The FT Isn't Just Saying Piketty Made A Mistake — It's Saying He Manipulated Data
...In a follow-up video on FT.com, Giles shows another example: Piketty appears to have added random numbers to certain formula to bend the data toward his hypothesis. "A 2 is added because the number wasn't high enough — it didn't seem to fit what he wanted to show in his charts, so he just added 2 to it," Giles says. "There was quite a lot of this sort of thing in his spreadsheets."...
Facts Are Stubborn Things . . . As Thomas Piketty Is Beginning to Find Out
...Thomas Piketty is in no doubt that data underpin the conclusions of his best selling economics book, “Capital in the Twenty-First Century” .
He writes, in the introduction: “Compared with previous works, one reason why this book stands out is that I have made an effort to collect as complete and consistent a set of historical sources as possible in order to study the dynamics of income and wealth distribution over the long run”.
While the conclusions of his work, including his call for an international wealth tax, have stirred controversy among academics, commentators and policy makers, even his critics have generally praised the ambition and quality of the data presented in the text.
Reviewing the book this month, Lord Mervyn King, former governor of the Bank of England, said, “the principal weakness of the book is that the carefully assembled data do not live up to Piketty’s rhetoric about the nature of capitalism”.
The sense of diligence in Professor Piketty’s compilation of trends in wealth is bolstered by an online technical annex and spreadsheets containing the data, with sources.
An investigation by the Financial Times, however, has revealed many unexplained data entries and errors in the figures underlying some of the book’s key charts.
These are sufficiently serious to undermine Prof Piketty’s claim that the share of wealth owned by the richest in society has been rising and “the reason why wealth today is not as unequally distributed as in the past is simply that not enough time has passed since 1945”.
After referring back to the original data sources, the investigation found numerous mistakes in Prof Piketty’s work: simple fat-finger errors of transcription; suboptimal averaging techniques; multiple unexplained adjustments to the numbers; data entries with no sourcing, unexplained use of different time periods and inconsistent uses of source data....
...But while the two Harvard professors’ errors seemed to have been unintended, Giles levels a more serious critique: that Piketty actively manipulated his data.
His most damning claim: Piketty altered U.K. data to show that wealth distribution there is worse off than it appears to be.
Piketty says the share of income going to the top 10% never fell lower than 60%, and since the end of the 1970s has returned to 70%, a level not seen in 70 years.
But the data Piketty himself cites shows the top 10% share of wealth is no greater than 50%, and may be as low as 42%.
Giles writes: “This appears to be the result of swapping between data sources, not following the source notes, misinterpreting the more recent data and exaggerating increases in wealth inequality.“...
...The second thing we ought to note is that neither Giles, nor Giugliano, nor the Financial Times would have discovered that Piketty’s books is fundamentally flawed if they listened to Paul Krugman, who famously said on his blog that “if you think you’ve found an obvious hole, empirical or logical, in Piketty, you’re very probably wrong. He’s done his homework!” Yes, that was a real statement by Paul Krugman, and yes, it ought to haunt him for the rest of his life–and beyond. We now know that it is more accurate to say that Piketty fudged his homework. I doubt that Krugman knew that Piketty’s conclusions were pretty much made up out of thin air–if he did, there is truly something rotten in the state of economics–but the point is that Krugman tried his damnedest to ensure that no one would take a critical eye to Piketty’s data and conclusions. ...
Thomas Piketty ‘Cherry Picked’ Data In His Book Critiquing Capitalism
...Upon reviewing Piketty’s sources and research methodologies, Giles says he found transcript errors in the author’s spreadsheets and evidence that he used incorrect formulas.
Implying that these miscalculations may have been deliberate mistakes, Giles noted that some of the information used in the book looked like it had been “cherry picked.”
When FT contacted Piketty to question him about how he gathered his data, he told the outlet that he had 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.”
Piketty added, “I have no doubt that my historical data series can be improved and will be improved in the future … 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.”
Ever since its release last year, Piketty’s book has been enthusiastically applauded among left-leaning groups, lawmakers and economists.
Economist and Professor Paul Krugman of Princeton University, said he considered the book to be the “most important economics book of the year – and maybe of the decade”.
And during the US portion of his book tour last month, Piketty had a meeting with US Treasury secretary Jacob Lew, gave a presentation to the White House Council of Economic Advisers and lectured at the International Monetary Fund and the UN.
In an email to the FT responding to Giles’ article, Piketty defended his findings, adding that income inequality might be even more pervasive in the West than what he outlines in his book.