tag:blogger.com,1999:blog-3471471289744825428.post8063643797768118489..comments2024-03-11T00:31:41.186-07:00Comments on The Oregon Economics Blog: Fred Thompson: Capitalism Is Biased In Favor Of Capitalists IIPatrick Emersonhttp://www.blogger.com/profile/17242234148546323374noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-3471471289744825428.post-24856593135203082242014-05-31T16:41:42.039-07:002014-05-31T16:41:42.039-07:00In a smart comment on the flap over Piketty’s data...In a smart comment on the flap over Piketty’s data, Matt O’Brien at the Washington Post’s Wonkblog notes that: Piketty’s alleged errors fall into three categories: 1) transcription mistakes, 2) unexplained data tweaks and 3) in the case of Britain, incorrect data. In fact, every single example cited by the FT (including so-called transcription errors) reflects an explicit choice on Piketty’s part about how to make sense of the (lousy) data available. One may question his interpretations and extrapolations, but they are not obviously wrong. Indeed, most of his decisions about the use of sources and how to adjust them make good sense to me. Moreover, there is really only one place where Piketty’s choices render his big-picture results iffy – the dynamics of the US wealth distribution – not because Piketty makes bad choices but because the underling data are really spotty.<br /><br />For the U.S., there isn't much of the estate-tax data that Piketty uses elsewhere (what there is seems to show a decline in wealth concentrations as measured by Gini indices). Consequently Piketty must rely on survey data, the Survey of Consumer Finances (SCF), or, like Saez and Zucman, use capital income flows to construct a picture of U.S. wealth inequality. Both seem to show that wealth inequality is increasing (higher than in 1970), although neither is conclusive (indeed, the second approach looks a lot like question begging to me).<br /><br />Note that some commentators confuse two separate but related issues: how fast is wealth increasing (the wealth-income ratio [W/Y], or B in Piketty’s terms) and is the wealth distribution becoming more unequal (i.e., is the Gini index now higher than it was in the 50s or 60s say)? The second is the question that is still up for grabs, not the first. The ratio of wealth to income is clearly up, which is consistent with the conclusion that the rich (probably) and the super rich (undoubtedly) have on average gotten richer faster than the rest of us. At the same time it is not necessarily the case that the distribution of wealth (which has always been much more unequal than the distribution of income, Gini W > .7 vs Gini Y > .35) has also become more unequal, by some measures, it is becoming less so (from .77 in 1960 to ,72 in 2010 – with a low of about .68 circa 1975).<br /><br />Very few bloggers confuse income with wealth, but many seem unaware that, for the bottom 99.9 percent of US households, annual income (logY) predicts less than 30 percent of the variation in net wealth (log[W-debt]). Toss some additional variables like age, education, and gender into the analysis and you can boost the R^2 to >50 percent, but that’s about it. IMHO net wealth probably measures permanent income more accurately than annual income, but one thing is sure: they are not the same.fthompsohttps://www.blogger.com/profile/13953605115587300660noreply@blogger.comtag:blogger.com,1999:blog-3471471289744825428.post-61671757189471450562014-05-22T12:05:31.942-07:002014-05-22T12:05:31.942-07:00The best analysis of Piketty so far: http://equita...The best analysis of Piketty so far: http://equitablegrowth.org/2014/05/22/honest-broker-mr-piketty-neoclassicists-suggested-interpretation-week-may-17-2014/#more-3102fthompsohttps://www.blogger.com/profile/13953605115587300660noreply@blogger.com