Academic journal article Journal of Private Enterprise

Challenging the Empirical Contribution of Thomas Piketty's Capital in the Twenty-First Century

Academic journal article Journal of Private Enterprise

Challenging the Empirical Contribution of Thomas Piketty's Capital in the Twenty-First Century

Article excerpt

I. Introduction

Thomas Piketty's Capital in the Twenty-First Century (2014b) begins with a bold claim. The ensuing work, he promises, is "based on much more extensive historical and comparative data than were available to previous researchers, data covering three centuries and more than twenty countries, as well as a new theoretical framework that affords a deeper understanding of the underlying mechanisms" of his subject matter (2014b, p. 1). Though he qualifies this assertion with an acknowledgment of an imperfect and incomplete data set, this concession should not be mistaken for modesty. As Piketty repeatedly reminds his readers over the ensuing 700 pages, it is his unprecedented assemblage of data that supposedly sets his work apart from a literature on wealth inequality that-he contends- frequently suffers from "an abundance of prejudice and a paucity of fact" (2014b, p. 2).

When paired with an unconventional theoretical argument rooted in hypothesized "laws of capitalism," and, perhaps more so, radical policy recommendations in the form of an 80 percent top marginal income tax rate and an annual 5 percent global wealth tax on the biggest fortunes (2014b, pp. 512, 530), Piketty's claim to an empirically robust and data-heavy narrative has always been the strongest ecumenical feature of his work.1 Empirics are also the root of much of the book's claimed novelty, as well as its self-stated purpose of "patiently searching for facts and patterns and calmly analyzing economic, social, and political mechanisms that might explain them" (2014b, p. 3) in order to better inform the public discourse about the causes and consequences of global wealth inequality.

Data, and more specifically the story in those data-"as extensive as possible a set of historical data" (2014b, p. 16) as can be gathered-thus become the main evidentiary tool on which Piketty predicates his work. Indeed, he goes on to extol his own "novel historical sources" and lays claim to a patient, empirically driven search for "facts and patterns" within them twice more before the conclusion of the first chapter (2014b, pp. 20, 31-32). While Piketty's product is part theoretical argument, part empirical exercise, and part policy recommendation, its unifying rationalization is an overarching historical narrative about the characteristics of human wealth accumulation, derived from and purportedly sustained in data.

Given these extensive claims, not to mention the heavy criticism directed toward certain other works in the wealth inequality genre, it might come as some surprise to learn that Piketty's reported "three centuries" of empirics infrequently predate 1900 beyond a stray data point or two connected by a century's worth of linear interpolation. Elis claimed global analysis only consistently examines three countries-France, Britain, and the United States-with more than passing rigor, with only occasional forays into Sweden and Germany beyond that. Even many of his twentieth-century figures, presumably constructed from better records and more readily available data sources, are often products of further interpolation and decennial averaging around multiyear and decade-long gaps. Taken alone, these circumstances might only attest to the inherent difficulties of amassing a large, continuous economic time series. A more serious problem emerges, though, when an author attempts to interpret highly specific historical events through data points that are substantially less thorough or conclusive than their initial presentation suggests.

Finally, the investigator may become downright alarmed when discovering the dubious foundation of some of Piketty's "novel" data sets, because Piketty's charts do not convey such weakness to the innocent reader. Furthermore, Piketty's narratives are occasionally peppered with wildly inaccurate historical "facts" that, coincidentally, seem to bolster his desired interpretation of the surrounding data. In this context, the various leaps and judgment calls that Piketty often makes in his historical reconstructions should raise alarm bells. …

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