Paul Krugman Takes On Inequality Deniers and Piketty's Critics
New York Times columnist Paul Krugman is still fighting the good fight against the deniers of inequality. In his column on Sunday, he somewhat depressingly pointed out that he's been talking about rising inequality since at least 1992 when he wrote an article titled “The Rich, the Right, and the Facts.” Of course, he promptly was trolled by inequality deniers.
Now, Krugman points out, it's like deju vu all over again with the scuffle over French economist Thomas Piketty's bestselling new book “Capital in the 21st Century,” and the intellecutally dishonest critics of Piketty's data and conclusions. Most notably, an article by Chris Giles, the economics editor of the Financial Times, which attacked Piketty's work on the basis of what Giles called slight errors in data, went on to claim that this proved there is no such thing as rising inequality and the accompanying phenomenon of increasing concentration of wealth.
Balderdash, writes Krugman. Giles' "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 — and that I identified in that 1992 article."
While Krugman probably finds it tiresome to keep being right about inquality after all these years, he lays the real facts out once again for those who might not be clear:
We have two sources of evidence on both income and wealth: surveys, in which people are asked about their finances, and tax data. Survey data, while useful for tracking the poor and the middle class, notoriously understate top incomes and wealth — loosely speaking, because it’s hard to interview enough billionaires. So studies of the 1 percent, the 0.1 percent, and so on rely mainly on tax data. The Financial Times critique, however, compared older estimates of wealth concentration based on tax data with more recent estimates based on surveys; this produced an automatic bias against finding an upward trend.
In short, this latest attempt to debunk the notion that we’ve become a vastly more unequal society has itself been debunked. And you should have expected that. There are so many independent indicators pointing to sharply rising inequality, from the soaring prices of high-end real estate to the booming markets for luxury goods, that any claim that inequality isn’t rising almost has to be based on faulty data analysis.
Later Krugman updates his inequality analysis and debunks two popular, specious arguments from ther deniers, that America still has tons of economic mobility and anyone can become part of the 1 percent, and that somehow the current tax system has this whole problem under control:
The concentration of both income and wealth in the hands of a few people has increased greatly over the past few decades. No, the people receiving that income and owning that wealth aren’t an ever-shifting group: People move fairly often from the bottom of the 1 percent to the top of the next percentile and vice versa, but both rags to riches and riches to rags stories are rare — inequality in average incomes over multiple years isn’t much less than inequality in a given year. No, taxes and benefits don’t greatly change the picture — in fact, since the 1970s big tax cuts at the top have caused after-tax inequality to rise faster than inequality before taxes.
Piketty makes the wealthy uncomfortable, Krugman says, as do all populist demands for higher taxes on the rich.
But denying inequality, just like denying climate change is not about science or data, the columnist points out. It's politically motivated to protect groups with strong interests in denying the facts, or casting doubt on them.
And Krugman will keep saying it until people finally listen, and realize, as he says, that this time the populists just might be right.