Sumner Picks Apart Piketty? Or is He Just King of all Hyperbole?

     The bellicose nature of his Piketty posts makes it pretty clear that anything he writes about him will certainly not be friendly. Clearly he feels the need to 'pick him apart' for his team-Right wing economists. This is not the first time he's used such high faluting imagery in a Pikety title. 

      http://diaryofarepublicanhater.blogspot.com/2014/06/sumner-demolishes-piketty-or-not-so-much.html

       He missed by a mile in the link above-all he had was a story about Sting giving most of his inheritance to charity rather than his daughter. This certainly happens and I don't think Pikety or any other liberal who questions the level of social mobility in America-or other First World nations-today is unaware of this fact. 

      Sumner's latest alleged demolition of Piketty again returns to the idea that Piketty is all wrong about social mobility. He goes to another old standard of his-using the fact that older people are on average richer than younger people to suggest that when you factor in for age, inequality of wealth basically disappears. 

      "But at some point in their lives 73% of Americans do reach the top 20% of incomes.  Piketty doesn’t mention that fact.  Yes, most Americans don’t become corporate CEOs, is anyone surprised by that?"

         http://www.themoneyillusion.com/?p=27027

         These phrases like 'at some point in their lives', and 'most people' as well as 'do reach the top 20% of incomes' are pretty slippery terms. He seems to be saying a lot more than he's really saying. This certainly doesn't mean that most people are rich at some point in their lives-or that there aren't significant numbers of people who are poor their whole lives.. What Piketty shows is that the disparity of wealth is almost as great within each age group as in the population as a whole. So Sumner's attempt to ascribe it purely to differences in wealth due to age doesn't work.

        https://read.amazon.com/?asin=B00I2WNYJW

         "Here’s Thomas Piketty on the US financial crisis (page 297):

In my view, there is absolutely no doubt that the increase of inequality in United States contributed to the nation’s financial instability. The reason is simple: one consequence of increasing inequality was virtual stagnation of the purchasing power of the lower and middle classes in the United States, which inevitably made it more likely that modest households would take on debt, especially since unscrupulous banks and financial intermediaries, freed from regulation and eager to earn good yields on the enormous savings injected into the system by the well-to-do, offered credit on increasingly generous terms.

       "Where does one begin?"

    "1.  In my view there is plenty of doubt as to whether inequality contributed to the crisis, partly because Europe is much more equal, and had an even worse financial crisis.  In fairness, he did say “contributed,” but my real complaints lie elsewhere."

      "2.  Why would stable real wages lead to more debt?  More specifically, why would it “inevitably” lead to more debt?  If my wages were stagnant I certainly wouldn’t react by taking on more debt, rather I’d borrow more if I expected my income to rise.  Is there a theory here?"

      While 'Europe'-or at least Western Europe may be more equal than the U.S., it has seen an increase in inequality since 1980 which is just as sharp. I just don't get why 'stable wages' wouldn't lead to more debt if you had loosening lending standards. I pointed this out to Sumner and he threw in another non sequitor about he not remembering any increase in debt during the Depression, hereby again totally missing the point. The reason for this is not because people 'chose' not to take on more debt but because there was no debt to be had as lenders didn't loosen standards then as they did during the housing bubble-Sumner of course doesn't know if bubbles are possible. They either aren't because of the EMH or they are possible but don't matter. 

          His number 2 and according him more important complaint on 'why would stable wages lead to more debt?' has got to be a sick joke. He calls the stagnation of purchasing power 'stable wages'-he is not only the King of Hyperbole but at least a Duke of Euphemism. 

         "On the very next page Piketty discusses the minimum wage in Germany.  But he forgets to point out that the 2004 labor reforms allowed for a large increase in low-wage German jobs, and that after these reforms the German unemployment rate plummeted while French unemployment increased. Isn’t that evidence important?"

          It's important but it doesn't necessarily lead us where Sumner seems to think-'wow let's do what Germany did in 2004!' as why do we want a country full of low wage jobs? Even now with the unemployment rate down to 6.1 percent in the U.S. how many of these jobs are in fact low wage? How exactly do these low wage jobs 'pick apart' Piketty's theory of rising inequality?

            There's no question that the conservative economists see this book as a real worry. Sumner dearly wants to carry their water for them on this-which makes sense, he is the most effective conservative intellectual by far today. If any conservative can poke holes in Piketty, he's the one to do it. However, you get the sense that he's here just throwing everything at the wall and seeing what will stick. We see his intention-to 'demolish Piketty' , to 'pick apart Piketty' but Piketty is still standing and very much still 'put together.'

          Sumner is sounding like he did when he won that imaginary bet with Krugman-ie, a little embarrassing, which again only underscores how much is at stake here-he doesn't want  anyone to talk about inequality. He has all kinds of ways to try to distract this conversation-like when he says 'the problem is not inequality within countries but on an international level. Wow these liberals sure are provincial to think it matters if inequality went up in their own country! What do they have against the rest of the world?'

        Of course he has a great solution for that-more Free Trade. The answer to the disaster of Neoliberalism is always: more Neoliberalism.