The Financial Times 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 economics 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 important economics book of the year—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 FT’s concerns.
He makes his case by posting excerpts from his spreadsheets on the FT’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 FT’s 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 FT 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.”