FT discovers serious problems with Piketty’s statistics of rising wealth inequalities.
Thomas Piketty at a recent lecture at the London School of Economics
Professor Thomas Piketty’s Capital in the 21st Century has data on wealth inequality at its core. His data collection has been universally praised. Prof Piketty says he has collected,
“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”
However, when 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.
This is a material difference and it prompted me to go back through Piketty’s sources. I discovered that his estimates of wealth inequality – the centrepiece of Capital in the 21st Century – are undercut by a series of problems and errors. Some issues concern sourcing and definitional problems. Some numbers appear simply to be constructed out of thin air.
When I have tried to correct for these apparent errors, a rather different picture of wealth inequality appeared.
Two of Capital in the 21st Century’s central findings – 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 – no longer seem to hold.
Without these results, it would be impossible to claim, as Piketty does in his conclusion, that “the central contradiction of capitalism” is the tendency for wealth to become more concentrated in the hands of the already rich 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”.
This long post will outline the classes of data problems I have found in Chapter 10 of Piketty’s book, which deals with the inequality of capital ownership. I will then show why these problems matter for each one of the four countries prof Piketty studies – France, Sweden, UK and the US.
Finally, I will put all the revised data together to show that, based on the sources Piketty cites, the conclusions that (a) wealth inequality rose after 1980 and (b) wealth inequality in the US is larger than in Europe no longer seem to hold.