Don’t dismiss Piketty just yet

The big news of the last 24 hours from the world of policy wonks is that parts of the French economist Thomas Piketty’s book ‘Capital‘ have been called into question. The FT’s economic editor Chris Giles claims to have identified problems with the data sets underlying Piketty’s conclusions about escalating wealth inequality. This rather good analysis by The Economist (a paper not necessarily wholly sympathetic to Piketty’s conclusions) urges caution especially on the key question of:

whether the book’s conclusions are called into question by Mr Giles’s analysis. If the work that has been presented by Mr Giles represents the full extent of the problems, then the answer is a definitive no, for three reasons. First, the book rests on much more than wealth-inequality figures. Second, the differences in the wealth-inequality figures are, with the exception of Britain, too minor to alter the picture. And third, as Mr Piketty notes in his response, Chapter 10 is not the only analysis of wealth inequality out there, and forthcoming work by other economists (some conclusions of which can be seen here) suggests that Mr Piketty’s figures actually understate the true extent of growth in the concentration of wealth.

However, given the questions that have been raised it would be inappropriate to say anything definitive. One hopes there will be an additional response from Mr Piketty. There will no doubt be efforts by other scholars to dig into Mr Piketty’s figures; Scott Winship, a scholar at the Manhattan Institute who disputes Mr Piketty’s overarching narrative about inequality wrote on Twitter last night:

I’ve spent time with Piketty U.S. wealth ineq[uality] spreadsheet and LOTS of time with his income data. He’s not up to funny business.

And of course, it will take future research to show whether the broad strokes of Mr Piketty’s book are correct or not. But that was true before the FT analysis was published as well.

Now, the academic debate is a different thing from the judgment reached in the court of public opinion. There was an outbreak of gloating across the wires the moment the Financial Times story went live. The book has plenty of critics (many of which never spent much time wrestling with the book’s arguments in the first place), and many of which reached gleefully for word that Mr Piketty’s work might not be perfect. One suspects that in a public back-and-forth that has often failed to hew particularly closely to the substance of the book, this will become an excuse for many to write the book off, and for others a piece of ammo to fire at ideological opponents.

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