Friday, July 04, 2014

Picking Piketty Apart (6) Statistics

Thomas Piketty deals with four broad themes in his book called Capital.

  1. Statistics
  2. Explanatory theory
  3. Forecast for the future.
  4. Policy recommendations.
Piketty puts considerable effort into proving that wealth is unequally distributed. His statistics show that inequality is increasing. Everyone assumes that this is the case, but it is good to have statistical proof.

Piketty presents a lot of statistics. As someone who has dabbled in statistics a bit, I like the way that he does not just do a data dump, but uses his graphs and tables to tell an economic and social story. Piketty and his colleagues have collected a massive database of statistical information. He presents the information in a way that is east to understand. Statisticians often dull their readers with numbers. Piketty uses statistics to illuminate his story.

I have also done enough with statistics to know that measuring income is hard, and measuring wealth is even more difficult, so I expect there will continue to be arguments about his statistics, but I doubt that these will change the underlying story.

That said, Piketty tends to gets a bit exuberant in some of his interpretations. He consistently see a U pattern, a series declines between 1914 and 1950, but is now returning to the level that prevailed in the 19th century. I see quite a few reverse Js. Many of the measures he describes as a U are a long way from returning to the level of the 19th century.

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