Facts Are Stubborn Things . . . As Thomas Piketty Is Beginning to Find Out

I have bought Thomas Piketty’s book Capital in the Twenty-First Century, and while I have posted many an item that takes issue with the books claims and conclusions concerning wealth inequality, I do plan on reading Piketty; his book has made quite the intellectual and cultural impact, and although I know what his basic arguments are, I want to be sure that I read the whole of the book to be fully aware of his claims.

But even before reading the book, one can conclude certain things about Piketty, as my previous blog posts indicate. And today, we learn that we may well be able to conclude one more thing still about Piketty, his research, and his arguments: They may be completely wrong. And yes, those words were worth emphasizing.

The Financial Times has engaged in exhaustive research regarding Piketty’s book, and it has found serious errors. Let us give the microphone to Chris Giles and Ferdinando Giugliano:

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.

Together, the flawed data produce long historical trends on wealth inequality that appear more comprehensive than the source data allows, providing spurious support to Prof Piketty’s conclusion that the “central contradiction of capitalism” is the inexorable concentration of wealth among the richest individuals.

Once the data are cleaned and simplified the European results do not show any tendency towards rising wealth inequality after 1970.

The US source data are also too inconsistent to draw a single long series. But when the individual sources are graphed, none of them supports the view that the wealth share of the top 1 per cent has increased in the past few decades. There is some evidence of a rise in the top 10 per cent wealth share since 1970.


Prof Piketty, 43, provides detailed sourcing for his estimates of wealth inequality in Europe and the US over the past 200 years. In his spreadsheets, however, there are transcription errors from the original sources and incorrect formulas. It also appears that some of the data are cherry-picked or constructed without an original source.

For example, once the FT cleaned up and simplified the data, the European numbers do not show any tendency towards rising wealth inequality after 1970. An independent specialist in measuring inequality shared the FT’s concerns.

And still more:

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.

Read the whole thing. Read this, this, and oh, yes, this as well, and note that the last link makes the following entirely accurate statement about what the gravamen of the Financial Times’s charges against Piketty is:

Giles says there are clear examples of some “fat finger” mistranscriptions and compares the situation to omissions found in Reinhart’s and Rogoff’s data on debt levels and growth.

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.

Below is the chart. The right-most portion of Piketty’s blue trend line showing the share of wealth owned by the top 10% of Britons ends up well above what’s suggested by the data, in red, that Piketty himself cites.

Meanwhile, just one official data point for the top 1% share of wealth aligns with Piketty’s blue line. But Giles said the source of that data said it was not suitable for the kind of calculation Piketty is trying to make.

“Prof. Piketty ends his series taking at face value the level of the HMRC data, despite HMRC saying clearly the data is not suited for that purpose, nor is it consistent with the old Inland Revenue Series which Prof. Piketty uses for earlier years. This latter point is also clearly stated in the notes to the source data.”

The charges are devastating, and there is plenty to back them up. And again, let’s be abundantly clear: The Financial Times is accusing Thomas Piketty of dishonesty, of making up his arguments, of actively trying to mislead readers and actively trying to mischaracterize inequality trends. This mischaracterization leads to policy prescriptions on Piketty’s part that are both entirely unrealistic in their design and implementation, and, more importantly, are wholly unsupported by the actual data on inequality. The main thrust of Thomas Piketty’s book is entirely undermined, and his arguments and conclusions are annihilated. It is hard to imagine a more comprehensive refutation.

Having established that Piketty’s conclusions are shredded and unbelievable, it is important now to note two things. The first is that the Financial Times–and Chris Giles and Ferdinando Giugliano in particular–deserve kudos for the scholarship and for shining a light on Piketty’s mistakes and dishonesty. For those who are wondering how journalism ought to be done, look no further than the example set down by Giles, Giugliano and the Financial Times in general. They have truly done excellent work. Would that more media outlets followed the example that Giles, Giugliano and the Financial Times have set.

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. It’s a good thing that the good people at the Financial Times were more intellectually honest and rigorous than Krugman would have wanted them to be, but it should scare us more than a little bit that a leading economist who won a Nobel Prize and who has a big megaphone provided to him by the New York Times was trying as hard as humanly possible to prevent good journalists and scholars from poking at Piketty’s data and arguments to see whether or not they passed the laugh test.

And of course, as of this writing, and with this scandal having fully erupted into public view, Krugman has nothing whatsoever to say about the debunking of Thomas Piketty–though of course, he has time to post a music video. Because, you know, priorities. As for Krugman’s Mini-Me, as of this writing, nothing on Brad DeLong’s eponymous blog (though again, music video!), and one thing on an alternative blog pointing to a graph prepared by Matthew Yglesias (of all people) that tries to pretend that there is nothing to see here, and that we should all just move along.

Sorry, but that dog won’t hunt. In light of the allegations against him, Thomas Piketty has a lot of explaining to do, and given the nature of the allegations and the detail which backs them up, it is hard to see how any amount of explaining will persuade anyone who isn’t already a hack that Piketty is in fact in the right.


  1. Will you be addressing Stiglitz and Piketty in the near future? Stiglitz would seem to be in a tight spot and after his own generous praise have something of a professional obligation to check into the facts and render a verdict, to double down or to make it safe for the left to disown Piketty.

