Matt O’Brien writes that the nine most terrifying words in the English language for a researcher are: "You made spreadsheet errors like Reinhart and Rogoff did." But that's what Chris Giles of the Financial Times thinks rockstar economist Thomas Piketty did, among other mistakes, in his groundbreaking new book, "Capital in the Twenty-First Century."
Matthew Yglesias writes that the universally praised element of Capital is its collection of historical data on wealth, so allegations that his construction of data series is riddled with errors is a really big deal. Neil Irwin writes that one of the most common approaches for people writing about Piketty’s blockbuster book has been to critique his theories and predictions while effusively praising his data collection. Piketty, after all, did yeoman’s work compiling data from tax and other records to try to determine a history of wealth inequality around the world.
Ryan Avent writes that this does look quite a lot like the Reinhart-Rogoff contretemps. The errors identified in their spreadsheet turned out to be far more embarrassing to the authors than a threat to their work. But none of that mattered when the news broke. Partisans took to their bunkers to lob bombs at each other, the truth of the matter be damned. It would be unfortunate were that to happen in this case, but it almost certainly will, and indeed it has already begun. James Hamilton writes that the contrast between Krugman’s defense of Piketty and the zeal with which he jumped on top of the Reinhart-Rogoff dog pile is amusing.
Branko writes that if you create (as Piketty did) bunch of data for a bunch of countries, there are bound to be issues. The question is, was there intentional data manipulation to get the answer one desires. I do not know it but it strikes me as unlikely that if one wanted to do it, he would have posted all the data, complete with formulas, on the Internet.
The FT attack
Matt O’Brien writes that Giles identifies three basic types of issues. The first are simple transcription errors. He finds, for example, that Piketty accidentally entered Sweden's wealth data from 1908 instead of 1920. There are data-entry errors, and they're embarrassing, but they don't change the big picture. The next concern is methodological. Giles thinks Piketty should average European data by population, not by country. He doesn't like that Piketty draws trends between large gaps in the numbers. Or that Piketty labels data from, say, 2004 as "2000" on some of his charts. And Giles isn't sure why Piketty has put together some of his wealth data—which is sparse, and needs to be adjusted, if not constructed—the way that he has. But these aren't errors. They're questions. Ones that Piketty should answer, but still just questions. The last problem is the most significant. Giles points out that Piketty seems to have mixed up different sources on British wealth the last few decades, and overestimated their inequality.
Ryan Avent writes that while some of the data and adjustments in the spreadsheets lack adequate documentation, Giles does not have the evidence to justify the implication that figures are drawn "from thin air". Data fabrication is a serious charge to make, and I am surprised Mr Giles would allege it without clearer proof.
The British exception
Simon Wren-Lewis writes that the only issue of substance involves trends in the UK wealth income ratio, but of course an article headlined ‘Data sources on UK wealth income ratio differ’ would not have had the same punch. Justin Wolfers writes that while it’s quite natural for a journalist to emphasize the differences between his findings and those of a famous author, the most striking fact is how closely The F.T.'s analysis agrees with Mr. Piketty’s. Their preferred time series for the evolution of wealth inequality are remarkably similar. To the extent that the FT and Piketty disagree it’s not yet clear whether the cause is obvious errors as pointed out by the newspaper, or judgment calls where perhaps the professional economist deserves the benefit of the doubt.
Jordan Weissmann writes that the 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. Once Britain’s corrected data is included in the picture, the FT argues, the evidence that wealth inequality is growing across Europe disappears.
FT Money Supply
Source: FT Money Supply
Jonathan Hopkin writes instead of a U-shaped trend over the 20th century, claimed by Piketty, the FT's alternative data suggests a flatlining distribution since the 1970s, thus invalidating the claim of rising inequality. But this is misleading, because by throwing in new data that gives a lower figure in the same chart, the visual impact is of a different trend that is not really supported by the data. The IRS numbers that Giles throws in raw were used by Tony Atkinson and Piketty to construct the longer series, with adjustments to attempt to make them consistent with different sources for earlier periods. The fair test of whether Piketty's trend exists or not is to compare the IRS numbers with data for the earlier period. In fact those numbers track the trend of the Piketty series fairly closely, but with lower absolute values.
Chapter 10 as “the central theme” in the book
Mike Konczal writes that the idea that the ownership of capital will become more concentrated isn't an essential part of the theory. Though obviously if it does grow, then it's an even greater problem. Rising inequality in the ownership of capital is not the necessary, major driver of the worries of the book. It isn't that the 1% will own a larger share of capital going forward. It's that the size and importance of capital is going to go big. If the 1% own a consistent amount of the capital stock, they have more income and power as the size of the capital stock increases relative to the economy, and as it takes home a larger slice.
Ryan Avent writes that Piketty's wealth-inequality analysis certainly matters as a component of the book's argument, but it is not accurate to say, as Giles does, that the results in Chapter 10 constitute the "central theme" of the book. Much of the data was collected by Piketty and other economists in a series of published papers that have since been used to create the World Top Incomes Database. None of this work appears to be at issue. Rather, Giles focuses on wealth inequality, to which Piketty turns in Chapter 10 of his book. Piketty has not published nearly as much research on the question of wealth inequality, and it seems that much of the analysis in Chapter 10 was done specifically for the book, based on others' research.
Read more: Blogs review: The Piketty data controversy | Jérémie Cohen-Setton at Bruegel.org
- MAY 26, 2014, 3:20 PM
- 1,981
REUTERS/Charles Platiau
French economist and academic Thomas Piketty, poses in his book-lined office at the French School for Advanced Studies in the Social Sciences (EHESS), in Paris May 12, 2014.
What’s at stake: While everyone praised the data collection effort behind the bestseller book “Capital in the 21st century”, Chris Giles of the Financial Times has dug up data-entry errors and dubious adjustments, which appeared unexplained in the book. While Piketty appears confident in his response to the FT that the overall conclusions of his book are robust, he hasn’t yet provided a point-by-point response to the questions raised.
Piketty, Reinhart and Rogoff
Matt O’Brien writes that the nine most terrifying words in the English language for a researcher are: "You made spreadsheet errors like Reinhart and Rogoff did." But that's what Chris Giles of the Financial Times thinks rockstar economist Thomas Piketty did, among other mistakes, in his groundbreaking new book, "Capital in the Twenty-First Century."
Matthew Yglesias writes that the universally praised element of Capital is its collection of historical data on wealth, so allegations that his construction of data series is riddled with errors is a really big deal. Neil Irwin writes that one of the most common approaches for people writing about Piketty’s blockbuster book has been to critique his theories and predictions while effusively praising his data collection. Piketty, after all, did yeoman’s work compiling data from tax and other records to try to determine a history of wealth inequality around the world.
Ryan Avent writes that this does look quite a lot like the Reinhart-Rogoff contretemps. The errors identified in their spreadsheet turned out to be far more embarrassing to the authors than a threat to their work. But none of that mattered when the news broke. Partisans took to their bunkers to lob bombs at each other, the truth of the matter be damned. It would be unfortunate were that to happen in this case, but it almost certainly will, and indeed it has already begun. James Hamilton writes that the contrast between Krugman’s defense of Piketty and the zeal with which he jumped on top of the Reinhart-Rogoff dog pile is amusing.
Branko writes that if you create (as Piketty did) bunch of data for a bunch of countries, there are bound to be issues. The question is, was there intentional data manipulation to get the answer one desires. I do not know it but it strikes me as unlikely that if one wanted to do it, he would have posted all the data, complete with formulas, on the Internet.
The FT attack
Matt O’Brien writes that Giles identifies three basic types of issues. The first are simple transcription errors. He finds, for example, that Piketty accidentally entered Sweden's wealth data from 1908 instead of 1920. There are data-entry errors, and they're embarrassing, but they don't change the big picture. The next concern is methodological. Giles thinks Piketty should average European data by population, not by country. He doesn't like that Piketty draws trends between large gaps in the numbers. Or that Piketty labels data from, say, 2004 as "2000" on some of his charts. And Giles isn't sure why Piketty has put together some of his wealth data—which is sparse, and needs to be adjusted, if not constructed—the way that he has. But these aren't errors. They're questions. Ones that Piketty should answer, but still just questions. The last problem is the most significant. Giles points out that Piketty seems to have mixed up different sources on British wealth the last few decades, and overestimated their inequality.
Ryan Avent writes that while some of the data and adjustments in the spreadsheets lack adequate documentation, Giles does not have the evidence to justify the implication that figures are drawn "from thin air". Data fabrication is a serious charge to make, and I am surprised Mr Giles would allege it without clearer proof.
