Chris Giles' Attack on Piketty as Payback for Rogoff and Reinhart

     Sorry but in reading Giles this is the first thought that comes to mind. What first jumps out at you is the triviality of his concerns, not to say quibbles. It's not clear that even if Piketty has failed to dot an i or cross a t why this matters so much materially for his work. Of course, you know what the conservative man in the street, a la Scott Sumner answer will be for this: well R-R's Excel error was at least as trivial if not more.

    In saying this, though Sumner and friends give away the game-they're drawing equivalences with R-R because in their mind this is payback for what was done to R-R. Another bad sign is that Giles immediately goes from pointing out various 'errors' real or imagined and then makes the categorical declaration that inequality has not increased since 1980 and so the problem is greatly overstated by the Piketys of the world. As Krugman notes, in saying this, Giles says too much. Of course Sumner's favorite debunking of inequality in America and Europe is to talk about inequality in the world and suggest declare the answer is more free trade and low corporate taxes-and more fiscal austerity. 

     "Great buzz in the blogosphere over Chris Giles’s attack on Thomas Piketty’s Capital in the 21st Century. Giles finds a few clear errors, although they don’t seem to matter much; more important, he questions some of the assumptions and imputations Piketty uses to deal with gaps in the data and the way he switches sources. Neil Irwin and Justin Wolfers have good discussions of the complaints; Piketty will have to answer these questions in detail, and we’ll see how well he does it."

     "It’s just not plausible that this increase in the concentration of income from capital doesn’t reflect a more or less comparable increase in the concentration of capital itself.

     "The point is that Giles is proving too much; if his attempted reworking of Piketty leads to the conclusion that nothing has happened to wealth inequality, what that really shows is that he’s doing something wrong."

    http://krugman.blogs.nytimes.com/2014/05/24/is-piketty-all-wrong/?_php=true&_type=blogs&module=BlogPost-Title&version=Blog%20Main&contentCollection=Opinion&action=Click&pgtype=Blogs&region=Body&_r=0

    UPDATE: This quote by Krugman obviously precedes Piketty's subsequent answer to Giles which Krugman duly notes is very effectively. 

     "OK, Thomas Piketty has replied at length (pdf) to the attempted takedown of his work by Chris Giles, and done it very effectively. Essentially, Giles tried to compare apples and oranges, and the result was a lemon."

     "The central point here is one that’s familiar to anyone who works at length on inequality issues. We have two kinds of data on distribution of both income and wealth: surveys, in which people are asked what they make or own, and tax data. Survey data are better at describing lower-income families, who often aren’t covered by taxes; but they notoriously understate top incomes and wealth, roughly speaking because it’s hard to interview billionaires. Also, survey data start fairly recently — after World War II, and often much later than that."

    "So Piketty works mainly with tax data, although he also makes some use of survey data; when he combines them, he makes adjustments for the known downward bias of top wealth estimates from surveys. Giles, however, basically noted that some relatively recent survey estimates of large fortunes are smaller than some tax-based estimates for earlier periods, and used this to claim that there isn’t any clear trend toward wealth concentration. Bzzzt! Error!"

   "This should really settle the issue, but of course it won’t. Inequality deniers will pick up on the FT’s bad critique, and it will become part of what they “know” to be true."

     http://krugman.blogs.nytimes.com/2014/05/30/thomas-doubting-refuted/?module=BlogPost-Title&version=Blog%20Main&contentCollection=Opinion&action=Click&pgtype=Blogs&region=Body

     For now, Sumner himself has stayed out of this one though there's no doubt which side he's on and that he's just waiting until he can come up with the right sophistical angle to jump in. I will say this. as conservative apologetics go, his is usually among the best. Again, my guess is he'll say something along the lines I already suggested above-inequality matters but not in America and Europe-yes we American workers have being doing fine the last 30 years! Inequality in Asia, Africa, or Latin America ought to shame us discussing it here. 

     At least Morgan Warstler admits the truth-that with the Internet and data revolutions, the amount of high skilled labor-white collar jobs, is greatly reduced no matter what standard economics says about the market correcting for this seamlessly by creating new jobs somewhere else in the economy. Yes, but most of these new jobs don't pay enough for even a single person to survive on.