Thomas Piketty’s False Depiction of Wealth in America

From William McBride of the Tax Foundation.

"Executive Summary

In his book, Capital in the 21st Century, Thomas Piketty portrays the rich as heirs with privileged access to high rates of return, stating “it is almost inevitable that inherited wealth will dominate wealth amassed from a lifetime’s labor.” He points to the Forbes wealth rankings for support.

In fact, the Forbes 400—an annual ranking of the richest Americans—indicates wealth is much more fleeting than Piketty suggests and is characterized more by entrepreneurship than by inheritance.

Key Findings

• Of the Forbes 400 from 1987, 327 people have dropped off the list. Of the remaining 73 people, those with the highest annual rates of return are generally self-made entrepreneurs and investors—not heirs—with an average annual real rate of return of 5.6 percent over the last 26 years.
• The rate of return for the Forbes 400 as a whole, 2.4 percent, is roughly equal to Piketty’s estimated returns for the entire population.
• Wealth today is largely generated by entrepreneurial skill, with the number of entrepreneurs on the Forbes 400 list rising from 40 percent in 1982 to 69 percent in 2011.
• The role of inheritance has diminished over the last generation; the share of the Forbes 400 that grew up wealthy has fallen from 60 percent in 1982 to 32 percent today.
• As with individuals, the wealth of corporations has been highly dynamic over the last 30 years; turnover in the Dow Jones Industrial Average has increased in recent decades, with only one corporation (General Electric) remaining on the Dow Jones for more than 100 years."