Thomas Piketty speaks to the Department of Economics at the University of California, Berkeley on April 23, 2014. Photograph: Getty Images.
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That big Financial Times story on errors in Piketty's data is overrated

Piketty’s theory – right or wrong – is largely unaffected by these results.

Usually, the Friday afternoon before Memorial Day is the perfect time for a political news dump. The Financial Times used it to drop a major investigation into the data behind Thomas Piketty’s hit book, Capital in the Twenty-First Century. For those on Twitter who hadn’t left yet for vacation, it was the top story. “Not so fast with that Nobel,” Clive Crook tweeted. From Quartz economics writer Tim Fernholz: “This is big, if true: Piketty's data flawed?”

But the errors that the FT finds, while significant, do not materially change Piketty’s conclusions or disprove the economic theory behind his work. Chris Giles, the economics editor of the FT, reviewed Piketty’s data set and found multiple occasions where the French economist had miscopied numbers from one data set into his published spreadsheets. Piketty also averaged data for France, Sweden and Britain without making any population adjustments. Effectively, that makes every Swedish citizen carry the same weight as seven British and French citizens, according to Giles. In his spreadsheets, Piketty also makes adjustments to the numbers that seem arbitrary. “In the US data, Prof Piketty simply adds 2 percentage points to the top 1 per cent wealth share for his estimate of 1970,” Giles writes, providing a screenshot to prove it. It’s unclear what to make of these adjustments.

“[O]ne needs to make a number of adjustments to the raw data sources so as to make them more homogenous over time and across countries,” Piketty writes in a response posted to the Financial Times. “I have tried in the context of this book to make the most justified choices and arbitrages about data sources and adjustments.”

Piketty doesn’t specify these adjustments with his data sets and Giles points out other times where certain data do not have sources. Piketty should have done a better job explaining his adjustments and specifying his sources, but few economists in the world have been as open and transparent with their data as Piketty has been with his. It wouldn’t make much sense to distort the data and then release the incriminating evidence to the public. In addition, Scott Winship, an inequality scholar at the Manhattan Institute and frequent critic of Piketty, has used Piketty’s U.S. data extensively and understood all of his adjustments.

“Having looked at the U.S. inequality spreadsheet quite a bit, I definitely knew what he was doing in that spreadsheet,” Winship said.

But the data errors that Giles are found are real nonetheless. Do they materially change Piketty’s results? Giles thinks so: “The central theme of Prof Piketty’s work is that wealth inequalities are heading back up to levels last seen before the first world war. The investigation undercuts this claim, indicating there is little evidence in Prof Piketty’s original sources to bear out the thesis that an increasing share of total wealth is held by the richest few.” For Britain, this seems to be true, but it does not seem to bear itself out for France, Sweden or the United States, assuming more errors do not come to light.

 

Giles constructs alternate series using other sources of data to compare and improve upon Piketty’s work. For France and Sweden, Giles’s data is almost identical to Piketty’s:

Financial Times
Financial Times

The largest differences are for Britain, where wealth inequality for the top 1 percent and top 10 percent are considerably greater under Piketty’s original data:

britain
Financial Times

Finally, for the United States, Giles’s data show, at most, that wealth inequality stayed constant over the past few decades, while Piketty’s show a slight increase:

usa
Financial Times

It’s important to remember that wealth data is subject to significant error. For instance, economists do not agree how to factor capital gains into wealth data: Do you include capital gains as they accrue or only when they are realized? In addition, further back in time, the data becomes even more unreliable.

“These numbers are just imprecise to begin with. The numbers that Giles has come up with are imprecise,” Winship said. “Piketty’s original numbers were imprecise. Piketty probably, in places, talked about the numbers in a way that deemphasized the imprecision and I think it’s fair to whack him for that. But when I look at these charts, to me, if you imagine margin of errors around any of these data points, it sort of looks like nothing has changed much.”

Even if you believe that Giles’s findings dramatically change Piketty’s results, they have little bearing on his economic theory. Giles makes a passing comparison to economists Carmen Reinhart and Ken Rogoff (R&R), who drove a significant part of Republican austerity agenda, but saw their findings disproven in 2013. Liberals celebrated when Thomas Herndon, a graduate student from UMass Amherst, discovered a spreadsheet error in R&R’s results that invalidated their main finding. But unlike Piketty, Reinhart and Rogoff largely had no economic theory to ground their argument that national debt crises occur when a country’s debt level surpasses 90 percent of GDP. Once their data fell apart, their theory had no legs to stand on. On the other hand, Piketty fits data to this theory, but does not depend on it. Piketty’s theory—right or wrong—is largely unaffected by these results.

This piece originally appeared on the New Republic's website.

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Who will win in Copeland? The Labour heartland hangs in the balance

The knife-edge by-election could end 82 years of Labour rule on the West Cumbrian coast.

Fine, relentless drizzle shrouds Whitehaven, a harbour town exposed on the outer edge of Copeland, West Cumbria. It is the most populous part of the coastal north-western constituency, which takes in everything from this old fishing port to Sellafield nuclear power station to England’s tallest mountain Scafell Pike. Sprawling and remote, it protrudes from the heart of the Lake District out into the Irish Sea.

Billy, a 72-year-old Whitehaven resident, is out for a morning walk along the marina with two friends, his woolly-hatted head held high against the whipping rain. He worked down the pit at the Haig Colliery for 27 years until it closed, and now works at Sellafield on contract, where he’s been since the age of 42.