    In this affair, I see Stiglitz as the one whose reputation is most in danger and not for his past statements but what he does in reaction to these charges. Krugman has less of a reputational height to fall if he behaves like a hack.

  2. Krugman’s Nobel was for his political screeds, although we’re all meant to pretend it was for economics.

  3. Piketty (and Saez) have been ignoring transfer payments as a form of income in their analyses for years. It’s nice to see this devastating blow to their credibility.Not that hard data errors and consequent policy prescription errors will deter the left from citing their work. It is all about intent and not results.

  4. Now, will the honest conservative constitutionalists among us play the same game the opponents of liberty engage in and sue the publisher? It seems to me the publisher was negligent of selling a product they did not vet or carefully edit.

  5. Can there be a better example of confirmational bias? Leftists hear what they want to hear, uncritically accept it, and rush to foreclose any honest critical analysis.


    Epistemic closure indeed.

    Thank you Mr. Piketty, for your unintentional accomplishment.

  6. Apart from any issues with Piketty’s data and analysis, a fundamental problem with any conclusions he derives about “capitalism” is that the current economic system in the West is not capitalism. Rather, it is a mixed economy welfare state, containing an ever-shifting amalgam of capitalist, socialist, and fascist elements. The trend over the past 50+ years has been toward more of the latter two and less of the former.

  7. It is plain classical economics which explains the acceptance of frauds like Piketty.

    It’s supply and demand at work. Keep in mind that tax-eaters depend on forcible spoilation for their daily bread. Their demand for the power to mulct their fellow citizens is absolute. When the tea goes overboard and the Beast dies, they are on the beach, competing with the illegal aliens for lettuce-pecking jobs. .

    This dependency includes not just the direct recipients of government loot, but also derivative tax-eaters, such as those who sell to the recipients of all those government checks. The rot is very deep.

    Never be surprised by the acceptance of academic frauds such as the one described above. The 47% have a burning interest in keeping the machine running the way it is.

  8. The important thing is that assertions have been made and praised publicly. Any criticism can now safely be ignored or dismissed as politically motivated if it becomes inconvenient for their eventual implementation as policy.

  9. Marx’s “work” on capitalism was an outright fraud, too; and millions of people were murdered trying to make his utopia come true.

    But leftists still revere and want to follow him. So, like millionaire Yglesias, don’t expect the falsity of Piketty’s work to dissuade them.

  10. Anyone familiar with conspiracy literature understands the technique. The idea is to have such an exhaustive list of footnotes and alleged sources that it becomes too difficult to check. Pikety just took that same principle and did it one better by using statistics and and relying on quantitative bias. But the idea than an avowed socialist would write an objective book on capitalism is so laughable on its face that it seems incredible. The misuses of sources, the use of seemingly exhaustive sourcing to create a smoke screen and the use of statistics to thwart easy criticism were intended to create the appearance of objectivity where none could possibly exist.
    A trendy book that is meant to fulfill short term but very expensive political goals. The irony is that in the age of the internet the refutation comes a lot quicker. Think of how long it took to fully demolish Beard’s Economic Origins. In that sense its politicized notoriety had a downside. Not that the Democrats will care. They just needed cover, and it doesn’t matter if it’s correct.

  11. It is very promising for journalism at the FT that this was done despite the newspaper’s well-established leftward editorial tilt. This also removes the argument that the article might be written due to some bias in the newspaper. The FT is harder to attack than the WSJ would have been for example.

  12. Let’s see. You are able to draw conclusions about Pikittey’s findings before reading his book.

    This was my first visit to your website. For what should be an obvious reason it will be my last.

    Keep trolling Delong’s site. I am sure you will get a few more curious readers to click through.

  13. An amusing and insightful take here:

    In Douglas Adams famous non-fiction series on galactic economic history, “The Hitchhiker’s Guide to the Galaxy”, we are presented with a description of the tragedy of the planet Frogstar B.

    On Frogstar B, for a time shoe production increased faster than the rate of overall economic growth. As a result, with time, shoe production became a larger and larger fraction of the economy, until finally the Shoe Event Horizon was hit, at which point nothing but shoes could be manufactured, and lacking any other goods or services, their civilization collapsed.

    Thomas Piketty’s “Capital in the Twenty-First Century” describes a similar tragedy that lies inevitably in our future, the point at which the only economic activity left is investment, all money is held by a tiny minority of wealthy people, and our civilization permanently ends.

  14. Every time the Left speaks they lie. The entire Leftist/Marxist enterprise required deceit and lying to advance it’s cause. The media should be constantly producing documentaries and news stories that expose the endless deception of the Left, but alas, they are Leftists too.

  15. This Piketty bloke has so obviously hit a nerve with the right. The reason (in the UK) that the upward trend in inequality since 1970 varies between Piketty and the FT is simply due to the fact that the rich do not DECLARE their wealth. In the last attempt in 2005 by the Inland revenue to measure wealth they said that on top of £3.4tn “identified” wealth in the UK, a further £1.7tn had to be assumed that was either not declared or belonged to people who slipped through the net.

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