Macroeconomist Scott Sumner blogs at EconLog on Thomas Piketty and Jewish wealth:

JUNE 26, 2014

Piketty on “merit”

Scott Sumner One thing I noticed while reading Thomas Piketty’s new book was the topics that were not covered; progressive consumption taxes, Singapore (or indeed any of the 4 Asian “tiger economies”),

That’s why I wrote about South Korean heterodox economist Ha-Joon Chang being ignored while Piketty is lionized.

and the link (if any) between ethnicity and great wealth. In an earlier post I discussed progressive consumption taxes—here I’ll focus on ethnicity. Piketty is quite dismissive of the idea that great wealth and/or high incomes are generally associated with “merit” (or productivity, the term I prefer.) He tends to emphasize that many of the very wealthy have inherited their fortune. Or that out-sized CEO pay packages are not closely linked to productivity. Indeed this is a theme Piketty repeats frequently. … A paper by Steven Kaplan and Joshua Rauh: “Furthermore, the Forbes 400 lists include virtually no public company chief executives who are not founders or who became the chief executive officer after the company went public.”

Piketty is convinced that the Forbes lists hide the existence of secret hereditary billionaires. He doesn’t mention who he is thinking of in particular, but the family name usually at the top of the lists of his fellow conspiracy theorists is “Rothschild.” I don’t dismiss conspiracy theories out of hand, but Piketty’s seems one of the less plausible simply because there is so much interest in vast wealth (e.g., among divorce attorneys).

Interestingly, I don’t recall any Piketty reviews discussing the role of ethnicity and great wealth. One of the wealthiest people in the world is Mexican telecom owner Carlos Slim, who is of Lebanese descent (a fairly small minority in a mostly Hispanic culture.)

You should be reading my reviews of Piketty, Scott. I mentioned Piketty’s eye-opening views on Carlos Slim briefly here and at length here.

In many Southeast Asian nations the wealth is disproportionately owned by a relatively small group of Chinese immigrants. America has many examples of immigrant success, perhaps none more famous than Jewish immigrants from Europe. According to Forbes, of the 40 Americans with more than $10 billion in wealth, 12 are Jewish. (And a 13th was described as Russian-American.) So it looks like about 30% of the very rich in America are Jewish. I couldn’t find data on the proportion of all US billionaires that were Jewish, but some sources suggested roughly 25%. (The global figures seems closer to 11% of all billionaires being Jewish, although of course Jews make up a much smaller share of the global population that the US population. Roughly 0.2% globally vs. 2.0% in the US.)

Jewish publications, especially in Israel, love ranking Jewish billionaires. However, the most careful lists are kept by human science blogger race / history / evolution notes, who estimates that the Jewish share of the American Forbes 400 list is not 1/4, but at least 1/3, while the Jewish percentage of global billionaires is probably closer to 1/6th than 1/9th.

Even accounting for data problems

I critique the various methodologies here.

(what counts as Jewish when there is intermarriage?)

Nobody seems to be doing this yet, but I think the best all around method would be to attribute fractions based on both genetic ancestry and ethnic upbringing, with nature and nurture weighted equally. For example, Larry Ellison of Oracle is said to have been born during the tumultuous days of World War II as the illegitimate child of an Italian-American pilot and a teenage Jewish mother, who gave little Larry to her aunt to raise in a stable Jewish home. The makes Ellison half Jewish by nature and all Jewish by nurture. Since my working presumption has always been to assume that nature and nurture are fairly comparable in influence unless evidence for a particular issue is presented to the contrary, I’d list Ellison as 3/4th Jewish.

In general, there aren’t that many cases of mixed backgrounds among Forbes’ billionaires — average age 66 — although that no doubt will grow.

it looks like Jewish immigrants to American have been considerably more successful than average. What does any of this have to do with Piketty’s book? Very possibly nothing. However given that Piketty is quite dismissive of the idea that great wealth and/or high incomes are associated with “merit”, I wonder what would be the Piketty explanation of ethnic differences in wealth. One factor might be discrimination, but that doesn’t seem to apply to cases where small immigrant communities have done very well—indeed they often face adverse discrimination, just the opposite of what you would expect. It seems to me that the most straightforward explanation for the success of minority immigrant groups is high productivity. … … If I could hazard a guess, it might be that the lack of discussion of ethnicity in the Piketty debate might partly reflect the fact that explanations of disproportionate ethnic success that are not merit-based might seem slightly non-PC. I’m not sure that would be fair to those on the other side—my own view is that we have become so sensitive to these issues (mostly a good thing!) that the charge of prejudice is somewhat overused in contemporary American intellectual debates. Still, I feel slightly better finding myself on the “merit” side of the question of ethnic success, than having to defend some sort of non-merit theory of disproportionate ethnic success (where discrimination is clearly not the deciding factor.)

Let me warn Scott, who seems like a good guy, that if he’s not Jewish, he should make sure he has tenure before publicly counting up rich and/or powerful Jews. If you are Jewish, it’s acceptable to joke about Jewish power, as in Joel Stein’s 2008 column in the L.A. Times “Who Runs Hollywood? C’mon …” But if you are not Jewish, pour encourager les autres you can have your career and income massively damaged (e.g., Gregg Easterbrook and Rick Sanchez), or at minimum be forced into a humiliating apology tour (e.g., Marlon Brando) simply for mentioning the fact of Jewish power in a non-fawning way.

So, while I appreciate Scott’s bravery in blogging on this highly important subject, let me point out to him that there’s a reason why the data on the subject of Jewish wealth is so hazy and understudied.