Sunday, May 11, 2014

Six Ways Thomas Piketty's 'Capital' Isn't Holding Up to Scrutiny

By Kyle Smith

Dubbed the “rock-star economist,” France’s Thomas Piketty has topped the A bestseller list with the surprise blockbuster book Capital in the Twenty-First Century, which argues that because the return on capital must be greater than overall growth, the rich are destined to hog an ever-increasing proportion of the economic pie.

Piketty’s research, his eloquence (he quotes Jane Austen and Honore de Balzac) and his call for wealth taxes plus a confiscatory marginal income tax rate (80 percent) have Keynesian liberal economists swooning. Their leader, Paul Krugman, boasts that “the right seems unable to mount any kind of substantive counterattack to Mr. Piketty’s thesis. Instead, the response has been all about name-calling.”

Krugman is misinformed. Piketty’s book is being shredded. Here’s a brief rundown of some of the flaws in “Capital in the Twenty-First Century” that have already been exposed.

  • Piketty’s story about the source of capital accumulation is misleading. A paper by a quartet of French economists says that return on capital has been higher than growth entirely because of the soaring value of housing, hardly something that is available only to a handful of oligarchs.
  •  Piketty’s claims about capital accumulation are contradicted by his own charts...
Read the rest here.


  1. "For an opinion has now become established, pernicious to us, and pernicious to the republic, which has been the common talk of every one, not only at Rome, but among foreign nations also, that in the courts of law as they exist at present, no wealthy man, however guilty he may be, can possibly be convicted." Cicero, In Verrem

  2. Krugman misinformed? Who could have guessed?

  3. One of my clients, who has a degree in economics, who thinks the book is correct, is struggling to get through the 600 pages. More proof (in my mind) that the only reason it is #1 is because it is being purchased en masse by g'mint agents.

  4. ZIRP Era in Pictures

    Zero Interest Rate Policy (ZIRP) was instigated by a credit induced collapse of the US financial system and perpetuated in December of 2008 by desperate financial policy makers as a fix to problems they created in the first place.

    In reality, it is simply an epic distortion of normal economic signals that cleaned up the mess created by previous policy distortions (like the commercial credit bubble of the Greenspan era) by systematically (5+ years and running) main lining new distortions into the system.

  5. Excerpt (pp 160-164)

    The behavior of selected individuals and institutions needs to be exposed and properly adjudicated if capitalism is to exorcise the cronyism that was core to the fraud. James K. Galbraith, the chair in government and business relations at the University of Texas at Austin, understood this. Galbraith addressed the Senate Judiciary Committee’s Subcommittee on Crime in mid-2010 and laid out the shortcomings behind and the fallout from our economic crisis. His exquisitely detailed testimony skewered his own profession, the study of economic theory, for its failure to properly delve into and understand systemic financial frauds. In point of fact, leading into the current crisis, Wall Street curried favor with academics by paying them to produce research supportive of practices and market developments central to the perpetuation of fraud.

    isn't fraud a tax on the rest of us?

    so what do you do...let the fraudsters keep their ill gotten gains?

  6. Isn't this the real problem?

    Cherie Blair, the oil tycoon and jobs for Blairites in poor Albania
    The Balkan country is proving a fruitful source of work for Blairites with a legal contract for Mrs Blair and a job for Alastair Campbell's nephew in the office of the Albanian PM

    Mrs Blair was awarded a contract worth £300,000 to advise the Albanian government after making friends with the wife of the Balkan country’s then prime minister while in Downing Street.

    Mrs Blair, best known in the legal world as a human rights lawyer, acted for Albania in a billion dollar oil dispute with an American energy firm.

    Mr Blair subsequently became an adviser to the current Albanian government. James Naish, Mr Campbell’s 25-year-old nephew, also works as an adviser in the office of Edi Rama, Albania’s prime minister.