Sunday, May 25, 2014

More problems with Thomas Piketty's thesis

The FT Claims Thomas Piketty's Numbers Don't Add Up, Piketty Calls The FT Ridiculous - Forbes - Tim Worstall:

May 25, 2014 - "This has rather put the cat amongst the pigeons: the Financial Times went through the data that Thomas Piketty used to prove that wealth is becoming ever more concentrated and found, at least so they claim, that the evidence isn’t actually there. There are some minor transcription errors, there’s also some questionable interpolations in the data sets. But the real killer is that the claimed concentration of wealth, the thing that Piketty insists is going to get ever worse, doesn’t actually seem to exist....

"Here’s the nub of the FT’s claim: '... once the FT cleaned up and simplified the data, the European numbers do not show any tendency towards rising wealth inequality after 1970. An independent specialist in measuring inequality shared the FT’s concerns'....

"This isn’t the only problem with the case that Piketty is making either. As I noted ... he is correct in stating that the wealth to GDP ratio is rising.... However, as the FT says we don’t seem to see any increase in the concentration of wealth over recent decades. But if wealth to GDP is rising, and wealth isn’t becoming ever more concentrated, well, where is that increased wealth?

"The answer, amusingly, coming from Emmanuel Saez, a regular Piketty collaborator ... the increased wealth is our pensions savings. And this is another terrible hole in Piketty’s argument. For it’s something that we would have expected to see from the first. The lifetime savings hypothesis almost insists that alongside rising lifespans (one of the two great demographic changes of the past 70 or so years, along with the declining fertility rate) that we would see an increase in pensions savings. And that’s exactly what Saez does find: pensions savings move from some trivial percentage of GDP to 150% of it....

"Piketty seems to have assumed that the rise in wealth was all going to the rich: whereas it really seems to have been going to pay for our own old ages."

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