Piketty's Problem

Every time i've talked about Thomas Piketty with someone, the first question I've gotten was "have you seen any takedowns of him?" 

Here's one from the FT, and if true it's a big deal: 

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.

For example, once the FT cleaned up and simplified the data, the European numbers do not show any tendency towards rising wealth inequality after 1970. An independent specialist in measuring inequality shared the FT’s concerns.

Read the whole thing. It's short. 

  • He points to new data from Saenz and Zucman, using different methods. Here's a chart from the deck he references. Here's the deck.
  • "I don’t think this will have much of an impact on the general findings."
  • "My estimates on wealth concentration do not fully take into account offshore wealth, and are likely to err on the low side."
Update 2: Here's a full rundown of the supposed errors. Here's the conclusion: 
As I have noted, even with heroic assumptions, it is not possible to say anything much about the top 10 per cent share between 1870 and 1960, as the data for the US simply does not exist.

There is more data for the top 1 per cent share, but I also do not think it is wise to draw a definitive time series for the US as the data is inconsistent. But one can plot all the individual data and compare it to the European data, as I do in the picture below.

The chart shows that Europe did have higher wealth concentration in the 19thcentury and that inequality fell more than in theUS. On this Prof. Piketty appears to be right.

The exact level of European inequality in the last fifty years is impossible to determine, as it depends on the sources one uses. However, whichever level one picks, the lines in red in the graph show that – unlike what Prof. Piketty claims – wealth concentration among the richest people has been pretty stable for 50 years in both Europe and theUS.

There is no obvious upward trend. The conclusions of Capital in the 21st century do not appear to be backed by the book’s own sources.

This chart finishes out the post: