There are a few things on which we agree. First, the source data on wealth inequality is poor. I have written that it is “sketchy” and Prof Piketty says it is “much less systematic than we have for income inequality”. Second, it would have been preferable for Prof Piketty to have used a more sophisticated averaging technique than a simple average of Britain, France and Sweden to derive an estimate for European wealth inequality. Third, the available data suggests a broad trend of reduction in wealth inequality during most of the 20th Century.
Thomas Piketty has now come out with a substantive response to the criticisms issued by Giles and Giugliano in the Financial Times. I am glad that he has done so and I suspect that there is much to chew over in the response, so I will look forward to reading the response of others to Piketty’s defense. For the time being, let me offer the following somewhat random observations (I am not going to comment on every paragraph or sentence in the letter, though I have read it all. I certainly encourage readers to read it all as well):
— Piketty tells us that he “certainly agree[s] that available data sources on wealth inequality are much less systematic than what we have for income inequality.” I am glad he states so; it is nice to establish that the data sources for wealth inequality are sketchy and incomplete. But while Piketty tells us that he is sure the data set can be improved, he also claims that he “would be very surprised if any of the substantive conclusions about the long run evolution of wealth distributions was much affected by these improvements.”More
Gentle readers, whenever Paul Krugman issues a defense of Thomas Piketty regarding the charges against the latter, by all means, be sure to read that defense. Be sure to consider its merits seriously. Be sure to closely and carefully examine the data Krugman might present in defense of his point and if Krugman actually makes a good point — or several — in defending Piketty, be gracious enough to acknowledge as much.
But of course, let us all remember that thus far, Krugman has failed to issue a serious and persuasive defense of Piketty’s findings and position in light of the Giles/Giugliano findings. And no matter how overwhelming the case against Piketty may become, Krugman may never be willing to admit that he is simply on the wrong side of this debate.More
Is Thomas Piketty’s sprawling best-seller, Capital in the Twenty-First Century, really just a bit of dystopian, neo-Marxist, speculative fiction tarted up with dodgy math? Some free-market types who disagree with the French economist’s controversial analysis and policy prescriptions might like to think so.
But this would be a more reasonable and fair take: extraordinary claims require extraordinary evidence. And Piketty, at the very least, makes a bold claim when he asserts discovery of powerful forces inherent to capitalism driving an “endless inegalitarian spiral” of ever-greater wealth concentration. And he offers mounds of data as support.More
The latest Pikettian response to Giles’s and Giugliano’s assertions regarding the quality of Piketty’s data and research is to accuse Giles and Giugliano of being “dishonest.” (Hat tip in comments here.) I suppose this means that Piketty’s is employing a classic I-am-rubber-and-you-are-glue defense, but there is little substance to the accusation; at best, Piketty can assert (without evidence) that the flaws found with his data do not change his conclusions, and that other studies find widening inequality “by using different sources.”
The response to this is (a) there is, in fact, plenty to suggest that the flaws in Piketty’s data change his conclusions (see my original post and my follow-up for more on this issue), and (b) just because other studies find widening inequality “by using different sources” does not mean that they are right or that, even if they are, Piketty is justified in finding widening inequality through a flawed data set. It is worth noting that Piketty issued a reply via the Financial Times that sought to address Giles’s and Giugliano’s concerns, but, as Tyler Cowen pointed out, Piketty’s reply “was quite weak. Maybe he’s not to be blamed for what was surely a rapid and caught-off-guard response, and perhaps there is more to come, but it doesn’t reassure me either.”More
Remember the Reinhart/Rogoff spreadsheet error? In the event that you do not, here is a summary. Those who follow debates between economists will recall that the spreadsheet error led to all kinds of excoriations of Carmen Reinhart and Kenneth Rogoff on the part of liberal economists, who claimed that they were responsible for austerity policies that killed off economic growth. Even Stephen Colbert got in on the act. Their spreadsheet error was considered to be the worst tragedy that befell the planet since that one time when Oedipus and Jocasta had a super-awesome first date.
Of course, the excoriations were vastly overstated, but that didn’t stop intellectual opponents of Reinhart and Rogoff from engaging in hyperbole on a grand scale. Now that Thomas Piketty has been caught making his own significant errors, comparisons have naturally been made between Piketty on the one hand, and Reinhart and Rogoff on the other.More
I have bought Thomas Piketty’s book Capital in the Twenty-First Century, and while I have posted many an item that takes issue with the books claims and conclusions concerning wealth inequality, I do plan on reading Piketty; his book has made quite the intellectual and cultural impact, and although I know what his basic arguments are, I want to be sure that I read the whole of the book to be fully aware of his claims.
But even before reading the book, one can conclude certain things about Piketty, as my previous blog posts indicate. And today, we learn that we may well be able to conclude one more thing still about Piketty, his research, and his arguments: They may be completely wrong. And yes, those words were worth emphasizing.More