The Increasing Hold of Capital on Wealth Is so Obvious that Criticisms of Thomas Piketty’s Bad Math in Proving the Proposition Are the Moral Equivalent of Laughable
© 2014 Peter Free
30 May 2014
The avaricious brain is a frequently deceitful thing, which may explain why most religions roundly condemn the sin
Professor Thomas Piketty is the economist whose book, Capital in the Twenty First Century, asserted that capital — “fat cats and lucre” for the purposes of my only slightly distorting parable — is increasingly gaining and holding onto the world’s wealth.
That proposition is not a surprise to reasonably alert people of my age, who lived through the tail end of the American 1940s to now.
Nevertheless, wealth’s entrenched Establishment apparently feels compelled to deny the reports of the return of the Robber Baron era — perhaps so as to protect itself against (a) questions about the nature of a just society and (b) the metaphorical social contract that allegedly supports it:
The book’s thesis, that wealth concentrates because the returns to capital are consistently higher than economic growth, has spawned furious debate. Mr Piketty’s preferred remedy (a progressive wealth tax) even more so.
A scathing analysis by Chris Giles, economics editor of the Financial Times, claims Mr Piketty’s statistics on wealth distribution are undermined by a series of problems.
Some numbers, he says, “appear simply to be constructed out of thin air”. Once apparent errors are corrected, some of Mr Piketty’s central findings—for instance, that wealth inequality has begun to rise over the past 30 years—no longer seem to hold.
Thus, Mr Giles claims: “The conclusions of ‘Capital in the Twenty-First Century’ do not appear to be backed by the book’s own sources.”
Mr Giles’s critique is enormously useful. By taking a tooth-comb to the wealth-distribution numbers, he has provided a powerful reminder of the limitations of such historical data series. Mr Piketty’s conclusions are drawn from huge numbers of sketchy figures . . . .
[J]ust as the statistics have their limits, so does the certainty of the trends Mr Piketty identifies. The logic of “Capital in the Twenty-First Century” is not an iron law.
© 2014 Free Exchange (blog), Picking holes in Piketty, The Economist (31 May 2014) (extracts)
This critique can be translated to:
Statistics lie, and Piketty’s data is frequently vacuous — therefore no societal problem exists.
This tactic parallels Big Tobacco’s (not so long ago) reasoning that smoking cigarettes did not cause lung cancer and other health problems.
The moral? — The obvious is not, when people are deliberately blind to it
One can reasonably argue with any analyst’s use of historical and economic data by saying that the data are incomplete, inaccurate, manipulated, or simply do not exist.
In most instances, all of this is true because the parameters of history and economics are impossible to precisely and mechanistically define, much less winnow any single hypothesis’ confounding variables from. No one has ever run a controlled, double-blinded experiment in macroeconomics or history.
Nevertheless, sometimes the probablistically obvious is evident enough to draw tentative conclusions about. The increasing concentration of wealth and power in Capital’s hand (as opposed to Labor’s) in most of the world is clear enough to act upon, at least for those inclined toward establishing or maintaining a more equitably just society.
Professor Piketty’s nitpickers are manipulatively and self-aggrandizingly missing his very probably valid point. A simple-minded philosophy like unregulated capitalism, which is founded on raw greed, is unlikely to value truth, justice and community.
Avarice treasures its lack of sight. Pun intended.