Is society becoming more unequal?

This isn’t the time, or space, for existential questions! No, but it can be the time and space to discuss economists tearing each other apart.

Who’s fighting whom? The relentless back-and-forth is between Thomas Piketty and the Financial Times on the former’s conclusions that, regardless of what we might say to delude ourselves, global income inequality is inexorably marching ahead. The rich are getting richer and their kids get huge trust funds.

Piketty, who? Monsieur Thomas Piketty, professor at the Paris School of Economics, had earlier this year published Capital in the Twenty-First Century . The book turned out to be a sleeper hit, and was lauded by the likes of Paul Krugman.

What’s the book about? Piketty argues that wealth and income inequality in the developed world has been steadily rising, and if the way capitalism works is not reformed, we’re heading into a future dominated by a few rich with inherited wealth and power so great that they control politics, government and society. He calls it patrimonial capitalism.

So this is more meat for the world against the one per cent debate? Yes, but a lot more substantial, apparently. Piketty’s book is rich in data dating from as far back as the 18th century, explaining how r> g, or, capital accumulates more for itself (rate of return for the capitalist) faster than the general economy can grow.

What’s making the pink ’un see red? The FT alleges that Piketty’s math doesn’t add up. Its investigation, led by economics editor Chris Giles, “found numerous mistakes in Piketty’s work: simple fat-finger errors of transcription; suboptimal averaging techniques; multiple unexplained adjustments to the numbers; data entries with no sourcing, unexplained use of different time periods and inconsistent uses of source data.”

Once the data was cleaned, the paper went on to say, “the European results do not show any tendency towards rising wealth inequality after 1970. The US source data are also inconsistent… None of (this) supports the view that the wealth share of the top 1 per cent has increased in the past few decades.”

Damned by data? That’s what the FT would like us to believe.

How’s Piketty taking it? Obviously, he has been defending himself. Piketty is accusing the FT of “ridiculous” and “dishonest” criticism. Besides his own rebuttal to the paper, he said in an interview to AFP that “I have no doubt that my historical data series can be improved and will be improved in the future… But I would be very surprised if any of the substantive conclusions about the long-run evolution of wealth distributions were much affected by these improvements.”

Which means the data could be wrong? Which means a lot of the old data, where available, is imperfect. However, several others have examined Piketty’s book after the FT controversy and concluded that Giles’ criticisms do not change the book’s fundamental thesis.

It’s still a bestseller, though? Of course. Piketty has made all the data used in the book, his Excel spreadsheets and his formulae available online, so anybody who is interested can examine it.

Does that make Piketty the 21st century’s prophet? Or just a passing rockstar with a handle on the zeitgeist? Your guess is as good as anybody else’s.

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