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[Newsmaker] Economist Piketty rejects FT’s claims of data flaws

Thomas Piketty rejected allegations that data behind his best-selling book on inequality are flawed as fellow economists spoke up in his defense.

Piketty, the French economist whose book “Capital in the Twenty-First Century” has transformed the debate on the causes and consequences of disparities in income and wealth, called a Financial Times analysis of his statistics “just ridiculous.” He added in an email to Bloomberg News that “there’s no mistake or error” in his work.
French economist Thomas Piketty. (AFP-Yonhap)
French economist Thomas Piketty. (AFP-Yonhap)

The newspaper’s economics editor, Chris Giles, wrote last week that figures underpinning the 696-page book contain unexplained statistical modifications, “cherry picking” of sources and transcription errors. He said the mistakes undermine Piketty’s conclusion that wealth inequality in Europe and the U.S. is moving back toward levels last seen before World War I.

After correcting for the alleged errors, two of the book’s “central findings ― that wealth inequality has begun to rise over the past 30 years and that the U.S. obviously has a more unequal distribution of wealth than Europe ― no longer seem to hold,” according to Giles.

Economists disputed that assertion. Scott Winship, a fellow at the New York-based Manhattan Institute for Policy Research, said the newspaper’s allegations aren’t “significant for the fundamental question of whether Piketty’s thesis is right or not.”

James Hamilton, an economics professor at the University of California, San Diego, said there’s “abundant evidence” of widening inequality “from a good many sources besides Piketty.”

Giles declined to comment. Bloomberg LP, parent of Bloomberg News, competes with the Financial Times and its publisher Pearson Plc in providing business news and information.

Piketty, a 43-year-old professor at the Paris School of Economics, examined centuries of data on countries including the U.S., Sweden, France and the U.K. to show that returns on capital in excess of economic growth lead to widening disparities in wealth.

One “serious discrepancy” Giles said he found was in Piketty’s data on the U.K. While Piketty cited a figure showing the top 10 percent of its population held 71 percent of national wealth, a survey by the country’s Office for National Statistics put the figure at 44 percent.

The survey cited by Giles “is based upon self-reported data and is very low quality,” Piketty said in his email. Other economists agreed.

“The FT seems to take that survey as gospel, and I think that’s a mistake,” said Gabriel Zucman, an assistant professor at the London School of Economics whose research focuses on global wealth, inequalities and tax havens. “Anybody involved in this literature knows that survey data can massively underestimate wealth inequality. In this case, that is exactly what is happening.”

Giles also questions Piketty’s “seemingly arbitrary adjustments to the source data,” writing that “some numbers appear simply to be constructed out of thin air.” Economists said Giles had no basis for that charge.

“I do think that Piketty needs to explain a few things, like why the adjustments were done” the way they were, said Branko Milanovic, visiting professor at the Graduate Center of the City University of New York and a former lead economist at the World Bank’s research department. “It’s true that when you do this kind of huge multi-country work, you often make adjustments here and there, and sometimes you don’t write them down. It happened to me.”

Giles said he found the discrepancies in the data Piketty posted on his website, which consist of all the figures, tables and statistical series cited in his book. The website also includes a 97-page technical appendix describing his sources and methods.

Giles also cited discrepancies between Piketty’s source materials and the figures cited in his book, such as the data for the wealth held by the richest 10 percent and 1 percent of people in Sweden in 1920.

“I am sure that such errors happen all the time,” Dani Rodrik, an economics professor at the Institute for Advanced Study in Princeton, New Jersey, said in an email. “Most of the time they are ‘honest mistakes’ that do not change the basic conclusions. The assumptions that go into generating consistent data series are different. They are and should be debated.”

Economists praised Piketty’s decision to post his data on his website for review by other scholars.

“It’s hard to think Piketty did something unethical when he put it up there for people like me to delve into his figures and find something that looks sketchy,” said Winship, who said he spent the weekend poring over Piketty’s spreadsheets.

“Piketty has been as good or better than anyone at both making all his data available and documenting what he does generally.”

Piketty wrote in a letter posted on the Financial Times website that he put the spreadsheets online in order to “promote an open and transparent debate about these important and sensitive measurement issues.”

“For the time being, we have to do with what we have, that is, a very diverse and heterogeneous set of data sources on wealth,” he wrote. (Bloomberg)
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