Tags: Krugman | Piketty | Financial Times | inequality

Paul Krugman: French Economist Thomas Piketty Is Right on Inequality, Financial Times Is Wrong

By    |   Monday, 02 June 2014 11:27 AM EDT

The Financial Times has challenged the calculations underlying economist Thomas Piketty's assertion that income inequality is exploding globally, and Nobel laureate economist Paul Krugman has challenged the Times' challenge.

Chris Giles, the Times' economics editor, said Piketty's work made "a series of errors that skew his findings."

Krugman responded in his New York Times column, "The alleged errors were actually the kinds of data adjustments that are normal in any research that relies on a variety of sources.

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"The crucial assertion that there is no clear trend toward increased concentration of wealth rested on a known fallacy, an apples-to-oranges comparison that experts have long warned about."

That apples-and-oranges comparison involved mixing surveys of people about their finances, which can be unreliable and typically track the poor and the middle class, with tax data, which are used to gather data for the wealthy. "This produced an automatic bias against finding an upward trend," Krugman argued.

"In short, this latest attempt to debunk the notion that we've become a vastly more unequal society has itself been debunked," he wrote.

"Inequality denial persists for pretty much the same reasons that climate change denial persists: there are powerful groups with a strong interest in rejecting the facts, or at least creating a fog of doubt."

Meanwhile, some commentators are claiming that income inequality has widened to the highest levels since at least the 1920s. "The conclusion is damning," wrote Washington Post columnist Robert Samuelson.

"But as economist Gary Burtless of the Brookings Institution shows, it's 'flatly untrue.' Inequality isn't as great now as in the '20s. Although the debate over inequality is legitimate, we shouldn't distort it with overwrought rhetoric."

Samuelson explained that Piketty and other economists contend "the richest 1 percent of Americans receive roughly 20 percent of the nation's pretax 'market income,' mainly wages, salaries, dividends, interest and other business income."

"The trouble with 'market income,' he [Burtless] notes, is that it ignores taxes, most fringe benefits (mainly employer-paid health insurance and pensions) and government transfers (Social Security, Medicare, food stamps and the like)," Samuelson noted.

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Economy
The Financial Times has challenged the calculations underlying economist Thomas Piketty's assertion that income inequality is exploding globally, and Nobel laureate economist Paul Krugman has challenged the Times' challenge.
Krugman, Piketty, Financial Times, inequality
366
2014-27-02
Monday, 02 June 2014 11:27 AM
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