The controversy about Thomas Piketty’s use of data in Capital in the 21st Century is producing more heat than light.
It started on 23 May when the FT reported that figures used by Piketty had been manipulated and didn’t produce the results the author claimed. Piketty’s response on the same day said the figures were imperfect but the assertion that income and wealth differentials have grown is intuitively obvious and well supported.
An article in the Guardian online today by Channel 4’s new culture editor Paul Mason countered the FT’s challenge and charged the newspaper with being biased in favour of the rich. Hundreds of readers expressed support for Mason’s view.
The FT in an editorial, also today, reaffirmed its conviction Piketty’s use of data was flawed. “…before you use blunt tools, proper information on the distribution of wealth is required,” it said. “Prof Piketty’s book is a remarkable collection of statistics, but does not provide the definitive answer.” The FT’s chief economics writer Martin Wolf had previously written that he was impressed by Piketty’s work.
In an attempt to advance the debate, Texas University professor James Galbraith said in a comment article in the FT today that “A judgement on the issue must, of course, await Prof Piketty’s response.” Galbraith has led the Texas University Inequality Project.
Economics2030 argues that criticisms of Piketty’s use of data and his conclusions — that there should be a stiff increase in taxation of the rich — are valid. The main problem is that wealth and capital can never be scientifically defined and what is considered to be capital today includes items that would not have been 50 years ago. Those seeking to challenge income and wealth inequality need to recognise that facts in economics are always ambiguous.
A proper understanding of how value is created in advanced economies where the majority of output and employment takes the form of intangibles leads to the conclusion that capital itself is an intangible and consequently immeasurable. Piketty’s project is, therefore, futile and creates the impression that there is a simple answer to complex problems, including inequality and how to eliminate poverty.
For a full discussion of conventional economic theory and the way it treats capital be found in The myth of intangible capital. https://edmundosullivan.com/economics2030/the-intangible-capital-myth/