The British exception
Simon Wren-Lewis writes that the only issue of substance involves trends in the UK wealth income ratio, but of course an article headlined ‘Data sources on UK wealth income ratio differ’ would not have had the same punch. Justin Wolfers writes that while it’s quite natural for a journalist to emphasize the differences between his findings and those of a famous author, the most striking fact is how closely The F.T.'s analysis agrees with Mr. Piketty’s. Their preferred time series for the evolution of wealth inequality are remarkably similar. To the extent that the FT and Piketty disagree it’s not yet clear whether the cause is obvious errors as pointed out by the newspaper, or judgment calls where perhaps the professional economist deserves the benefit of the doubt.
Jordan Weissmann writes that the 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. Once Britain’s corrected data is included in the picture, the FT argues, the evidence that wealth inequality is growing across Europe disappears.
FT Money Supply
Source: FT Money Supply
Jonathan Hopkin writes instead of a U-shaped trend over the 20th century, claimed by Piketty, the FT's alternative data suggests a flatlining distribution since the 1970s, thus invalidating the claim of rising inequality. But this is misleading, because by throwing in new data that gives a lower figure in the same chart, the visual impact is of a different trend that is not really supported by the data. The IRS numbers that Giles throws in raw were used by Tony Atkinson and Piketty to construct the longer series, with adjustments to attempt to make them consistent with different sources for earlier periods. The fair test of whether Piketty's trend exists or not is to compare the IRS numbers with data for the earlier period. In fact those numbers track the trend of the Piketty series fairly closely, but with lower absolute values.
Chapter 10 as “the central theme” in the book
Mike Konczal writes that the idea that the ownership of capital will become more concentrated isn't an essential part of the theory. Though obviously if it does grow, then it's an even greater problem. Rising inequality in the ownership of capital is not the necessary, major driver of the worries of the book. It isn't that the 1% will own a larger share of capital going forward. It's that the size and importance of capital is going to go big. If the 1% own a consistent amount of the capital stock, they have more income and power as the size of the capital stock increases relative to the economy, and as it takes home a larger slice.
Ryan Avent writes that Piketty's wealth-inequality analysis certainly matters as a component of the book's argument, but it is not accurate to say, as Giles does, that the results in Chapter 10 constitute the "central theme" of the book. Much of the data was collected by Piketty and other economists in a series of published papers that have since been used to create the World Top Incomes Database. None of this work appears to be at issue. Rather, Giles focuses on wealth inequality, to which Piketty turns in Chapter 10 of his book. Piketty has not published nearly as much research on the question of wealth inequality, and it seems that much of the analysis in Chapter 10 was done specifically for the book, based on others' research.
Read more: Blogs review: The Piketty data controversy | Jérémie Cohen-Setton at Bruegel.org
Brown_Pride
All Star
maybe i'm a dumbass but this doesn't look to be the epic Gotcha it's being purported to be.The Piketty Controversy Has Economics Bloggers Debating Over 4 Issues
- MAY 26, 2014, 3:20 PM
- 1,981
REUTERS/Charles Platiau
French economist and academic Thomas Piketty, poses in his book-lined office at the French School for Advanced Studies in the Social Sciences (EHESS), in Paris May 12, 2014.
What’s at stake: While everyone praised the data collection effort behind the bestseller book “Capital in the 21st century”, Chris Giles of the Financial Times has dug up data-entry errors and dubious adjustments, which appeared unexplained in the book. While Piketty appears confident in his response to the FT that the overall conclusions of his book are robust, he hasn’t yet provided a point-by-point response to the questions raised.
Piketty, Reinhart and Rogoff
Matt O’Brien writes that the nine most terrifying words in the English language for a researcher are: "You made spreadsheet errors like Reinhart and Rogoff did." But that's what Chris Giles of the Financial Times thinks rockstar economist Thomas Piketty did, among other mistakes, in his groundbreaking new book, "Capital in the Twenty-First Century."
Matthew Yglesias writes that the universally praised element of Capital is its collection of historical data on wealth, so allegations that his construction of data series is riddled with errors is a really big deal. Neil Irwin writes that one of the most common approaches for people writing about Piketty’s blockbuster book has been to critique his theories and predictions while effusively praising his data collection. Piketty, after all, did yeoman’s work compiling data from tax and other records to try to determine a history of wealth inequality around the world.
