Wealth Inequality data problems

Financial Times claims significant and possibly deliberate errors or falsehoods in the Picketty wealth inequality data.

There seems to be little consistent evidence of any upward trend in wealth inequality of the top 1 per cent. Their wealth share declines from after the first world war to around 1980 and is pretty constant thereafter. The best guess for a consistent series would be a figure close to 20 per cent in 2010. In fact, the ONS Wealth and Assets Survey, which is now three waves old and consistently measures the share of the top 1 per cent has a much lower estimate, at 12.5 per cent, which should be the best current estimate of that wealth share. That is less than half prof Piketty’s estimate.

There is also little consistent evidence of any upward trend in wealth inequality of the top 10 per cent. Top 10 per cent wealth appears to have fallen from around the time of the first world war until about 1980. There was a gentle rise in the 1990s (largely because of fast-soaring equity prices which are very concentrated among the rich), but inequality then fell again after the millennium and remained stable. My best guess for a number consistent with this data would be around 52 per cent in 2010, but note should again be taken of the ONS data, which is specifically designed to measure wealth. It puts the concentration in the top 10 per cent in each of its three waves at 44 per cent, well below Prof Piketty’s own estimate.

Picketty claims he did it to smooth the data, but that he made all of his excel data available and hopes to improve the data and analysis.

Initial Nextbigfuture coverage is here

Much of Picketty claims is based upon predicting a future economic growth slowdown for everyone except the rich. If this does not happen then the dire claims of doomed capitalism do not materialize. Also, the prescription could be policies to increase economic growth instead of using global taxes to steal wealth. The problem with Robinhood tax policy was sometimes effectively taking the wealth but usually with the giving to the part about giving to the poor. The poor usually did not end up getting it and if they did they did not get lifted out of poverty with improved capabilities but kept on a marginal dole (with most of the wealth going elsewhere because of corruption).

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