Fear of Piketty

The fear of many Right wing, libertarian inclined economists and commentators that Piketty is right about how capitalism and the rise of inequality works has been palpable right from the start.  Any and every criticism of his book (and of him personally) has been leapt on with great enthusiasm; so much so  that was clear that they saw his argument as very threatening.   (I'm not sure whether they realised how obvious they were being.)

It's clear why they were scared:  I don't have to do more than spell out t-a-x to explain.

Anyway, this weekend's kerfuffle about Piketty's 'errors' by the Financial Times has been interesting.  In the least surprising admission from an economist this century, Sinclair Davidson today writes " I’m underwhelmed by the argument and not convinced by his thesis."  But what I am most interested in is the short video from FT that he posts that gives some examples of mistakes from graphs from the book.

Watching that, it seems pretty clear that Giles and FT are over-egging their complaints.  In a couple of the graphs, they show Piketty's originals, which pretty clearly show only a very moderate rate of growth in inequality in the recent period, and the FT corrected graph lines look insignificantly different.  If anything, the graphs gave the impression to me that Piketty was being pretty cautious on the matter of how much inequality is recently increasing.

In fact, some of the phrases about Piketty that seem to be originating from FT sound pretty much defamatory to me, and of course they are being lapped up entirely uncritically by those who fear Piketty.

Krugman was pretty restrained in his defence of Piketty over the weekend, but makes the point that is very unlikely he's off the mark on the matter of rising inequality in the US.  The Economist has done the most detailed "defence" against the FT claims so far, again showing some examples where the alleged errors seem far from important.

On the bigger scale, what I think people like me find so surprising about the whole Piketty phenomena is that we really had no idea economists do their work with such poor source material on key matters such as inequality.   It seems remarkable that they haven't put more effort into gathering the sort of information that it now appears clear has only been done in very recent years.  (And of course, even when it is collected, there is so much room for argument over its accuracy or correct way to interpret it.)

No wonder economists are so bad at prediction.  It makes the field look rather like astronomy before the telescope was invented.  (Or perhaps to be more precise, before the data from telescopes was available.  Actually, now that I think of it, the situation is more that it seems economists have been acting like astronomers who have poor quality telescopes available, but have been more interested in theorising about what they are seeing rather than in collecting, comparing and improving the data  from them.)