Piketty’s numbers on inequality don’t add up

The Financial Times, a center-Left British publication, has the story here.

Piketty, an economist at France’s most prestigious business school, recently wrote an almost 600-page treatise on the growth of economic inequality in the West. The book has earned him lots of fame and has been discussed ad nauseum for about a month now.

Here is what I have found most interesting up to this point on the debate about inequality: The factions and their strategies regarding data and how it is interpreted. I think Dr Delacroix’s approach to the way data is interpreted is best, namely that the study design itself should be analyzed first and foremost.

Regarding factions, remember when that graduate student from the heavily neo-Keynesian UMass-Amherst found discrepancies in the work of Kenneth Rogoff and Carmen Reinhart on austerity in the West? The Left attacked savagely. The Right came up with excuses that would have earned an ‘F’ on most undergraduate tests.

Now that the Left’s own preferred conclusions have been borne out by bad data, what do you think is going to happen? Who wants to bet that the roles of Left and Right will be reversed? When Rogoff’s and Reinhart’s mistakes went public, the graduate student was invited to speak on televised talk and radio shows around the world. His work was (justifiably) hailed in the national and international press, and also (much less justifiably) as an answer to the deplorable state of the discipline of economics. What do you think the odds will be that the researchers responsible for finding flaws in Piketty’s data will get the same reception?

My money is on the answer “not good.”

All of this discussion about austerity and inequality is great, of course. The fact that researchers are expanding their findings to include more than just the data within their own countries is perhaps the most satisfying development in regards to epistemological human progress. I will await further developments to lay down my own verdict on the matter of inequality in the West. With the mistake of Rogoff and Reinhart, I decided, after carefully reading the merits and weaknesses of both sides of the debate, that their mistake was small enough to overlook and that austerity generally leads to better economic outcomes in the near- and long-term and that public debt is a drag on economic growth.

Depending on how the Left responds to its critics, I will see if economic inequality is indeed growing in the West.