26 May 2014

Piketty Hits Back

Capital & Interest, Shameless Self-Promotion 19 Comments

I want to move on with my life, but I’m apparently one of the few people who actually read Chris Giles’ FT critique of Piketty, and so I can explain just how ludicrous his counterattack in Bloomberg is. My conclusion:

There are many oddities in Piketty’s work. We know for a fact that he has made demonstrable mistakes when it comes to tax rates and minimum wage levels, and these were “convenient” mistakes to boot. He almost certainly made transcription errors, as Giles documents. And his trends for UK wealth concentration have large discrepancies with other source data, not just counting the ONS surveys.

In the face of such allegations, for Piketty to call the FT article “just ridiculous” and claim “there’s no mistake or error” in the book is actually further evidence that this guy is a shyster.

It should go without saying that Piketty could be a slippery character, and yet his underlying thesis turns out to be correct. Even so, the way many of Piketty’s fans have shrugged off these criticisms is quite disturbing. To simply ask, “Why would Piketty publish his files if they were full of mistakes?” is hardly a good response, when Giles and others are daily documenting such mistakes.

19 Responses to “Piketty Hits Back”

  1. Alexander N. Andreassen says:

    That’s the shitty thing about people like Pikkety. People read the headlines, possible the articles, and then they’ve made up their mind. Most people won’t even read any of the criticism, while the other half will simply shrug you off.

  2. Bob Roddis says:

    Don’t move on. Keep up the attack. History will reward you.

  3. Major-Freedom says:

    Wow. This is like peeling back the layers of an onion and finding increasingly rotten inner layers.

    Who would have thought that a Marxist historian sort of econpmist would fudge empirical data to fit his narrative?

    Kidding aside, Marx’s direct followers, once they had no choice but to accept that real wages kept increasing, as Marx’s “prophecy” of the iron law of wages didn’t pan out, they instead began to argue that “what Marx really meant” was relative worker impoverishment, not absolute impoverishment.

    What’s worse? Fudging data or fudging theory?

    • skylien says:

      The only “minor” problem with this was that the inevitability of the social revolution by the working class, well, isn’t inevitable anymore.

      There is no need to rise up if you are (absolutely) better off with more capital in society even if you don’t own any capital yourself. I mean it is still possible to rise up theoretically, but then why didn’t it happen already anyway…

      • Major-Freedom says:

        Rothbard convincingly argued that Marx’s issue with the world was actually deeper and more fundamental than workers in capitalism not having ownership control over the means of prpduction, i.e. division of labor.

        Drawing on Marx’s main intellectual influences and his earlier writings, Rothbard showed that Marx’s issue with the world is that spacetime itself was intolerable to his aesthetic ideal, as object is separated from subject when there is consciousness. This is the actual “alienation” that upset Marx, whether he was fully aware of it or not.

        In my view, it has been the unfortunate case in the last couple of hundred years that most individuals in the world are not enlightened to rationalism. Because of this, the average person is more or less helpless in terms of truly finding and understanding purpose and meaning in their lives. Most people grow up into adulthood with still a childlike constitution. This is why the state as mommy and daddy can persist.

        In this intellectual vacuum, it is highly likely that Marx’s framework of estrangement and alienation would psychologically and emotionally appeal to the average “worker” who feels something isn’t right with spacetime, that is, their mentality does not gel with spacetime, and so when you have a priest like figure offering a way to relief and fulfilment, and given that each and every human is an egoist with a natural tendency of desiring to “own” the world, it is not surprising that the average worker would accept the doctrine that their feelings of estrangement would be eliminated if only they had more ownership of the means of production in the manner in which Marx prescribed. Hence the perpetual antagonism against those individuals who “refuse to give up ownership of capital”.

        And related, hence the perpetual antagonism from Keynesians (who have found themselves sailing in Marxist oceans) against those individuals who “refuse to give up ownership” of their money, i.e. “hoarders.” The fundamental principle is the exact same. Feelings of estrangement and helplessness turns into antagonism against those who remind them of “alienation” from the material world a la Marx.

        TL;DR The individual inspired by Marx wants more control over the material world via collectivism, and in so doing, hope to eliminate their feelings of estrangement that is itself caused by an absence of enlightenment of rationalism.

        • skylien says:

          I think that even people inspired by Marx don’t want more control over the material world only for power’s sake, but I think that most genuinely only want to make the world a better place.

          However in the end they all suffer from the “if only I (or someone who thinks the same, ideally voted in democratically) were in charge” mentality.

  4. Major-Freedom says:

    Nice work Murphy.

  5. Philip Huff says:

    “It should go without saying that Piketty could be a slippery character, and yet his underlying thesis turns out to be correct.”

    Just a typo alert: I think you meant to write “turn.”

    • Richie says:

      Thesis is singular. Theses is plural.

      • Philip Huff says:

        Of course, but take this sentence: “He could try and his attempt fails.” I think everyone would agree that this sentence is an ungrammatical way of expressing the thought that even if a certain person tries, his attempt might fail.

        One can write “He could try and his attempt could fail.” And one can probably write, more elliptically, “He could try and his attempt fail” —though stylistically, I think this second choice is a bad idea. But “He could try and his attempt fails”?

        Anyway, it’s obviously not a big deal. Murphy’s sentence did not sound like natural English to me, and I genuinely thought there was a typo in it. But I admit I haven’t studied grammar.