Ryan Avent writes that this does look quite a lot like the Reinhart-Rogoff contretemps. The errors identified in their spreadsheet turned out to be far more embarrassing to the authors than a threat to their work. But none of that mattered when the news broke. Partisans took to their bunkers to lob bombs at each other, the truth of the matter be damned. It would be unfortunate were that to happen in this case, but it almost certainly will, and indeed it has already begun. James Hamilton writes that the contrast between Krugman’s defense of Piketty and the zeal with which he jumped on top of the Reinhart-Rogoff dog pile is amusing.
Branko writes that if you create (as Piketty did) bunch of data for a bunch of countries, there are bound to be issues. The question is, was there intentional data manipulation to get the answer one desires. I do not know it but it strikes me as unlikely that if one wanted to do it, he would have posted all the data, complete with formulas, on the Internet.
The FT attack
Matt O’Brien writes that Giles identifies three basic types of issues. The first are simple transcription errors. He finds, for example, that Piketty accidentally entered Sweden's wealth data from 1908 instead of 1920. There are data-entry errors, and they're embarrassing, but they don't change the big picture. The next concern is methodological. Giles thinks Piketty should average European data by population, not by country. He doesn't like that Piketty draws trends between large gaps in the numbers. Or that Piketty labels data from, say, 2004 as "2000" on some of his charts. And Giles isn't sure why Piketty has put together some of his wealth data—which is sparse, and needs to be adjusted, if not constructed—the way that he has. But these aren't errors. They're questions. Ones that Piketty should answer, but still just questions. The last problem is the most significant. Giles points out that Piketty seems to have mixed up different sources on British wealth the last few decades, and overestimated their inequality.
Ryan Avent writes that while some of the data and adjustments in the spreadsheets lack adequate documentation, Giles does not have the evidence to justify the implication that figures are drawn "from thin air". Data fabrication is a serious charge to make, and I am surprised Mr Giles would allege it without clearer proof.
The British exception
Simon Wren-Lewis writes that the only issue of substance involves trends in the UK wealth income ratio, but of course an article headlined ‘Data sources on UK wealth income ratio differ’ would not have had the same punch. Justin Wolfers writes that while it’s quite natural for a journalist to emphasize the differences between his findings and those of a famous author, the most striking fact is how closely The F.T.'s analysis agrees with Mr. Piketty’s. Their preferred time series for the evolution of wealth inequality are remarkably similar. To the extent that the FT and Piketty disagree it’s not yet clear whether the cause is obvious errors as pointed out by the newspaper, or judgment calls where perhaps the professional economist deserves the benefit of the doubt.
Jordan Weissmann writes that the 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. Once Britain’s corrected data is included in the picture, the FT argues, the evidence that wealth inequality is growing across Europe disappears.
FT Money Supply
Source: FT Money Supply
Jonathan Hopkin writes instead of a U-shaped trend over the 20th century, claimed by Piketty, the FT's alternative data suggests a flatlining distribution since the 1970s, thus invalidating the claim of rising inequality. But this is misleading, because by throwing in new data that gives a lower figure in the same chart, the visual impact is of a different trend that is not really supported by the data. The IRS numbers that Giles throws in raw were used by Tony Atkinson and Piketty to construct the longer series, with adjustments to attempt to make them consistent with different sources for earlier periods. The fair test of whether Piketty's trend exists or not is to compare the IRS numbers with data for the earlier period. In fact those numbers track the trend of the Piketty series fairly closely, but with lower absolute values.
Chapter 10 as “the central theme” in the book
Mike Konczal writes that the idea that the ownership of capital will become more concentrated isn't an essential part of the theory. Though obviously if it does grow, then it's an even greater problem. Rising inequality in the ownership of capital is not the necessary, major driver of the worries of the book. It isn't that the 1% will own a larger share of capital going forward. It's that the size and importance of capital is going to go big. If the 1% own a consistent amount of the capital stock, they have more income and power as the size of the capital stock increases relative to the economy, and as it takes home a larger slice.
Ryan Avent writes that Piketty's wealth-inequality analysis certainly matters as a component of the book's argument, but it is not accurate to say, as Giles does, that the results in Chapter 10 constitute the "central theme" of the book. Much of the data was collected by Piketty and other economists in a series of published papers that have since been used to create the World Top Incomes Database. None of this work appears to be at issue. Rather, Giles focuses on wealth inequality, to which Piketty turns in Chapter 10 of his book. Piketty has not published nearly as much research on the question of wealth inequality, and it seems that much of the analysis in Chapter 10 was done specifically for the book, based on others' research.
Read more: Blogs review: The Piketty data controversy | Jérémie Cohen-Setton at Bruegel.org