“Whatever happens, a change has got to happen,” he says, hands stuffed into the pockets of his thick fleece. “If I do vote, the Bootle lass talks well for the Tories. They’re the favourites. If me mam heard me saying this now, she’d have battered us!” he laughs. “We were a big Labour family. But their vote has gone. Jeremy Corbyn – what is he?”

The Conservatives have their sights on traditional Labour voters like Billy, who have been returning Labour MPs for 82 years, to make the first government gain in a by-election since 1982.

Copeland has become increasingly marginal, held with just 2,564 votes by former frontbencher Jamie Reed, who resigned from Parliament last December to take a job at the nuclear plant. He triggered a by-election now regarded by all sides as too close to call. “I wouldn’t put a penny on it,” is how one local activist sums up the mood.

There are 10,000 people employed at the Sellafield site, and 21,000 jobs are promised for nearby Moorside – a project to build Europe’s largest nuclear power station now thrown into doubt, with Japanese company Toshiba likely to pull out.

Tories believe Jeremy Corbyn’s stance on nuclear power (he limply conceded it could be part of the “energy mix” recently, but his long prevarication betrayed his scepticism) and opposition to Trident, which is hosted in the neighbouring constituency of Barrow-in-Furness, could put off local employees who usually stick to Labour.

But it’s not that simple. The constituency may rely on nuclear for jobs, but I found a notable lack of affection for the industry. While most see the employment benefits, there is less enthusiasm for Sellafield being part of their home’s identity – particularly in Whitehaven, which houses the majority of employees in the constituency. Also, unions representing Sellafield workers have been in a dispute for months with ministers over pension cut plans.

“I worked at Sellafield for 30 years, and I’m against it,” growls Fred, Billy’s friend, a retiree of the same age who also used to work at the colliery. “Can you see nuclear power as safer than coal?” he asks, wild wiry eyebrows raised. “I’m a pit man; there was just nowhere else to work [when the colliery closed]. The pension scheme used to be second-to-none, now they’re trying to cut it, changing the terms.”

Derek Bone, a 51-year-old who has been a storeman at the plant for 15 years, is equally unconvinced. I meet him walking his dog along the seafront. “This county, Cumbria, Copeland, has always been a nuclear area – whether we like it or don’t,” he says, over the impatient barks of his Yorkshire terrier Milo. “But people say it’s only to do with Copeland. It ain’t. It employs a lot of people in the UK, outside the county – then they’re spending the money back where they’re from, not here.”

Such views might be just enough of a buffer against the damage caused by Corbyn’s nuclear reluctance. But the problem for Labour is that neither Fred nor Derek are particularly bothered about the result. While awareness of the by-election is high, many tell me that they won’t be voting this time. “Jeremy Corbyn says he’s against it [nuclear], now he’s not, and he could change his mind – I don’t believe any of them,” says Malcolm Campbell, a 55-year-old lorry driver who is part of the nuclear supply chain.

Also worrying for Labour is the deprivation in Copeland. Everyone I speak to complains about poor infrastructure, shoddy roads, derelict buildings, and lack of investment. This could punish the party that has been in power locally for so long.

The Tory candidate Trudy Harrison, who grew up in the coastal village of Seascale and now lives in Bootle, at the southern end of the constituency, claims local Labour rule has been ineffective. “We’re isolated, we’re remote, we’ve been forgotten and ignored by Labour for far too long,” she says.

I meet her in the town of Millom, at the southern tip of the constituency – the opposite end to Whitehaven. It centres on a small market square dominated by a smart 19th-century town hall with a mint-green domed clock tower. This is good Tory door-knocking territory; Millom has a Conservative-led town council.

While Harrison’s Labour opponents are relying on their legacy vote to turn out, Harrison is hoping that the same people think it’s time for a change, and can be combined with the existing Tory vote in places like Millom. “After 82 years of Labour rule, this is a huge ask,” she admits.

Another challenge for Harrison is the threat to services at Whitehaven’s West Cumberland Hospital. It has been proposed for a downgrade, which would mean those seeking urgent care – including children, stroke sufferers, and those in need of major trauma treatment and maternity care beyond midwifery – would have to travel the 40-mile journey to Carlisle on the notoriously bad A595 road.

Labour is blaming this on Conservative cuts to health spending, and indeed, Theresa May dodged calls to rescue the hospital in her campaign visit last week. “The Lady’s Not For Talking,” was one local paper front page. It also helps that Labour’s candidate, Gillian Troughton, is a St John Ambulance driver, who has driven the dangerous journey on a blue light.

“Seeing the health service having services taken away in the name of centralisation and saving money is just heart-breaking,” she tells me. “People are genuinely frightened . . . If we have a Tory MP, that essentially gives them the green light to say ‘this is OK’.”

But Harrison believes she would be best-placed to reverse the hospital downgrade. “[I] will have the ear of government,” she insists. “I stand the very best chance of making sure we save those essential services.”

Voters are concerned about the hospital, but divided on the idea that a Tory MP would have more power to save it.

“What the Conservatives are doing with the hospitals is disgusting,” a 44-year-old carer from Copeland’s second most-populated town of Egremont tells me. Her partner, Shaun Grant, who works as a labourer, agrees. “You have to travel to Carlisle – it could take one hour 40 minutes; the road is unpredictable.” They will both vote Labour.

Ken, a Conservative voter, counters: “People will lose their lives over it – we need someone in the circle, who can influence the government, to change it. I think the government would reward us for voting Tory.”

Fog engulfs the jagged coastline and rolling hills of Copeland as the sun begins to set on Sunday evening. But for most voters and campaigners here, the dense grey horizon is far clearer than what the result will be after going to the polls on Thursday.

Anoosh Chakelian is senior writer at the New Statesman.