Sanandaji on Piketty’s missing entrepreneurs

by Ryan Streeter on November 19, 2014. Follow Ryan on Twitter.

I always enjoy reading Tino Sanandaji. This NRO piece offers an interesting analysis of Piketty’s omission of self-employed business owners and entrepreneurs in his conclusions about earnings and wealth in America. Main takeaways:

  • An influential study by Cagetti and De Nardi used Federal Reserve data in 1989 to estimate the wealth share of self-employed business owners. Self-employed business owners constituted 8 percent of the population, but owned one-third of national wealth and more than half the wealth of the top 1 percent.
  • In 2010, self-employed business owners account for an astonishing 70 percent of the wealth of the top 0.1 percent. If we look at top earnings rather than top wealth, self-employed business owners accounted for around 50 percent of the total earnings of the top 0.1 percent. These facts are never mentioned in Piketty’s book.
  • Last year, the 500 CEOs of the Fortune 500 collectively earned $5 billion. By comparison, the best-performing hedge-fund manager alone earned $4 billion. The total earnings of the 0.1 percent are somewhere around $800 billion per year.