my Trade Tripper column in the recent weekend issue of BusinessWorld:
Rarely would an economics book full of numbers and graphs become the center of a global zealous debate among non-economists. But that is what 43-year-old Thomas Picketty’s did. The left’s rock star ever since his 2013 tome came out, Dr. Picketty however now finds himself forced to defend his numbers.
Trouble started when the Financial Times’ Chris Giles (“Piketty findings undercut by errors,” May 23) alleged that Dr. Picketty’s book “contain a series of errors that skew his findings. The FTfound mistakes and unexplained entries in his spreadsheets, similar to those that last year undermined the work on public debt and growth of Carmen Reinhart and Kenneth Rogoff. The central theme of Prof. Piketty’s work is that wealth inequalities are heading back up to levels last seen before the first world war. The investigation undercuts this claim, indicating there is little evidence in Prof. Piketty’s original sources to bear out the thesis that an increasing share of total wealth is held by the richest few.”
As example, Mr. Giles claimed that “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.”
Dr. Picketty was quick to reply. As reported by The Guardian (May 26): “the economist said: ‘The FT is being ridiculous because all of its contemporaries recognise that the biggest fortunes have grown faster.’ While the available data was imperfect, it did not undermine his central argument about widening inequality, he said. ‘Where the Financial Times is being dishonest is to suggest that this changes things in the conclusions I make, when in fact it changes nothing. More recent studies only support my conclusions, by using different sources.’”
What makes the present allegations interesting is that it was actually sped up by Dr. Picketty himself. Unlike the abovementioned Reinhart and Rogoff incident, the present dispute over Capital happened as it did because Dr. Picketty admirably decided to put all his data online for everyone to examine.
As quick as Dr. Picketty’s response ws, the FT was even quicker (“Big questions hang over Piketty’s work,” Financial Times, May 26): “Data on the distribution of wealth are notoriously unreliable, so any comparisons with more than 100 years ago must also be looked at with scepticism. Even if Prof. Piketty’s figures were flawless -- something which he too accepts is impossible -- wealth inequalities would still be much lower in the early 20th century. Modern America and Europe are nothing like Downton Abbey.”
The FT certainly has cause for concern. Capital in the 21st century has certainly provoked the reaction that it did more for the ideology that it purports to support (or contradict) rather than the actual economics. And now, Capital is also on its way to having an impact on the credibility of the remaining “serious” journalism that the Financial Times (or the Wall Street Journal) represents.
One can’t but think, however, of that other bastion of uber-serious journalism, The Economist, looking bit bemused at the debate the FT generated. In “A Picketty Problem” (May 24), The Economist noted: “Based on the information Mr. Giles has provided so far, however, the analysis does not seem to support many of the allegations made by the FT, or the conclusion that the book’s argument is wrong.”
So, in a way, I agree with The Economist: “how do the errors affect the fundamental conclusions of the book?” In essence, the problem faced by Dr. Picketty’s supporters is not the numbers but their over-reliance on them (which even Dr. Picketty disavows).
What does it matter ultimately knowing the actual size of the inequality? To lower the credibility of capitalism? It won’t. Will this debate point to the proper way to get rid of inequality? It can’t. And it will never answer why it should be done.
In the end, for a better economy (and society), I point to what Charles Murray, Alasdair MacIntyre, and a host of other commentators critical of the secular progressive mindset are increasingly declaring: the need for society to recognize values and to protect the traditional family institution.
Verily, JL Liedl, writing for Ethika Politika (“Want a Good Economy? Try Virtue”; Sept. 4, 2013) expressed it best: “The dehumanizing theorems and charts of the economist have done us enough harm already. Their consistent failures and the general increase in global misery under their watchful guidance should be enough to convince us that modern economics has been tried and found wanting. Man does not live by bread alone, a truth that must be acknowledged, perhaps especially acknowledged, when considering how man produces and obtains bread. There is something metaphysical in play here, and it must be observed even when dealing with the nitty-gritty, physical practicalities of capital and labor. Virtue, more than anything else, more than economic theories or fiscal policy, is what a society needs to have a good and just economy.”