Criticism of Piketty (1)

Piketty’s work on inequality has attracted a lot of attention, leading to both criticism and praise. On one hand, the book was received with enthusiasm, and there quite a few causes for this reception. Probably, the main cause for the success of this work comes from the growing inequality in United States. On top of this, there has a significant increase in the perception of inequality by the general public, policy makers and academics (see the debate on the top 1%, which might as well be a discussion on the top 0.01%).

A first source of criticism which has received a lot of attention has focused on the compilation of data. The criticism regarding data has come mainly from Chris Giles, a journalist associated with Financial Times. Surprisingly, the list of issues raised by Giles in his initial article is quite large comprising mistakes and unexplained entries, data that are constructed without any references, huge disparities between statistics reported by national statistics institutes and those by Piketty (for example, Piketty reports that 10% of individuals in UK hold 71% of total wealth, while UK’s statistics office reports a figure of 44% of individuals), or using wrong years of reference. All in all, according to Giles, when these suspected errors are corrected, the new series on inequality do not display any growing trend in inequality for European countries after 1970, contrary to what Piketty said.

Piketty offered an extensive reply here. There is a clear agreement on the lack of accurate sources for data on inequality. As he moves through the points raised by Giles, Piketty offers clear and reasonable answers. In the end, even the corrected series by Financial Times do not lead to pretty different trends. Giles’ final reply does not contradict this evidence regarding the corrected time series, however it points to some issues which are not really explained by Piketty, related mainly to the construction of data.

The efforts by Giles are welcome, and potentially, they might lead to better series on inequality. However, it is actually widely agreed that inequality has rather increased in the last decades, see the debate on the top 1% (or 0.01%). That’s why I personally think that while there might be some mistakes in Piketty’s data, nevertheless they point to the obvious fact of a rising inequality. Focusing too much on the data also prevents a serious discussion of the really important points in Piketty’s work.

This post has focused on the data issue in Piketty’s Capital in the 21st century. Following posts will discuss central issues in Piketty’s work which are even more significant than the data issue.


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