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Piketty's Findings Undercut by Errors

ft.com

11–20 of 30 posts

Re: Piketty's Findings Undercut by Errors

#11

In Piketty's credit, he did make this easy. Providing data for reproducibility and replicability is relatively new in economics. There are, however, two kinds of claims here. One is that mistakes were made, which is grounds for schadenfreude for those (like me!) who don't like the slight jumps in reasoning from "inequality is rising" to "something must be done about inequality" to "this is what must be done". For all…

"But secondly, it is claimed that he cherry-picks. Economists (we) do that. A lot. And it has to be called out."

The total effect of his cherry picking can't even be discerned from this article. With a lot more work (more than a single blogger probably has time for), it might be shown to be much worse. For example, Piketty chose the U.K., France and Sweden for his list of European countries (averaging them all into "Europe" without adjusting for their populations, as the article pointed out). But why those particular countries? Would the results have been completely different if he would have also included Germany, one of the wealthiest and most populous European countries? We'll probably never know how he came up with his set of countries, and whether he deliberately omitted other countries whose data was available because they would have caused his results to be not significant enough to publish (or even contradicted his thesis).

This reminded me a lot of one of the original studies linking cholesterol to heart disease, which chose a carefully picked subset of European countries even though results were available for several others. Subsequent research showed that including the data from the missing countries would have yielded very different results.

Re: Piketty's Findings Undercut by Errors

#12

In Piketty's credit, he did make this easy. Providing data for reproducibility and replicability is relatively new in economics. There are, however, two kinds of claims here. One is that mistakes were made, which is grounds for schadenfreude for those (like me!) who don't like the slight jumps in reasoning from "inequality is rising" to "something must be done about inequality" to "this is what must be done". For all…

I liked your point, which is similar to my reaction to the book. Part 1: "Relative inequality is rising" Step 2: "?" Step 3: "Policy proposals"

Most notably, Piketty never made a case why his policy proposals are the best way to improve the lives of the bottom 50% on an absolute basis.

Re: Piketty's Findings Undercut by Errors

#13
post #12

In Piketty's credit, he did make this easy. Providing data for reproducibility and replicability is relatively new in economics. There are, however, two kinds of claims here. One is that mistakes were made, which is grounds for schadenfreude for those (like me!) who don't like the slight jumps in reasoning from "inequality is rising" to "something must be done about inequality" to "this is what must be done". For all…

I liked your point, which is similar to my reaction to the book. Part 1: "Relative inequality is rising" Step 2: "?" Step 3: "Policy proposals" Most notably, Piketty never made a case why his policy proposals are the best way to improve the lives of the bottom 50% on an absolute basis.

Have you read the book? It is clearly not his focus (or area of expertise!) but the book makes its premise clear: extreme inequality is inconsistent with the meritocratic ideals upon which modern capitalist democracies are founded, and can lead to social unrest. This is close to a direct quotation from the book's introduction --0 I would quote it exactly if I had the book in front of me right now. Maybe you don't agree with this premise, but I don't think you can fault Piketty for taking it as an assumption (explicitly!), particularly given that he is not a sociologist or political philosopher.

And in either case, it strikes me a significant contribution in itself to move the debate from "does capitalism and rising productivity raise all boats?" (answer: no) to "ok then...is extreme inequality really such a bad thing?"

Re: Piketty's Findings Undercut by Errors

#14
post #4

The more substantive article on ft.com is here: http://blogs.ft.com/money-supply/2014/05/23/data-problems-wi... This shows the actual errors, correcting for the errors, and the new results. If you get an unauthorized popup, search on Google and click the top link: https://www.google.com/search?q=data-problems-with-capital-i...

Thank you! The linked bit is so devoid of information it's almost silly.

Re: Piketty's Findings Undercut by Errors

#15
post #8

There are a lot of problems, they have been pointed by economists on every side of the spectrum right now, few months after the book has been published. More errors will be pointed during the years, but all the criticisms will be ignored, Piketty will be remembered as a genius for the time being and his ideas will be teached in schools and universities as if they were the God's words. Just like happened with Keynes.

And Hitler. Let's not forget to bring up parallels to Hitler when trying to smear up someone. Godwin's law must be fulfilled, damn it!

I don't see "criticisms being ignored." The author is dialoguing with his critics. His response was published in this very article.

Re: Piketty's Findings Undercut by Errors

#16
post #8

There are a lot of problems, they have been pointed by economists on every side of the spectrum right now, few months after the book has been published. More errors will be pointed during the years, but all the criticisms will be ignored, Piketty will be remembered as a genius for the time being and his ideas will be teached in schools and universities as if they were the God's words. Just like happened with Keynes.

Or with Reinhart & Rogoff, who made a "mistake" in Excel that helped push disastrous austerity all over the world with a 90% debt-to-GDP cliff that didn't actually exist...

Re: Piketty's Findings Undercut by Errors

#17
post #8

There are a lot of problems, they have been pointed by economists on every side of the spectrum right now, few months after the book has been published. More errors will be pointed during the years, but all the criticisms will be ignored, Piketty will be remembered as a genius for the time being and his ideas will be teached in schools and universities as if they were the God's words. Just like happened with Keynes.

if he's wrong in 50 years, and still talked about, he will still matter for a simple reason: if a bad idea is popular, you need to implement it and make it fail to prove it's a bad idea. you just learn by your errors. It's better than to not experiment at all.

economics and policy are influenced by history. sometimes you have to find arguments in economics that manage to change politics even if it's not an entirely good idea. that's how history unfold.

Re: Piketty's Findings Undercut by Errors

#18
FT's accusation sounds dubious.

For example, Giles claimed:

"Piketty appears to have added random numbers to certain formula to bend the data toward his hypothesis." (from BI) and Giles: "A 2 is added because the number wasn't high enough — it didn't seem to fit what he wanted to show in his charts, so he just added 2 to it..." Source: http://static1.businessinsider.com/image/537fa370eab8ea427aa...

First off, it's not a random number. That 2 is an estimation from the two actual numbers from (Wolff 1994) Table 4. There was neither 1960 nor 1970 numbers available and only 1962 numbers (25.9% & 7.5%) available from the original paper. Hence, for the difference of that 2 and 8 years, Piketty first estimated the 1960 Top 1% wealth share number (31.4%) by (25.9 + 7.5 - 2). Then, the 1970 number is calculated based on the 1960 number and the ratio of "top 0.1% wealth share of 1960 and 1970, with the addition of that "2" which just took off for the 1960 number (2+31.4*10.4/8.7). I would say "2" is reasonable, even though it's arbitrary, to make the whole data series more smooth. Of course someone could use other estimate number for that two years, but it only makes the whole series more bizarre, and it does not change the pattern of that data series.

Second, FT's own conclusion even shows the patterns are almost the same with FT's claimed "correct" numbers or Piketty's. Piketty even pointed out other researches from Saez and Zucman published after his book also confirms his finding in the book.

All in all, FT just sounds like trying to sell more paper/subscription.

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