Pun Salad

Many people are interested in the distribution of income and wealth and how it may have changed over time. But there is no single and undisputed source for such data. Rather, economists construct historical time series using partial information and many assumptions.

French economist Thomas Piketty and colleagues have for years been publishing data showing extreme changes in top 1 percent income and wealth shares in the United States over the decades. Many news outlets report the information unquestioned, despite evidence that Piketty is sloppy with data and makes bad assumptions that throw his calculations off.

The other day in the Wall Street Journal, Phillip Magness and Vincent Geloso described errors in the top 1 percent income data of Piketty and his colleagues. The Cato Institute published a collection of essays critiquing Piketty’s theories and data in 2017. Alan Reynolds has been finding flaws in Piketty’s data since 2007.

In the Cato Journal, Robert Arnott and coauthors examined the Forbes lists and found that of the 400 individuals on the 1982 list, just 69 individuals or their descendants remained on the 2014 list. They found that the wealth of those 69 people had grown far more slowly than if they had simply invested passively in stocks and bonds in 1982 and let their holdings grow. They conclude that “dynastic wealth accumulation is simply a myth.”

Similarly, the Tax Foundation’s William McBride looked at changes in wealth for the 400 individuals on the 1987 Forbes U.S. list through to the 2014 list. He calculated the growth in wealth for the 73 people who stayed on the list, and he estimated the growth for those who dropped off by assuming that the drop‐​offs had barely missed the wealth threshold for the 2014 list. With that assumption, he found that the average annual real wealth growth rate over 26 years for the people on the 1987 list was at most a meager 2.4 percent. By contrast, the average annual real return on U.S. stocks over the decades has been about 7 percent.

[Reich] attracted attention on social media on Tuesday for writing a particularly awful column titled "Elon Musk's Vision for the Internet is Dangerous Nonsense." It ran in The Guardian.

Reich begins by condemning Russian President Vladimir Putin's authoritarianism: how he hides the truth from the people of Russia by outlawing dissent, jailing protesters, and prioritizing government propaganda over independent media. Reich then turns his attention to former President Donald Trump, writing that the decisions by social media companies to ban the president "were necessary to protect American democracy."

But wait a minute: Why does silencing a political viewpoint protect democracy? How is that any different than Putin saying his silencing of dissenters is necessary to protect Russia? Reich doesn't seem to realize that he is condemning one kind of tyranny while lionizing another, which leads him into a very, very odd attack on Tesla CEO Elon Musk, who recently became the largest shareholder of Twitter after buying a 9 percent stake in the company.

Being deliberately misunderstood—having your words read in the least charitable possible way by an audience completely unwilling to consider your argument before attacking your character—is maddening. Resistance is, of course, futile. Attempting to defend yourself on the internet is, as the aphorism goes, like wrestling with a pig. You both get dirty. And the pig likes it.

So I didn’t defend myself. I gritted my teeth and did nothing. I watched as the internet crafted its fantasy of me—scheming yet weak, friendless yet socially powerful, rendered completely inept by Asperger’s yet an expert manipulator. I was incredibly hateable—the cloying white girl only able to publish in the Times because of an imaginary family connection. I was somehow both the mean-girl bully and the awkward freak who deserves what’s coming to her.

The vicious rage in reaction to the article is telling. It shows, with biting efficacy, what happens when you don’t self-censor. If there was no real problem of illiberalism on college campuses, or our broader culture for that matter, then thousands of people wouldn’t have clamored to decry a college student as everything from a whiny child to a white nationalist. If there was no real problem, then my article wouldn’t have registered as that much of a threat.

There are only two ways that modern industrial society can be powered: fossil fuels and nuclear power. The mastery of wind, water, animal, and solar power (via biomass), moved humanity from the Stone Age to the Enlightenment. It enabled global commerce under sail, the creation of metals, ceramics, glass, paper, and numerous other artificial materials (and all the devices and instruments that they enable,) and provided the mechanical energy to liberate the large majority of people—particularly in the West—from enslavement to lives of manual labor. But by the 19th century, these sources of energy were no longer sufficient to sustain the further growth of the very society that they had created.

That society, however, had the tools to give birth to a new one. Equipped with access to global knowledge, printed books, and literate populations wielding that science along with steel tools, drills, and other mechanisms, it was able to invent the technologies required to unleash the power of fossil fuels. Thus liberated from the limitations of pre-industrial energy sources, humanity was able to grow exponentially further in numbers, power, and knowledge—in sum creative capacity—to the point where it was able to discover and invoke the laws of chemistry and electricity. These, in turn, not only allowed the creation of new materials ranging from gasoline, plastics, fiberglass, aluminum, and silicon to uranium, but of scientific instruments unveiling deeper laws of nature, and, with them, new and still vaster powers hidden within the last of these.

There are many problems with this tax. For instance, it is unclear that taxing wealth as opposed to income wouldn't face constitutional problems, as Sen. Joe Manchin of West Virginia pointed out to the president. In addition, as we have learned from other wealth taxes, it will be administratively prohibitive. This is why most of the European countries that previously had wealth taxes eventually abandoned them.

In addition, it would likely raise very little revenue. This is precisely because capital is mobile and would soon fly to other, less-restrictive countries to escape the tax. Alternatively, the owners of the assets in question could be forced to sell — often to foreigners — also leaving less to tax.

More importantly for the purpose of this article, it would reduce U.S. saving and capital formation, which would have consequences for everyone else who isn't a billionaire. The wealth of billionaires isn't held the way most believe it to be — stored as if in gold or cash under their beds. A lot is invested back into their own companies, meaning wealth taxes ultimately hurt their employees.