23 May 2014

Yikes! Piketty Accused of Literally Making Up Wealth Inequality Data

Capital & Interest 8 Comments

OK, so I personally busted Piketty just making stuff up about tax rates, and in a way that served his narrative. Economist Diana Furchtgott-Roth at the Manhattan Institute caught him just making stuff up about the minimum wage, and in a way that served his narrative.

Now Chris Giles of FT comes out with an analysis that begins this way:

[W]hen writing an article on the distribution of wealth in the UK, I noticed a serious discrepancy between the contemporary concentration of wealth described in Capital in the 21st Century and that reported in the official UK statistics. Professor Piketty cited a figure showing the top 10 per cent of British people held 71 per cent of total national wealth. The Office for National Statistics latest Wealth and Assets Survey put the figure at only 44 per cent.

This is a material difference and it prompted me to go back through Piketty’s sources. I discovered that his estimates of wealth inequality – the centrepiece of Capital in the 21st Century – are undercut by a series of problems and errors. Some issues concern sourcing and definitional problems. Some numbers appear simply to be constructed out of thin air.

When I have tried to correct for these apparent errors, a rather different picture of wealth inequality appeared.

Two of Capital in the 21st Century’s central findings – that wealth inequality has begun to rise over the past 30 years and that the US obviously has a more unequal distribution of wealth than Europe – no longer seem to hold.

Now I haven’t personally gone through and verified Giles’ claims (I *did* verify the ones about the minimum wage–and yep, Piketty did indeed just make up a bunch of stuff that served his narrative on that issue). But this looks pretty bad.

But remember kids, all we troglodyte critics can really do is sputter and call Piketty names. We got nothin’.

8 Responses to “Yikes! Piketty Accused of Literally Making Up Wealth Inequality Data”

  1. Patrick Galbraith says:

    “national wealth” is an absurd concept to begin with. There is no such thing. There is wealth and it is owned by individuals who have created it. It’s not some resource such as oil, mountains or bodies of water. That premise is what should be disputed, not the percentage of a concept based in non-objective reality.

  2. Jim C says:

    Piketty’s whole premise is flawed in an even more fundamental way. How can he use data derived from our economic system to establish anything regarding capitalism, when we don’t have anything like a capitalist system*?

    *at least in the traditional sense where firms and banks are allowed to fail, and interest rates are genuinely set by the supply/demand balance of savers and borrowers rather than the grand pooh-bahs of the Fed determining our economy’s time preference for money?

    • Major-Freedom says:

      Imagine if Piketty was a conservative, or worse, a libertarian.

      Imagine his book to have the exact same (false) data, the exact same conclusions regarding wealth inequality, everything is the same EXCEPT the only difference being that instead of using the word “capitalism” he instead used the phrase “soft socialism” or “state hampered economy.”

      Imagine his thesis was that government intervention into laissez-faire capitalism has led to the alleged growing inequality that his data shows.

      Do you think Krugman would not immediately pour into the data and find a way to “refute” it? Do you think Krugman would be so protective of Piketty’s empirical claims against ideological anti-libertarians?

      • Tel says:

        We don’t have to imagine, that Rogoff guy got a formula wrong by one cell on his spreadsheet, which had a very minor influence on the final result, and the Progressive chorus freaked out over it.

  3. Major-Freedom says:

    Regarding Krugman’s article, is it me or has the quality of his writings declined so far that he is beginning to sound like “Lord Keynes”?

    • Dyspeptic says:

      Together they could be Lord Krugman!

      Cue the ominous music.

    • Jim C says:

      However good an economist Krugman may once have been, I tend to regard him as having left the profession for the far more lucrative career of progressivist shill.

  4. guest says:

    consultingbyrpm blog tag piketty

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