Thomas Piketty Book on Inequality Has Errors, FT Says

Thomas Piketty, author of a best-selling book on the widening gap between rich and poor, relied on faulty data that skewed his conclusions, the Financial Times reported on its website.

The mistakes undercut Piketty’s argument that wealth inequalities are heading back up to levels last seen before World War I, wrote Chris Giles, the FT’s economics editor.

Data underpinning Piketty’s “Capital in the Twenty-First Century” includes transcription errors, unexplained statistical modifications and “cherry picking” of sources, he wrote.

“Some issues concern sourcing and definitional problems,” Giles said. “Some numbers appear simply to be constructed out of thin air.”

After correcting for these apparent 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.

Piketty defended his work in a separate posting on the newspaper’s website, saying that he used a very diverse set of statistics that required him to adjust the data.

“I have no doubt that my historical data series can be improved and will be improved in the future,” wrote Piketty, who is a professor of economics at the Paris School of Economics.

“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.”

Transparent Debate

He said he had made all his Excel files available on the web because he wanted “to promote an open and transparent debate about these important and sensitive measurement issues.”

“If there was anything to hide,” Piketty asked, “why would I put everything on line?”

Giles’s article prompted responses from economists on Twitter.

“It’s hard to sort out how much of the #Piketty furor is about an economist’s data judgments differing from a journalist’s, or serious errors,” Justin Wolfers, a professor of economics and public policy at the University of Michigan, said in a Twitter posting.

“Piketty’s response to @ChrisGiles curiously doesn’t actually respond to @ChrisGiles,” Benn Steil, director of international economics at the Council on Foreign Relations in Washington, wrote on Twitter.

Giles likened Piketty’s errors to those made by Harvard University professors Carmen Reinhart and Kenneth Rogoff in their research on government debt and economic growth.

The two economists acknowledged that they had made a mistake in a 2010 paper that had been used to justify fiscal consolidation in the U.S. and Europe, while arguing that the error didn’t change the basic findings of their work.

(Corrects spelling of Piketty in third paragraph.)
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