Chris Giles at the Financial Times posted, Data problems with Capital in the 21st Century. It is a long and numbers-oriented article. And among economics wonks, it has created a flurry of activity, “You mean Thomas Piketty is wrong?!” Needless to say, there are a lot of people who want to think just that. For a good overview of what you need to know about Giles’ work and the problems in Piketty’s book, read Justin Wolfers, A New Critique of Piketty Has Its Own Shortcomings. Or just keep reading here.
I’ve seen this film before. It turns out that most of the data are correct, there are some minor data errors here are there, and some large but not ridiculous errors in the recent wealth inequality numbers in the United Kingdom. These large errors are on the order of 10%. Giles work is important. It should be done. But the bottom line is clear: nothing he’s found changes the argument that Piketty is making. What’s more, some or more of the errors may be on Giles part. Or they might be differences of opinion in how the data should be analyzed. And most of all, this is work on wealth inequality; it isn’t about the more important issue of income inequality.
But what will happen now is that conservatives and others who simply don’t want to think about it will take Giles’ article as proof that there is nothing to Capital in the 21st Century. And this will be true even if it turns out that Giles is completely wrong. Remember the Climatic Research Unit email controversy, commonly known as “Climategate”? As Wikipedia notes, “Eight committees investigated the allegations and published reports, finding no evidence of fraud or scientific misconduct.” Yet to this day I hear conservatives say global warming is a hoax because of that supposed scandal. (If anyone wants me to explain why it was always clear this was no scandal, just ask; but I admit: it is exhausting discussing global warming in these contexts.)
I’m sure that The Wall Street Journal and Washington Times (it’s a bit highbrow for Fox News) will pick up on this. It will be the liberal equivalent of Reinhart-Rogoff. You may remember that they put out a paper that said that once countries reached debt loads of more than 90% of their GDP, their growth slowed way down. Then, last year, a graduate student found a spreadsheet error in their work that demolished their claim. But I didn’t report it that way; I reported, Reinhart and Rogoff Shown to Be Wrong—Again. Because it was always clear that there was no mechanism by which high debt hurt the economy; there was, however, a mechanism that went the other way: governments with bad economies go into debt because they are getting less in tax revenue and spending more on welfare.
But watch, because the conservatives (who have mostly just ignored Piketty’s book until now) will pounce on this as the ultimately refutation. They will say that nothing needs to be done, except more of what got us to this terrible state. Data and accuracy only matter to conservatives as talking points. I imagine watching This Week in two years. Paul Krugman will be on it and say, “Thomas Piketty showed that income inequality is getting worse.” And Peggy Noonan will scoff, “Oh, the Financial Times proved that was rubbish years ago!” And George Stephanopoulos will just shrug. “Who can say?”