The finding that wealth inequality has not been rising in the last 30 years in Europe is a fundamental challenge to Prof. Piketty’s thesis

Has Piketty’s soft Marxism 

run afoul of hard math?

by James Pethokoukis

Is Thomas Piketty’s sprawling best-seller, “Capital in the Twenty-First Century,” really just a bit of dystopian, neo-Marxist, speculative fiction tarted up with dodgy math? Some free-market types who disagree with the French economist’s controversial analysis and policy prescriptions might like to think so.

But this would be a more reasonable and fair take: extraordinary claims require extraordinary evidence. And Piketty, at the very least, makes a bold claim when he asserts discovery of powerful forces inherent to capitalism driving an “endless egalitarian inegalitarian spiral” of ever-greater wealth concentration. And he offers mounds of data as support.

Previous critiques have questioned his interpretation of the evidence. But the Financial Times now questions the evidence itself. As reporter Chris Giles see it, various data-entry and methodological errors undermine the book’s central findings. This is perhaps the most serious possible mistake: Giles says that Piketty, as the Washington Post puts it, “mixed up different sources on British wealth the last few decades, and overestimated their inequality.”

So Giles inserts the, as he sees it, corrected UK data and uses a population-weighted “European average” of Britain, France and Sweden rather than a simple average as Piketty does. The results, Giles finds:

… show that while “wealth inequality fell after the First World War and that this fall levelled off after 1980 … there is no sign that wealth inequality in Europe is rising again. … The finding that wealth inequality has not been rising in the last 30 years in Europe is a fundamental challenge to Prof. Piketty’s thesis that all advanced economies have been witnessing a turnround in a long historic trend of falling wealth inequality after 1980. The data does not suggest that is true.

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