  6. gienon says:

    Is this enough evidence to move past the “you can only call Piketty names” attitude on the part of Krugman? No, and most likely it will never be but keep up the good work, Bob.

    I’d like to propose a new and ingenious way of writing PK’s name: Krug$225,000man which neatly demonstrates a huge and growing income gap between Krugster and an average man.

  7. Ben Kennedy says:

    How does Piketty even define “wealth”? I would think that the more important metric would be consumption inequality. If 1% of people were buying 40% (or 70% or whatever) the output of society that could be a problem – but any trip the the mall or grocery store seems to show otherwise. Plus, even to the extent that rich people overconsume, it seems to me that vast amounts of paper wealth ends up buying luxury status that isn’t “consumption” in any sense that matters – things like Jaguars and Rolexes that are only marginally better than Hondas and Swatches

  8. Major-Freedom says:

    “If 1% of people were buying 40% (or 70% or whatever) the output of society that could be a problem”

    Anything “could” be a problem. Better to ask if it is a problem.

    1% consuming 40% of final output is not a problem if that 1% is producing so much that they earn so much that their relative consumption increases, and it should go without saying that this doesn’t mean absolutely less consumption for the 99%, indeed they might even be consuming more in absolute terms.

    Inequality AS SUCH is never a problem. Well, let me qualify that. It can be a problem for those who believe inequality as such is an evil. But in terms of material well being, inequality of material goods is never a problem.

    What many people against inequality say to justify their antagonism against inequality, is that when a few individuals become highly relatively wealthy, they tend to have more control over the state (assuming it exists). But this isn’t a problem of inequality, it is a problem of the state, which of course is not a law of nature or inevitable, but contingent and predicated on ideas supportive of states. Relatively wealthy individuals in an anarchist population enlightened with anarcho-capitalist ethics and rationalist philosophy could not impose monopolistic law enforcement, or at least could not do so nearly as easy as they can in a statist population corrupted by collectivism and violence advocacy ideology.

  9. Bogart says:

    This is not my analysis, I think it was suggested by Gary North, but it fits here perfectly. By Pareto in most of life’s things the top 20% get 80% of the payoff leaving the bottom 80% the rest. If you take this several levels:
    20% gets 80% of spending power.
    4% gets 64% of spending power.
    0.8% gets 51.2% of spending power.
    So any study that finds the 90% with more than 48.8% of something positive is to the advantage of the 90%.
    Think about how equal society is where Pareto (A much smarter dude than this Piketty fellow) would expect to have more than 51.2% of spending in the hands of the top 1% but instead has a measly 40%. And the best part is that this is awesome. The top 1% does not take the difference between the 51.2% and 40% and bury it in the yard, they INVEST IT thus increasing production and the quality of life for all humanity

    Think about how crappy life would be if this bone head actually had his way. We would have less equality as the top 1% in positions of political power extracted what little wealth left in the form of non-cash benefits as society crashed into impoverishment.

    • Cosmo Kramer says:

      I will make a video on this in the very near future.

      Statists do not understand what the wealthy’s net worth actually is. They purposefully blue the lines. Somehow (in their minds) the wealthy being worth millions or billions is proof that they are hoarding. But hoarding what?

      If I buy stock in a public company, I give up my $USD and in return worth something that is valued in dollars. So what is their solution? Sell their hoards of stuff and financial assets? So their solution is to have the wealthy re-acquire $USD?!?!?! Or have the wealthy just shift their assets around amongst themselves!?!?!

      Their ultimate desire is for the wealthy to surrender their net worth and somehow this won’t hinder business activity. The job of the little guy is to “just spend”, and investment is just a given.

      In general, their whole assumption is that the wealthy’s net worth is removed from the economy. As I have explained, this is not only wrong but impossible. Many things statists believe we could deem plausible. It is conceivable that an intelligent person could come to certain conclusions that they hold. But this crud about hoarding can only be the result of un-intelligent thought.

      Again, this is why I call it “Opposite Economics”.

      • Ken P says:

        Cosmo, that is a view that I have pondered often. It’s like saying that farmers have too many farm animals and we would be better off if we slaughtered most of them in order to have more food available.

        Another problem is that the value extracted would initially be price-inflationary. As large amounts of money is pulled out of the investment circle and steered towards consumption, there would be more money chasing fewer goods.

        • Cosmo Kramer says:

          Their response would be that more demand = more supply, negating inflation.

          Things they deem idle are a waste of resources, blah blah blah.

  10. Dyspeptic says:

    There are certain characteristics of the left wing/state supremacist mentality that I have noticed when arguing with them over the years. First, they don’t really care about the facts. If you disprove their factoids, they simply spew more of them without acknowledging error. Second, they don’t really believe in the Marquis of Queensbury rules regarding rhetoric or logic. They are most interested in pushing an agenda and anything that deviates from the agenda, be it truth, logic or common decency is rejected as evil.

    For our intellectual enemies it’s all about “The Cause”, and their cause isn’t the unvarnished truth. They play to win “by any means necessary” to use a favorite radical left wing slogan. When your world view is based on an assumption of overwhelming moral superiority why let little details like facts or logic get in the way.

    It’s always about the agenda and the power necessary to implement it. In that sense Krugman, Piketty et. al. are no different than Lenin or Trotsky. While we argue the facts and assail their logic, they seize the power and influence that changes history. It has ever been thus.

  11. guest says:

    consultingbyrpm blog tag piketty

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