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Just in time for theÂ FridayÂ afternoon news dump (on a holiday weekend!), the FTâ€™s Chris Giles dropped a bombshell: Thomas Pikettyâ€™s â€śCapital in the Twenty-First Century,â€ťÂ he alleged, is full of data errors. After correcting the mistakes, he says (in aÂ separate post), â€śtwo of Capital in the 21st Centuryâ€™s central findings â€“ 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 â€“ no longer seem to holdâ€ť.
Gilesâ€™ allegations boil down to three points, detailed in a longÂ blog post: first, Piketty transcribed some numbers into Excel wrong. Second, Piketty made some unexplainedÂ changesÂ to the data. Finally, Piketty used questionable methods to arrive at his conclusions. In addition, Giles takes very specific issue with Pikettyâ€™s data on wealth inequality in Britain, claiming that â€śonce more reliable British results are included, there is no sign that wealth inequality in Europe is rising againâ€ť.
â€śThat is a damning conclusion, and if it holds up to scrutiny, would significantly undermine the case Mr. Piketty mounts,â€ť saysÂ Neil Irwin. Piketty, however, responded to Irwin: â€śEvery wealth ranking in the world shows that the top is rising faster than average wealth. If the FT comes with a wealth ranking showing a different conclusion, they should publish it!â€ťÂ Paul KrugmanÂ adds that â€śthe fact that Giles reaches that conclusion is a strong indicator that he himself is doing something wrongâ€ť.
Pikettyâ€™s response is slowly emerging. He published a robust, but fairly general, post in theÂ FT. However, he also told Newsweekâ€™sÂ Leah McGrath GoodmanÂ that he was ambushed by the FT and not given proper time to respond. ToÂ AFP, he saidÂ the FT â€śis being dishonest is to suggest that this changes things in the conclusions I makeâ€ť.
Being as Gilesâ€™ allegations accuse Piketty of major Excel errors, thereâ€™s aÂ natural comparisonÂ to last yearâ€™sÂ Reinhart and Rogoff debacle. ButÂ Mike KonczalÂ says they are nothing alike (after all,Â MarketplaceÂ reports that 88% of all spreadsheets have some sort of error). Konczal breaks down the comparison piece by piece, noting that Piketty was much more transparent about his data than R-R, and Gilesâ€™ accusations were much more nitpicky than the R-R error.
The blogosphere so far seems unconvinced by Giles, with reactions ranging from Giles being too nitpicky to Giles being just plain wrong (seeÂ JĂ©rĂ©mie Cohen-SettonÂ for a fuller roundup of the responses). â€śIt 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 wellâ€ť, says the Economistâ€™sÂ Ryan Avent.Â Justin WolfersÂ thinks that â€śin trying to put together its own series, the paper is at least as guilty as Mr. Piketty of making some pretty big assumptions about the comparability of quite different data setsâ€ť.
â€śFor the moment, the FTâ€™s strongest claims donâ€™t seem all that clearly supported by their analysisâ€ť, writesÂ Matt Yglesias. And finally, saysÂ Nate Silver, â€śPeople who are shocked when errors are uncovered in data probably haven’t spent much time actually working with dataâ€ť. â€”Â Shane Ferro
On to todayâ€™s links:
“We have been trying to distinguish between the ‘deserving’ and ‘undeserving’ poor for over eight hundred years” -Â Frances Coppola
“All studies of mobility across wealth percentiles should be sent straight to the trashcan” -Â Matthew Martin
Welcome to Adulthood
Not going to college out of fear it’s a bad deal “is among the most economically irrational decisions” -Â David Leonhardt
Five reasons the young have it economically tough -Â Cardiff Garcia