On careful selection of information

Oh well, why not use my first 'real' post to try to score an easy hit on one of most highly ranked economists around? 

So, it all started when Greg Mankiw again decided to defend the 1% in a NYT article. Unsurprisingly, Paul Krugman took him to task, both on the implicit assertion that the earnings of movies, sports, and arts are an important part of the increasing inequality story (they are not - it's mostly about corporate executives), and on the explicit statement on the importance of the financial sector as a reason for the very high pay observed there.

Mankiw then counters Krugman on a blog post, and offers 3 main comments: 

- The first one point to the importance of financial intermediation for growth, and looks like a deflection or a the use of a straw man; indeed, nowhere does Krugman (or pretty much any other economist) deny that financial intermediation is necessary - the point, rather, seems to be how much regulation it is subjected to, and whether lower salaries would lead to worse performance in the sector.

- The second, where he points to the non-existence of a single cuplrit for the financial crisis (he links to a chapter on which book, but for whatever reason the file is not opening). Maybe his book goes further than the blog post, but it still looks like a fair bit of hand-waving - sure, it's always hard to circumscribe responsibility for a major economic crisis to a single factor, but that hardly exonerates the financial sector from having played a major role.

- The third one is the main motivator for this post. There, Mankiw refers to Saez-Piketty data (for whatever reason, he does not provide a link) to mention that "during the downturn from 2007 to 2009, average income fell 17 percent, but the incomes of the top 1 percent fell 36 percent". I don't know what his source was, so it's impossible to know for sure if he was cherry-picking data. But i do know that Saez has made available an update of his "The Evolution of Top Incomes in the United States", using preliminary 2012 estimates. And the exact same table where it is indicated that income for the top 1% did decline 36% from 2007-09 also shows that a very fast recovery (31%) for them, during the 2009-12 period, while at the same time average income increased by 6%, and the income of those in the bottom 99% increased by only 0.4% (see table below, from the Saez article). But pointing this out would sort of ruin that poignant story about the heavy losses incurred by the top 1%...