Thomas Piketty is a French Economist, and woman-beater, who wrote the new socialist manifesto called Capital in the 21st Century, a play on Marx’s Das Capital (or Kapital, as the German spelling). Economically, it was crap. Politically, it was gold. It told the left leaning and media (but I repeat myself), what they wanted to hear. So it made the NYT best seller list in Fan Fiction, and everyone talked about it. It was peer reviewed and debunked in spades, but not before the gullible gobbled it up as a tasty plate of confirmation bias. Nom nom.
What happened is that there was another French Economist/Activist/Fiction Writer, Emmanuel Saez, how did research showing that incomes hadn’t risen for the poor as much as the rich, by ignoring all the ways that they had risen. He was quickly rebuked by real economists: but he won awards for economics (and creative writing). Logically, it was full of holes — salaries hadn’t gone up for poor, as long as you ignored tax deductions/credits/rebates, unemployment insurance, welfare payments, food stamps, Medicare, Medicaid, welfare, pensions, Social Security and employer-provided health insurance (and assumed there was no changes in compliance/reporting), and changes in family structure. In other words, it was a joke. But because he told politicians and the media what they wanted to hear ("income inequality is the new global warming"), he was also one of the most cited charlatans since Charles Ponzi. So with those "credentials", Piketty teamed up with him, on some follow on research.
So Piketty, figured that since a study could be disproven and still get that kind of fame/attention, imagine if he wrote an entire book? Not only that, I imagine his reasoning was that if it was long enough (600 pages of table-laden full of flim-flam and distractions), that was regurgitating the same flawed premises and worse conclusions (with more fluff), that no one would be able to focus on a single error, because there was so damn many. Or at least he would cash in, before people noticed it was all hokum, wrapped in mendacity. And viola, Das Capital 2 was pooped out, and parroted by gullible rubes that failed to notice that all his premises were wrong. (Even Emmanuel Saez criticized parts of the book, which was based on co-research). The one thing that 80% of economists agree on? That Piketty’s r>g and is the cause of rising income inequality, is wrong.
Ignoring that French Economist, is like saying pygmy basketball star. Piketty had 3 basic premises:
- that median household income had only risen 3.2% in the last 30 years (regurgitating Saez’s work)
- that class mobility has all but stopped and most people are inherited rich
- that the way to solve inequality is to try to punish the successful, and redistribute their wealth down, to make things more fair (inferred)
He’s blatantly wrong on all of them.
- The first is off by an order of magnitude. It turns out that incomes have risen at the lowest levels by 10x that amount. And when you factor in benefits and hand-outs, it’s even higher.
- Multiple economists have shown that in the U.S. especially, 73% of people will touch every quintile in their lifetimes. And that there’s more people that move across brackets than remain in only one. Mobility is high, and most of the rich today, were not the rich (or families of the rich) in the 80’s. If they’re different people, then it disproves his, "wealth is mostly inherited" premise.
- And history has proven that redistribution gets politicized and never works (in the long run), while Capitalism was responsible for raising people out of poverty (the best system we’ve ever had), facts he sort of omitted in his analysis.
Now #3 is nuanced — just because it worked well in the past, doesn’t mean it will continue to work well in the future. We don’t know (we just strongly suspect). But his whole Malthusian Chicken-Little theory, is incredibly redundant: the world (as we know it) will end, if you don’t give the leftists all your rights and all your money to let them shepherd us through these troubling waters. Historically, we ignored them more often than not, and got through much better when we did. The few that were gullible enough to give up control to so they could "help", ended in wars, purges, famines, re-education camps, mass murders, and other brutal violence and tyranny. But the only thing all these same theorists have in common, in all of recorded history, was they’re wrong. I have little reason to think that Piketty is going to be the exception in the group.
So other than the 3 foundational premises are all wrong, and his conclusion having all of recorded history going against him, the Press loved it. The real economists hated it.
NOTE: There are exceptions. Krugman of course loved it. But other than Piketty, no other economist has been as wrong (and self-contradictory) as Paul. And macroeconomists posing as macroeconomists (wrapped in the skin of a political polemicist) are not where you should get your macroeconomic advice from.
For 100’s of years (since Marx and before) people have predicted that factories and automation would eliminate the need for workers and thus, the only way to guarantee there wasn’t extreme stratification and a huge rich/poor divide, was to have the state steal from the top and give it to the bottom. And every time it was tried, the state was able to make fewer people at the top, and more people even further down on the bottom — creating more poverty and more stratification (slowing growth). It has never worked before, but this rehashed 1800’s economist is sure that we should follow the French model, and create utopia like their 11% unemployment (23% for those under 25), slower growth rates, and their young and educating living at home, fleeing, or living off the state.
If you want look at some articles linked below that shoot holes in the swiss cheese arguments made by Piketty, have fun reading:
- http://igeek.com/1557 – Income Inequality, Vanishing Middle Class, and other scams
Articles that spread Piketty’s fraud: