Piketty Fudged His Wealth Data But Progressives Still Support His 'Compelling Theoretical Predictions'

Tyler Durden's picture

Submitted by Robert Murphy via Mises Canada,

Thomas Piketty’s Capital in the Twenty-First Century is a moving target. The book contains foundational theoretical problems, a misreading of the empirical literature that blows up his whole case, sloppy and absurd factual errors concerning tax rates and minimum wage hikes, and shocking quotations that reveal he has no desire to actually raise government revenue with his massive soak-the-super-rich schemes, but instead merely wants to prevent the formation of fortunes in the first place.

I am now beginning to suspect that this is the Frenchman’s rope-a-dope strategy. By this point, after I (and others) have been harping on one problem after another, the poor blogosphere reader is too fatigued to take it seriously when Chris Giles at the FT alleges that Piketty’s most important scholarship–the thing that supposedly warrants Piketty a Nobel Prize, according to Larry Summers–is not only wrong, but contains deliberately fudged data. Uh oh.

You can click the FT link to read the big-picture (ungated) story, and this (gated) link to see the specific allegations about Piketty’s data errors. Giles explains what led him to start questioning Piketty’s historical figures on wealth and income concentration, which most other reviewers (including me!) had simply assumed were in the ballpark:

[W]hen writing an article on the distribution of wealth in the UK, I noticed a serious discrepancy between the contemporary concentration of wealth described in Capital in the 21st Century and that reported in the official UK statistics. Professor Piketty cited a figure showing the top 10 per cent of British people held 71 per cent of total national wealth. The Office for National Statistics latest Wealth and Assets Survey put the figure at only 44 per cent.

Whoa! Piketty’s figure for wealth concentration in the present–so we’re not quibbling over 1810 here–was off by 27 percentage points. Like Will Ferrell, that’s kind of a big deal.

Yet more amazing than Piketty’s apparent errors–and his rather odd reply amounting to “prove me wrong, kids, prove me wrong”–is the response that his defenders are mounting. For example, Danny Vinik at the New Republic tries to blow it off as the FT making a big deal about nothing. Let’s walk through Vinik’s apology for Piketty.

First, Vinik argues that the only significant changes have to do with Britain and the US; Giles’ reconstructed time series for France and Sweden match up almost identically with Piketty’s original figures in the book. OK so let’s look then at Britain and the US:

Giles vs Piketty UK

In the figure above (which Vinik reproduced from Giles’ FT post), the top lines refer to the total amount of wealth (“capital” in Piketty’s broad definition, which includes land) owned by the top 10% of wealth owners. The bottom lines show the amount owned by the top 1% (obviously it’s lower). The blue lines show the estimates as Piketty charted them in his book, while the red lines show the FT analysis (which has different options for the year 2010, based on whether one includes the “ONS Wealth and Assets survey or not”).

As the figure shows, there is an enormous discrepancy in Piketty’s figures and those that the FT computed. In addition to the figure for the top 10% being off by up to 27 percentage points–the discrepancy that originally caught Giles’ attention–we also see that, depending on which data point one uses for 2010, Piketty’s figure for the wealth held by the top 1% is off by around 9 to 18 percentage points, in the worst case with Piketty reporting a figure that is almost triple the actual value (about 29% instead of 11%, just eyeballing the bottom lines).

Yet beyond the discrepancy in values for given years, step back and look at the overall historical trend if the red lines are correct (as opposed to Piketty’s blue lines): We see that wealth inequality continued its downward trend even throughout the Thatcher years, and after a spike upward during the 1990s, is now (if we use the lower data points for 2010) at the lowest level in recorded UK history.

Let’s now look at the US:

Giles vs Piketty USA

Here things are trickier, because (apparently) there are no good long-term estimates for these data. The top lines (according to Giles) have a huge gap in them, because there are no estimates of the concentration of US wealth ownership by the top 10% between 1870 and 1960. So how, you ask, does Piketty generate that nice blue line, which zooms up to about 80% in 1910, then gradually falls through 1940, etc.? According to Giles, Piketty literally just made that blue line up (presumably guided by the trends in the other countries, and in the US 1%, for which there were better data).

For the bottom rows (showing the concentration of wealth held by the top 1%), there are better estimates, and Giles has shown some of them, along with Piketty’s reported line (in blue). Now notice: Piketty’s blue line shows a gradual trend upward in the ownership by the 1% from 1970 onward. This, after all, is the whole warning of the book: The rich are getting richer, and if governments around the world don’t start taxing the heck out of them, soon we’ll be back to the Gilded Age.

Yet the funny thing is, if you look at either of the longer data sets (the bottom red lines) upon which Piketty presumably based his blue composition, you’ll see that neither shows an upward trend in recent decades. In particular, if you look at the longest red series, it shows that the U.S. is currently hovering near the lowest level of wealth concentration in the hands of the 1% in recorded history.

But I’ve saved the best for last. Here is how Vinik handles the awkward fact that Giles has arguably just shown that when you correct Piketty’s factual mistakes, then the trend in both the UK and the US is the exact opposite of what everyone took away from the book:

Even if you believe that Giles’s findings dramatically change Piketty’s results, they have little bearing on his economic theory. Giles makes a passing comparison to economists Carmen Reinhart and Ken Rogoff (R&R), who drove a significant part of Republican austerity agenda, but saw their findings disproven in 2013. Liberals celebrated when Thomas Herndon, a graduate student from UMass Amherst, discovered a spreadsheet error in R&R’s results that invalidated their main finding. But unlike Piketty, Reinhart and Rogoff largely had no economic theory to ground their argument that national debt crises occur when a country’s debt level surpasses 90 percent of GDP. Once their data fell apart, their theory had no legs to stand on. On the other hand, Piketty fits data to this theory, but does not depend on it. Piketty’s theoryright or wrongis largely unaffected by these results.

Everyone got that? Vinik realizes he has to walk a tightrope here–progressives were quite pleased to pounce on R&R when their Excel errors came to light. So Vinik is trying to avoid charges of hypocrisy by saying that R&R had no theory to back up their warnings about government debt, whereas Piketty doesn’t need no stinking historical analysis of inequality in order to push through his theories (and consequent policy recommendations).

This should sound oddly familiar for those of you have been following my Piketty posts here at Mises Canada. For in his own review of Piketty–the one where he said Piketty should get the Nobel Prize for his historical work on wealth inequality–Larry Summers wrote:

I have serious reservations about Piketty’s theorizing as a guide to understanding the evolution of American inequality.



But if it is not at all clear that there is any kind of iron law of capitalism that leads to rising wealth and income inequality, the question of how to account for rising inequality remains. After Piketty and his colleagues’ work, there can never again be a question about the phenomenon or its pervasiveness. The share of the top 1 percent of American income recipients has risen from below 10 percent to above 20 percent in some recent years.



Even where capital accumulation is concerned, I am not sure that Piketty’s theory emphasizes the right aspects. Looking to the future, my guess is that the main story connecting capital accumulation and inequality will not be Piketty’s tale of amassing fortunes.



By focusing attention on what has happened to a fortunate few among us, and by opening up for debate issues around the long-run functioning of our market system, Capital in the Twenty-First Century has made a profoundly important contribution.

In the interest of brevity, I had to limit my quotations from Summers’ review. But I hope the limited excerpts above show my point: Summers was absolutely devastating in his critique of the theory underlying Piketty’s book. Yet Summers overall kept coming back to praise it, because Piketty gosh darn it had done “meticulous” work documenting the disturbing accumulation of wealth among the super rich over the last few decades. Except, as it turns out, that maybe a big chunk of those results were due to stupid mistakes or worse. (Be careful not to conflate wealth and income; that’s part of the confusion behind the various volleys of statistics from one camp to another in this debate.)

So that’s where we now stand: Plenty of progressives up till literally yesterday were saying yes yes, Piketty’s theoretical framework leaves much to be desired, but he’s a top scholar when it comes to the trends he’s documented. And now that much of that empirical work might be totally bunk, the defense is to argue that yes yes, the historical data might be the exact opposite of what Piketty claimed, but boy he offers some compelling theoretical predictions with which we must grapple.

Until this sorry episode, I had no idea just how much progressives hated rich people, and how little regard they had for intellectual integrity. Live and learn.

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TeamDepends's picture

Never let facts or truth get in the way, comrade!http://www.uhuh.com/nwo/communism/comgoals.htm


DoChenRollingBearing's picture

Piketty probably believes in Global Warming too.

TeamDepends's picture

Come on Chen get with it, it's climate disruption now!

Serfs Up's picture

Until Picketty understands that wealth accumulation, or should I say fiat currency accumulation, is simply a 'feature' of a debt-based money system, his analysis will fail to describe reality accurately or completely.

It's not political or partisan at all.  Neither is gravity. 

ZerOhead's picture

If Larry Fucking Summers says (in his long-winded way) that the Picketty piece is good then I know it has to be bad...

Let's end the Fed first and strictly regulate banks to stop them from creating massive debt for the purposes of consumption or speculation rather than production, R&D etc. Then we cut government spending by say 50%, remove 90% of onerous laws and over-regulation on productive industries and see what happens first.


chumbawamba's picture

This is a stupid controversey, notwithstanding the fact that I don't know anything about it, don't understand it, and don't care.

All I know is the banksters and a bunch of finance fags have way too much money, they didn't earn it--heck, they almost quite literally pulled it out of their ass--and they are using it to fuck the rest of us up.

Let's stop talking about ism's and start talking about how we're going to take the money (more like purchasing power) away from those that didn't earn it.

It's time to lay down some fucking law.  These mother fuckers need to volunteer to give it all back or away, before it's time to come in and take it all away.  And it'll be collected with interest.  Four hundred years worth, mother fuckers.

I am Chumbawamba.

James_Cole's picture

To point out for all the drooling "commies is destroyin' merica by agw" crowd crawling out of their caves to whine about this 'gigantic controversy'... this is one book by one author in the field of economics where data is always very debatable.

For the love of the internet just try to use your limited critical thinking skills to put this 'controversy' into context.

0b1knob's picture

Meanwhile in California a privileged wealthy hedonistic offspring of the 1% is killing other members of the 1% because they are marginally more privileged wealthy and hedonistic than he is.    If the 1% are going to kill each other I say make popcorn and enjoy the show.    Unbelievable video at the link.


This has false flag written all over it.

nmewn's picture

I don't know about false flags but the kid is a fucking moonbat who was obviously raised by moonbats.


BigJim's picture

"Rodger declares that the video will be his last, and laments a life of loneliness.

“Girls gave their affection and sex and love to other men but never to me,” he says."

Women rejected him? Gee, I wonder why.

nmewn's picture

It would seem they were good at picking out a born loser when they saw one huh? ;-)

kchrisc's picture

"heck, they almost quite literally pulled it out of their ass--and they are using it to fuck the rest of us up."

Not out of their asses, because they stole it from us. So in effect, they pulled it out of OUR asses.

As for laying down the law:


The Four Rs
Rejection: Quit paying, quit obeying, quit playing
Revolution: It is inevitable, so prepare, as they are.
Retribution: The guilty must answer for their crimes against the American people and the Constitution.
Restoration: Restore the American people, country and Constitutional republic.

swmnguy's picture

I agree, Mr. C.  It's a stupid controversy and a smokescreen distraction, whether this guy made up the whole damn thing or not.

You can't base an entire economic system on the assumptions of unlimited resources, energy, markets and money in a finite world.  When you inevitably encounter finiteness, the only one of those things you can keep pretending is infinite is money, and that only by making it abstract.  Doing that opens up the Pandora's Box we see so abundantly emptied all around us. 

As for income inequality, the problem resembles the game of Monopoly.  At a certain point, somebody has all the money, property, hotels and houses and nobody else can play.  At that point, the whole thing becomes worthless.  Dress it up in all the "isms" you want, all the other kids are going to go outside and play something else, no matter what you want.  A system that has that flaw in it ain't gonna work eventually.

25or6to4's picture

Whaaaaa? Only cut guberment spending by 50%??? Do you work for the government or something? 50% would be a slow start.

wee-weed up's picture

They're not Progressives - that's the term they've recently given to themselves.

They're Liberals! Fukin' Liberals! And Socialism is their creed!

Anusocracy's picture

The world is full of data-molesters with agendas.

Just another reason not to have government.

putaipan's picture

yeah well... fuck you too libertarian-fuck -tards! see dr. hudson's critique of this piketty crap if you you want to get past the great divide and seek some truth and justice.

disabledvet's picture

who? never even heard of this guy. there is only one reason a 600 billion dollar (bwhahahahahahaha. i can't even believe i can say that number) passes overwhelmingly over a feckless veto threat by our President...who is spot on to issue this veto threat i might add. Namely "we're not at war with the Taliban anymore" but with China, Russia and the entirety of the Middle East.

Don't even get me started on spending one trillion dollars on a two tiered healthcare system. You can do that with one dollar actually.

I'll exclude the VA for now because they actually have doctors and they do in fact show up for work and provide care that is more than palliative.

If i were President I would immediately eliminate HHS.

I also see zero need for the public education infrastructure as we have the internet now...although i would keep all the school teachers. "Your home is the new one room school house." the teachers will come to the consumer now.

That would save another 200 billion.

Plus i'd privatize the entire school bus fleet. "drive your own darn kid to school if its that important." And yes, pay for that sports program too.

Did i miss anything? I'm sure there's another trillion out there ready for eliminating. All cars will be hovercrafts? (no more potholes that need fixing.)

Subway systems are okay i guess.

Privatize the bulk of federal assets. Let Elon Musk, Jeff Bezos, et al take over NASA as well. They can launch as many rockets as they want.

Simply put...if it costs more than a million bucks "the Government people can pay for that out of pocket."

headhunt's picture

Actually they are progressives; it's just a cute name for communists

RevRex's picture

They are NEOCOMS



What kind of dirtbags down arrowed you?


Socialist assholes who cannot stand the truth and stupid people who still argue that 'both parties' are the same


wee-weed up's picture



"What kind of dirtbags down arrowed you?"

We have a few loony Libs here on ZH. I blast their incompetent president every chance I get, and that makes them get their panties all in a wad. But they usually only "junk and run" - they know they can't intelligently defend him.

DoChenRollingBearing's picture

+ 1

Most of my junkers say jack-squat!

BigJim's picture

 and stupid people who still argue that 'both parties' are the same

They ARE the fucking same! You have the tax-and-spend party and the spend-and-tax party. Neither want to shrink the empire, get rid of the Federal Reserve or fiat currency, end welfare or warfare, legalize recreational drugs, demilitarize the police, stop supporting Israel, stop meddling all over the world, etc etc.

Saying the two parties are different is like saying a white bread shit sandwich and a wholemeal shit sandwich are different.

TheReplacement's picture

You sure it isn't climate challenge now?

Kirk2NCC1701's picture

And Flat Earth (talking heads) theorists and their bosses also had "very compelling arguments" for a long time. 

And where theory failed to control the masses, the Church (= MSM today) and the Oligarchs/Monarchs decreed its acceptance, and their minions enforced it.

Same as it ever was, same as it ever was...

Remington IV's picture

Obama will nominate him to the CEA

XitSam's picture

Even more broadly: The end justifies the means.

Nothing is too morally repugnant to them.

sgt_doom's picture

Speaking of getting the facts straight, please get YOUR facts straight:  Prof. Piketty went by income tax returns, not capital gains, which is where the real concentration of wealth be, plus he completely ignores the data on foundations and trusts, admittedly difficult to obtain, not to mention offshore finance centers and hedge funds, etc.

This blog post is typical Von Mises Frankenstein bullcrap.

BigJim's picture

Dickwad, how can Piketty use 'data' to establish that 'capitalism' leads to more inequality, when we don't have anything like capitalism from which to draw the data from in the first place?

q99x2's picture

I often say about my dog, "She's a dog. She can't help it." 

Same with progressives: They're progressives; they can't help it that they are poor and stupid.

NotApplicable's picture

Fools for sophistry, they are.

Atomizer's picture

Progressive strategy; if you can't sell the program, make up false data to instill fear. 

TeamDepends's picture

....all the while letting them know, IN NO UNCERTAIN TERMS, just how fucking brilliant you are.

Anusocracy's picture

More of a strategy by those who want to foist their beliefs on others.

aardwolf's picture

Larry Summers is a murderer and traitor. Why should I give a shit about what this 0.01% hack says?? It's clear to a blind man that wealth inequality is too high and that the debt based fiat fractional reserve money system we use is broken once the consumers that power the economy are so tapped out with excess debt that even the slave owners won't create the money to lend them anymore...Bill Gates, Larry Summers etc. literally can't spend the money they have fast enough in the correct sectors of the economy to support the perpetual growth required by this stupid debt based system. Once money is created free of debt then we can have a discussion about tax rates, abolition of income tax to be replaced by land value wealth taxes for sustainable carrying capacity growth on this finite planet...until then all this noise is just bollocks.

ebworthen's picture

We don't need a book or Pikkety or data or theorems to know we have a fucked up kleptoligarchy with a lot of corrupt assholes that need to be hung.

August's picture

>>>corrupt assholes that need to be hung.

I'll take hanging, but seeing them torn apart by hyenas would be more educational.

falak pema's picture

What bullshit. It suffices to say that.

The FT covers itself in ridicule in implying that, and ZH which has factually supported this phenomenun unfurling before our eyes has made the Wealth gap one of its MAJOR analytical arguments since 2010 as irrefutable proof of prevailing MALINVESTMENt.

How can ZH post just aggressively oriented garbage to defend the Oligarchy point of view? 

Remember your motto  ZH : Don't hedge the truth ! 


LetsGetPhysical's picture

The truth is real enough. Making up bullshit doesn't help the cause. 

Sticky Wicket's picture

The argument isn't that there is no wealth inequality, it's that this chucklefuck made up his own data to push an agenda.

Spastica Rex's picture

I haven't read Picketty, but I've always been under the impression that the critique of wealth distribution in itself is un-American.

falak pema's picture

lol, like Luther was un-christian and also Erasmus. 

And, Jesus was  a communist. That really nails it; literally. 

holmes's picture

I don't give a fuck about wealth inequality. I care about theft. If the bankster pricks are made whole by the gov't after screwing up bigtime (see 2008) then the banksters and govt officials shoud be thrown in jail. And #1 on my list is Hank scumbag Paulson.

People get wealthy honestly, my hat's off to them. That's what made this Country great.

Spastica Rex's picture

People get wealthy honestly, my hat's off to them. That's what made this Country great.

A lion eats gazelles without any encumbrance of honesty. I would think that any alpha predator should be given praise: the bankers won.

holmes's picture

Last time I checked, humans should be behaving a little differently than lions.

disabledvet's picture

there is something fitting when all the limosine liberals distill the entirety of their Federal Edifice to "bank bailouts."

It's like "aha. I understand now. There never was a war to begin with but only a way to finance an imaginary one." The whole thing was probably started by New York City to begin with as they knew this already.

Certainly the stock market has been more than happy.

fencejumper's picture

Ah, so those who live as though their society is a civilized one are really just the stupid prey for the smart ones....or psychopathic / sociopathic ones.