Thomas Piketty

The Economist Was a Rock Star

Thomas Piketty isn’t just a brilliant economist; he’s a fantastic storyteller

French economist Thomas Piketty drew Paul Krugman, Joseph Stiglitz, and hundreds of eager fans when he appeared in New York City last night. It's because he has found the most compelling explanation yet for inequality.

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Why conservatives are wrong when they say income inequality doesn't matter.

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The conservative meme of the moment on income inequality is that the middle class isn't getting screwed at all; it's doing just fine. “Don’t Believe Obama On Income Inequality,” writes Clark Judge, chairman of the conservative Pacific Research Institute, for U.S. News & World Report. “Obama’s Inequality Argument Just Utterly Collapsed,” writes James Pethokoukos in The American, a magazine produced by the American Enterprise Institute.

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I woke up this morning seized with an uncontrollable urge to post Bloomsbury's video of me discussing The Great Divergence: America's Growing Inequality Crisis And What We Can Do About It, on my blog. Please don't judge me. I will henceforth confine overt marketing of the book--latest favorable reviews, upcoming book appearances, etc.--to my Web site, timothynoah.com (now available on mobile devices! and soon to carry an RSS feed of this blog, if I can figure out how to do that).

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The "one percent"--that is, the people in the top percentile of U.S. incomes, or families currently pulling down more than about $350,000--have been gobbling up an ever-larger share of the nation's income for the past three decades. But during the Great Recession of 2007-2009 the one-percenters took a break from their meal. Some observers, including Megan McArdle of the Atlantic, took this to mean that the 33-year inequality trend might be reversing itself. Most everybody else, including me, pointed out that income share for the top one percent typically falters during recessions.

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David Brooks Is Unwell

David Brooks has indigestion because President Barack Obama, whom Brooks rather likes, wants to raise taxes on the rich. "He repeated the old half-truth about millionaires not paying as much in taxes as their secretaries." Why is that a half-truth? Because "the top 10 percent of earners pay nearly 70 percent of all income taxes, according to the I.R.S." Oh, please. The top 10 percent pays nearly 70 percent of all income taxes because the top 10 percent makes half the income--49.74 percent, including capital gains, before the recession and only slightly less now.

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By many measures, meritocracy is more prevalent now than a century or two ago. But when it comes to how people become wealthy, inheritance seems to play almost as big a role now as it did in the 19th century. Based on an analysis of French data, Thomas Piketty finds that: the annual inheritance flow was about 20%-25% of national income around 1900-1910. It then gradually fell to less than 10% in the 1920s-1930s, and to less than 5% in the 1950s.

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Felix Salmon is super-pessimistic about the prospects for government action on reducing income disparities: [W]hen you have a progressive tax system, especially when there are surcharges on people making seven-figure incomes, you also have a system where for any given level of national income, the greater the inequality, the greater the government’s tax revenues.

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If there is one trend in American life that most irks economic conservatives, it is probably rising inequality. It’s not the inequality itself that bothers them, as most will happily admit. It is the perception of inequality and, worse, the constant discussion of inequality that is so irritating. It offends their view of capitalism, helps justify all sorts of nefarious government interventions, and makes the conservative economic agenda (most of which tends to increase inequality) appear unfair. They would very much like for it not to be true.

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