Has Thomas Piketty Made Mis­takes in His Best­seller?

The Economic Times - - World View - PETER COY

The Fi­nan­cial Times of Lon­don says French econ­o­mist Thomas Piketty “ap­pears to have got­ten his sums wrong” in his best-sell­ing book, Cap­i­tal in the Twenty-First Century, which ar­gues that in­equal­ity is ris­ing and calls for a global wealth tax.

“The FT found mis­takes and un­ex­plained en­tries in his spread­sheets, sim­i­lar to those which last year un­der­mined the work on pub­lic debt and growth of Car­men Rein­hart and Kenneth Rogoff,” writes FT econom- ics edi­tor Chris Giles.

If Giles is right, he has a block­buster story on his hands, be­cause Piketty’s book has been the eco­nomic pub­lish­ing sen­sa­tion of the sea­son. As Giles notes, Piketty has given pre­sen­ta­tions on the book to the White House Coun­cil of Eco­nomic Ad­vis­ers, the In­ter­na­tional Mon­e­tary Fund and the United Na­tions. New York Times colum­nist Paul Krug­man wrote that it’s safe to say Cap­i­tal “will be the most im­por­tan­te­co­nomics­bookof theyear — and maybe of the decade.”

Writes Giles: “Prof Piketty, 43, pro­vides de­tailed sourc­ing for his es­ti­mates of wealth in­equal­ity in Europe and the US over the past 200 years. In his spread­sheets, how­ever, there are tran­scrip­tion er­rors from the orig­i­nal sources and in­cor­rect for­mu­las. It also ap­pears that some of the data are cherry-picked or con­structed with­out an orig­i­nal source.” Giles writes that ac­cord­ing to the news­pa­per’s anal­y­sis “the Euro­pean num­bers do not show any ten­dency to­wards ris­ing wealth in­equal­ity af­ter 1970.” It says an in­de­pen­dent specialist shared the con­cerns.

Giles makes his case by post­ing ex­cerpts from his spread­sheets on the news­pa­per’s Money Sup­ply blog. At my re­quest, Giles also sent me a copy of the full spread­sheet to re­view.

Piketty stands by his con­clu­sions. In a long re­sponse posted on the blog, he wrote that he used “a very di­verse and het­ero­ge­neous set of data sources … [on which] one needs to make a num­ber of ad­just­ments to the raw data sources.” Added Piketty: “I have no doubt that my his­tor­i­cal data se­ries can be im­proved and will be im­proved in the fu­ture … but I would be very sur­prised if any of the sub­stan­tive con­clu­sion about the long-run evo­lu­tion of wealth dis­tri­bu­tions was much af­fected by these im­prove­ments.” Piketty also told the news­pa­per that more re­cent data not in his work showed “the rise in top wealth shares in the US in re­cent decades has been even larger than what I show in my book”.

Bloomberg Busi­nessweek

Thomas Piketty

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