Not all differences are errors: Criticism and Defense of Piketty’s Capital in the 21st Century

If you’re reading this then decent odds that you’re aware of economist Thomas Piketty’s new book, Capital in the 21st Century.  (I’ve cited journal articles by he and Emmanuel Saez as well as this op-ed piece they authored [1].)  If you’re not familiar, here’s a snippet from the Overview at the Barnes & Noble website:

Questions about the long-term evolution of inequality, the concentration of wealth, and the prospects for economic growth lie at the heart of political economy. But satisfactory answers have been hard to find for lack of adequate data and clear guiding theories. In Capital in the Twenty-First Century, Thomas Piketty analyzes a unique collection of data from twenty countries, ranging as far back as the eighteenth century, to uncover key economic and social patterns. His findings will transform debate and set the agenda for the next generation of thought about wealth and inequality.

That Piketty undertook a data-based analysis makes his effort noteworthy in and of itself.   You have tip your hat to someone does a deep dive into data, tries to suss out significant trends and relationships, and reports back their findings.  Long story short, Piketty examined data from the past 200 years across multiple nations and concluded that inherited wealth has ensured the dominance of a small class of people and, barring public policy changes, it will continue to do so for the foreseeable future.  Recently however Chris Giles, a columnist for the Financial Times, uncovered some errors in Piketty’s book.  He reported his findings in “Data Problems with Capital in the 21st Century” (Note:  The article is behind a registration wall).  Piketty has not yet responded point-by-point to Giles but read his Big Picture response here.

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