What is it with economists and spreadsheets? Another monumental work of economic research may have big data errors, if a new report by the Financial Times is true.
The blockbuster book by French economist Thomas Piketty, Capital In The Twenty-First Century, contains "many unexplained data entries and errors in the figures underlying some of the book’s key charts," FT writers Chris Giles and Ferdinando Giugliano claimed in a story published on Friday (subscription required).
Piketty defended the book at length in a response published on the FT's website.
The alleged errors don't seem to be as damning to the entire premise of Piketty's book as were the spreadsheet errors of Harvard economists Ken Rogoff and Carmen Reinhart, authors of an infamous study used to justify strict austerity measures in the U.S. and Europe. But they could undermine the book's reputation for analytical rigor. They will certainly lead to a frenzy of new scrutiny.
In a deeper dive on the specific errors, Giles noted what he described as fundamental problems with some of Piketty's numbers on wealth inequality.
"I discovered that his estimates of wealth inequality -- the centrepiece of Capital in the 21st Century -- are undercut by a series of problems and errors," Giles wrote. "Some issues concern sourcing and definitional problems. Some numbers appear simply to be constructed out of thin air."
Giles also said that the spreadsheets Piketty provided as source material for his book have "transcription errors from the original sources and incorrect formulas. It also appears that some of the data are cherry-picked or constructed without an original source."
This is an attack on one of the key pillars of Piketty's book, which claims that inequality is destined to return to the heights seen in earlier centuries unless governments intervene. The best-selling book has been embraced by liberals as a call to action to against inequality, and attacked by conservatives as a call for socialism and wealth redistribution. But nothing so far has dented the book's reputation for serious number-crunching.
In his detailed response, Piketty did not confirm or deny that there were any big errors in his data, but said his raw data sources had to be adjusted in some cases to paint a smoother picture, or to fill in gaps.
“I have no doubt that my historical data series can be improved and will be improved in the future," Piketty wrote, "but I would be very surprised if any of the substantive conclusion about the long-run evolution of wealth distributions was much affected by these improvements."
Piketty also pointed out that subsequent studies have backed up many of his conclusions, including the idea that wealth has become more concentrated in the U.S. in recent decades.
Giles seemed unsatisfied with these responses, declaring the entire premise of Piketty's book on shaky ground.
But, just as with the initial discovery of errors in Reinhart and Rogoff's work, this controversy has only begun. People will be pulling apart Piketty, and the FT, for months and maybe years to come.