“We all know that wealth inequality has gone up”

That is a response to the Piketty criticisms from Paul Krugman, and also mentioned by Matt Yglesias.  Phiip Pilkington also has a useful treatment.  This point however doesn’t do the trick as a defense.  Keep in mind that the “new and improved numbers,” as produced by Chris Giles, are showing doubts about the course of measured wealth inequality in the UK.  Maybe wealth inequality hasn’t gone up.

Now maybe that does “have to be wrong.”  But if the “new and improved” numbers are wrong, it is hard to then argue Piketty’s wealth inequality numbers can be trusted.  In which case we are back to knowing that income inequality has gone up, but not knowing so much concrete about wealth inequality.  (That is one reason why my own Average is Over focuses on income, and on labor income in particular, because that is where the main action has been.)  The data section of Piketty’s book, which has gathered so much praise, then is not so useful, though by no fault of Piketty’s.  We might think it likely that wealth inequality has gone up, but if we are going to do these selective overrides of the best available data, we cannot trust the data so much period or otherwise cite it with authority.  We also could not map wealth inequality into particular measures of the r vs. g gap at various periods of time.

If there is one big lesson of the FT/Piketty dust-up, it is that we don’t have reliable numbers on wealth inequality.

Now do we in fact “know” that wealth inequality has gone up?  See this piece by Allison Schrager.  Intuitions about wealth vs. income inequality are trickier than you might think.   And on what we actually do and do not know, here is a very good comment on Mian and Sufi’s blog (for U.S. data):

I very much appreciate that you did this, and it’s an interesting and important fact that you document here, but this does not directly respond to most of the discussion. As the extreme ratios seen here (on the order of ~20) indicate, the middle 20% has very little wealth compared to the top 20%, and this has always been true. I don’t think many conservative critics are trying to argue one way or another on this front.

The current discussion is more about the concentration of wealth at the very top, particularly the 1%. And there the SCF shows little to no evidence to support increased wealth inequality – only a minimal rise in the share of wealth held by the top 1%. This is what Kopczuk and Schrager’s article is referencing, and this is the most relevant question for the debate about Piketty’s (and Saez and Zucman’s) findings of higher wealth inequality at the top.

You really need to look at *that* issue, and if you think this is impossible because “the SCF is not a huge sample” (though it does oversample at the top), you need to say so, rather than passing off an interesting but essentially distinct point as being a decisive response to critics – which, frankly, is what you’re doing in this post.

I could not have said it better myself.


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