Interesting proof that Thomas Piketty got the modern economy wrong comes from The Sunday Times’s annual rich list, which was published yesterday. Some 94 per cent of the 1,000 people made the cut not by getting rich the old fashioned way — by marrying or inheriting — but instead by making it.
The Sunday Times findings match those from other sources, including Bloomberg and Forbes. Recent decades have seen many fewer of the listees being from the lucky sperm club, and many more of them there because of their own hard work.
This fact refutes Piketty’s main argument, and in doing so undermines his major policy demand: that the rich should be taxed more.
Piketty insists that r > g, that the return to capital exceeds economic growth. Thus, according to the French economist, the rich will just carry on getting richer and we’ll be left with an economy in which plutocrats are surrounded by us homeless and starving waifs. Further, he goes on to say that the rich who inherit have access to much greater returns than the rest of us, making it a self-supporting spiral of economic misery.
This appears not to be true and in a battle between a hypothesis and those pesky facts drawn from reality it is the universe that wins. That is the way the scientific method works.
The interesting question, then, is why Piketty’s Capital fails.