Summers vs Piketty on the Forbes 400

Larry Summers is one of several reviewers of Piketty I’ve seen who cast some doubt on his theories with reference to the Forbes 400 list:

A brief look at the Forbes 400 list also provides only limited support for Piketty’s ideas that fortunes are patiently accumulated through reinvestment. When Forbes compared its list of the wealthiest Americans in 1982 and 2012, it found that less than one tenth of the 1982 list was still on the list in 2012, despite the fact that a significant majority of members of the 1982 list would have qualified for the 2012 list if they had accumulated wealth at a real rate of even 4 percent a year. They did not, given pressures to spend, donate, or misinvest their wealth. In a similar vein, the data also indicate, contra Piketty, that the share of the Forbes 400 who inherited their wealth is in sharp decline.

This is an interesting point, but when I interviewed Piketty he had a rebuttal namely that the Forbes methodology undercuts inherited wealth.

Piketty’s point is that the whole reason we rely on journalistic sources for this kind of thing is that there’s no publicly available data. When it comes to the founder of a company, we have an easy way around it. Facebook’s SEC filings say how many Facebook shares Mark Zuckerberg owns. And the stock market gives us a valuation of Facebook’s shares. So it’s simple enough to calculate his wealth. But if you’re talking about the diversified stock holdings of the grandson of a rich corporate founder, there’s no easy way to tell how much money he has.

And there’s no particular incentive for Forbes and other media sources to invest tons of time and energy in figuring it out since people are actually much more interested in the doings of the Zuckerbergs and Bill Gates and other people actively engaged in the management of enterprises.