Have the top 0.1% of Americans made out like bandits since 2000?

IT IS A truth universally acknowledged that inequality in the rich world is high and rising. Or, at least, it used to be. A growing band of economists are challenging the received wisdom, pointing out that trends in the distribution of income and wealth may not be as bad as is often thought. Two recent studies focus on wealth inequality in America, providing further ammunition to the dissenters.

Measuring wealth is harder than it may seem. People are liable to under-report their asset holdings on official surveys, whereas it is hard to measure the true value of things like private companies and art works. Economists are using increasingly sophisticated methods to get a sense of who owns what. One popular method is to examine income earned on investments, such as interest payments from bonds, assume a rate of return, then multiply up to calculate the value of the investment.

In a newly updated working paper Matthew Smith of the Treasury department, Owen Zidar of Princeton University and Eric Zwick of the University of Chicago use this method to gauge American wealth inequality. Previous estimates have relied on the assumption that all people receive the same rates of return on a given type of investment. That may be misleading. The rich tend to plump for riskier investments, which command higher rates of return—implying...