Rockstar French economist Thomas Piketty's Capital in the Twenty-First Century is the most influential book in the field this year — everyone is reading or pretending to read it. But the Financial Times' Chris Giles scoured the tome and alleges that it's built on errors and bad math. Economists and financial journalists have been debating that claim through the holiday weekend. Who's right?
First, let's look at Giles' criticisms of Piketty's data. Capital traces income and wealth inequality in the U.S. and Europe since the 18th century, and concludes that inequality is a function of capitalism that needs to be corrected by the state. Giles, the economics editor at the Financial Times, argues:
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."
So Giles is specifically attacking Piketty's claims about wealth inequality, not income inequality. His criticisms are being taken seriously by the financial community, but The New York Times' Neil Irwin argues that Piketty's errors aren't big enough to undermine the thesis of the book. "Some of the issues identified by Mr. Giles appear to be clear-cut errors, and others are more in the realm of judgment calls in analyzing data that may not be fully explained by Mr. Piketty but are not necessarily wrong," he writes. You can read his full explanation of the errors here.