Morning Editorial Report
Piketty's Numbers Still Don't Add Up
More errors exposed in a popular book on income inequality, plus ObamaCare costs unions and carbon regulation will cost everyone.
The Wall Street Journal, May 27, 2014
MORE FLAWS EXPOSED IN LEFTIST BEST-SELLER
In a recent Journal op-ed, Harvard economist Martin Feldstein ticked off a series of errors in Thomas Piketty's "Capital in the Twenty-First Century." Now the UK's Financial Times also sees "data problems and errors" in the popular screed that has been lauded by economists including Paul Krugman.
In a recent Journal op-ed, Harvard economist Martin Feldstein ticked off a series of errors in Thomas Piketty's "Capital in the Twenty-First Century." Now the UK's Financial Times also sees "data problems and errors" in the popular screed that has been lauded by economists including Paul Krugman.
After reviewing Mr. Piketty's work, the Financial Times finds
"unexplained entries in his spreadsheets, cherry picking data sources
and transcription errors. Taken together, these problems seem to
undermine his conclusion that wealth inequality is rising in the US and
in Europe."
Two weeks ago, Mr. Feldstein noted a series of fundamental errors,
including those related to Mr. Piketty's practice of comparing the
incomes of top earners with total national income. "National income
excludes the value of government transfer payments including Social
Security, health benefits and food stamps that are a large and growing
part of the personal incomes of low- and middle-income households."
Mr.
Feldstein wrote that "Mr. Piketty's theoretical analysis starts with
the correct fact that the rate of return on capital...exceeds the rate
of growth of the economy. He then jumps to the false conclusion that
this difference between the rate of return and the rate of growth leads
through time to an ever-increasing inequality of wealth and of income
unless the process is interrupted by depression, war or confiscatory
taxation."
"[Mr. Piketty's] conclusion
about ever-increasing inequality could be correct if people lived
forever. But they don't," observed the Harvard professor. "The result is
that total wealth grows over time roughly in proportion to total
income. Since 1960, the Federal Reserve flow-of-funds data report that
real total household wealth in the U.S. has grown at 3.2% a year while
the real total personal income calculated by the Department of Commerce
grew at 3.3%."
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