A bombshell allegation rocked the economics world Friday afternoon.
FT economics editor Chris Giles says he has found serious errors in data used by Thomas Piketty in his best seller “Capitalism in the 21st Century,” about growing inequality in the Western world.
“Some issues concern sourcing and definitional problems,” Giles writes. “Some numbers appear simply to be constructed out of thin air.”
Correcting for the errors revealed fundamentally different conclusions about rising inequality, Giles said.
“Two of Capital in the 21st Century’s central findings — that wealth inequality has begun to rise over the past 30 years and that the US obviously has a more unequal distribution of wealth than Europe — no longer seem to hold,” he writes.
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.
Giles says he noticed the discrepancies while researching an article on UK wealth distribution. While Piketty said the top 10% per cent of British people held 71%, the UK’s Office for National Statistics said it was just 44%.
The alleged discrepancies are similar to ones that undermined findings of Carmen Reinhart and Ken Rogoff in their study of debt levels and growth, Giles says.
Reached by the FT, Piketty responded that he’d 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.” They paper has printed Piketty’s full response here »
Piketty’s findings renewed the focus on growing income inequality in recent weeks. If Giles’ findings bear out, they could cause that attention to dissipate.
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