Professor Thomas Piketty’s Capital in the 21st Century has data on wealth inequality at its core. His data collection has been universally praised. Prof Piketty says he has collected,
“as complete and consistent a set of historical sources as possible in order to study the dynamics of income and wealth distribution over the long run”However, when 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.
Without these results, it would be impossible to claim, as Piketty does in his conclusion, that “the central contradiction of capitalism” is the tendency for wealth to become more concentrated in the hands of the already rich and
“the reason why wealth today is not as unequally distributed as in the past is simply that not enough time has passed since 1945”.This long post will outline the classes of data problems I have found in Chapter 10 of Piketty’s book, which deals with the inequality of capital ownership. I will then show why these problems matter for each one of the four countries prof Piketty studies – France, Sweden, UK and the US.
Finally, I will put all the revised data together to show that, based on the sources Piketty cites, the conclusions that (a) wealth inequality rose after 1980 and (b) wealth inequality in the US is larger than in Europe no longer seem to hold....MUCH MOREOf all the commentary thus far the most interesting has to be from one of Marginal Revolution's readers:
Michael May 23, 2014 at 2:55 pmI suppose someone had to break the news to the FT's journalists, Professor Cowen and other 'not-very-bright people' who the real powers behind Pearson (and Marginal Revolution) are.
It’s really sad that many not-very-bright people will be fooled by Giles’s misleading and tangential nitpicking, which (as Piketty clearly points out) does not actually change the thrust of Piketty’s thesis.
It’s a sad attempt by a Murdoch-owned rag to undercut a very good thesis that undermines Murdoch’s political view. Note that the FT’s treatment of the R-R scandal was much, much more charitable:
“But the corrections do not affect Mr Rogoff and Ms Reinhart’s most up-to-date work, which still shows a slowdown in growth when debt hits 90 per cent of gross domestic product.”I’m sure it will fool a lot of Cowen’s fans, and readers of other Koch-supported blogs, but fortunately the clear trend of growing inequality is making it harder and harder for this kind of distracting propaganda to really make a meaningful impact on the hearts and minds of the majority.
However, well reasoned as they may be, it will be very difficult for MR's readers to top this Piketty commenter from April 10:
"I’m just going to agree with which ever side fits my political preferences."
(comment by Urstoff April 10, 2014 at 3:20 pm)
