It’s no surprise that French economist Thomas Piketty’s study of wealth inequality, Capital in the Twenty-First Century, has taken the left by storm, presented as an indictment of capitalism that embodies an unprecedented integration of exhaustive historical data. An in-depth review of Piketty’s citations and technique, however, reveals that his presentation of historical events is “laced with factual error,” his data points are often cherry-picked and sometimes manufactured, and his inconsistent methodology is “suggestive of a severe confirmation bias,” according to a new study soon to appear in the Journal of Private Enterprise by historian Phil Magness of Atlas Network partner the Institute for Humane Studies and George Mason University, and economist Robert Murphy of the Institute for Energy Research.
“The discrepancies we identify are pervasive in the book, beginning with misstatements of basic historical fact and extending to an abundance of political distortion, and confirmation bias in his data selection and methodological choices,” the paper concludes. “It is therefore something of a curiosity that the early reaction to Capital credited its data analysis despite other reservations with its contents and prescriptions. To the contrary, an abundance of questionable and problematic data claims may well mean that empirics are the book’s weakest point.”
Magness provided an earlier critique of Piketty’s work for Atlas Network in June, expanding on charges leveled against against Piketty’s accuracy by the Financial Times.
Atlas Network CEO Brad Lips also released a working paper in November explaining how the populist egalitarianism that Piketty represents is a threat to economic growth — and to widespread prosperity for all classes. Instead, it’s important to show that inequality of outcome isn’t the problem, but artificial impediments to entrepreneurship that keep people down — along with a culture of cronyism where the favored players don’t have to follow the same rules as their competitors.
“Societies that show little social mobility tend to be those with strong political classes and low degrees of economic freedom,” Lips wrote. “Unfree societies make it difficult to earn wealth except through politically granted privileges.”
Read the full study by Phil Magness and Robert Murphy.
Read the full working paper by Brad Lips.
Read “5 remaining problems for Thomas Piketty in the wake of the FT controversy,” by Phil Magness.
Read “Join the Inequality Debate,” by Brad Lips.
Read “What Piketty Misses,” by Herbert Grubel.
Read “The Irony of the American Left’s Love Affair with Thomas Piketty,” by Guy Sorman.