Jonathan Hopkin — Piketty Debunked? Not So Fast

By adding the raw data from the UK Inland Revenue figures, used by Piketty and colleagues to extend the series, and the ONS data, which they did not use, Giles is able to throw doubt on the uptick in wealth inequality Piketty claims for the period since the 1970s. This, alongside other errors and questionable decisions, means that the books 'central findings... no longer seem to hold'.

That's quite a big claim. Is it true? Well, here I'll just look at the data for the UK. There is a problem with the chart posted just above - it takes Piketty et al's series from 1810, and then, for the final few decades of the series, throws in other data sources which show a lower level of inequality. The picture that leaps out of the page is that instead of a U-shaped trend over the 20th century, claimed by Piketty, the FT's alternative data suggests a flatlining distribution since the 1970s, thus invalidating the claim of rising inequality.

But this is misleading, because by throwing in new data that gives a lower figure in the same chart, the visual impact is of a different trend that is not really supported by the data. The IRS numbers that Giles throws in raw were used by Tony Atkinson and Piketty to construct the longer series, with adjustments to attempt to make them consistent with different sources for earlier periods. The fair test of whether Piketty's trend exists or not is to compare the IRS numbers with data for the earlier period. In fact those numbers track the trend of the Piketty series fairly closely, but with lower absolute values. As for the ONS numbers, they give us only 3 data points over a 6 year period, which happens to include the biggest shock to asset prices since the Great Depression and the Second World War. You can argue that the ONS's lower estimate of wealth inequality is better than Piketty's, but you can't say anything about the trend.

However, the IRS numbers do still suggest rising wealth inequality. If we place these numbers in their own chart, with no tricky juxtaposition against the longer data series, this is what we get:

 A clear, though unspectacular upward trend in wealth inequality as measured by the Inland Revenue data, on which the Atkinson series used by Piketty is based. It's also worth pointing out that the HMRC numbers, although not much help with the long-term picture, do attribute 70% of wealth in the UK to the top 10%. As far as I can see, the main difference between Piketty and Giles's alternative data is that the latter suggests that inequality started to rise in the late 1980s rather than the 1970s.

Piketty Debunked? Not So Fast
Jonathan Hopkin
(h/t Mark Thoma at Economist's View)