Thursday, 19 October 2017

Piketty's rickety evidence...

Thomas Piketty became the go to anti-capitalist economist. Every trendy progressive pundit leapt onto his arguments about the inevitability of ever rising inequality. Whole economic strategies were designed by assorted far left numpties based on Tom's vast tome (which I guess most of them haven't read - I had a quick flick through, turgid doesn't fully capture its dullness).

Thing is though, Piketty's evidence - the thing that made his thesis so powerful - turns out to be a bit dodgy:
Very little of value can be salvaged from Piketty’s treatment of data from the nineteenth century. The user is provided with no reliable information on the antebellum trends in the wealth share and is even left uncertain about the trend for the top 10 percent during the Gilded Age (1870–1916). This is noteworthy because Piketty spends the bulk of his attention devoted to America discussing the nineteenth-century trends (Piketty 2014: 347–50).

The heavily manipulated twentieth-century data for the top 1 percent share, the lack of empirical support for the top 10 percent share, the lack of clarity about the procedures used to harmonize and average the data, the insufficient documentation, and the spreadsheet errors are more than annoying. Together they create a misleading picture of the dynamics of wealth inequality. They obliterate the intradecade movements essential to an understanding of the impact of political and financial-market shocks on inequality. Piketty’s estimates offer no help to those who wish to understand the impact of inequality on “the way economic, social, and political actors view what is just and what is not” (Piketty 2014: 20).
All this comes (via Marginal Revolution) from Professor Richard Sutch, a very highly regarded economic historian and economist. Seems that emperor might need a new tailor.


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