Piketty’s Left-Wing Anticapitalist Screed Suffers Another Blow To Its Credibility
In 2013, French economist Thomas Piketty set liberal hearts ablaze with his book “Capital in the Twenty-First Century.” In his book, Piketty argued the tired old socialist position that inequality is an intentional feature of capitalism and that it can only be corrected by large-scale government intervention. The book was a runaway best-seller (as compared to other economic tomes) and Progressives went absolutely gaga. Paul Krugman, the New York Times’ unofficial Minister for Keynesian Propaganda, called it a “magnificent, sweeping meditation on inequality” and adherents to the Occupy Wall Street movement held on to it as if it was their teenage diary.
Of course, it didn’t take long for the wheels to start coming loose.
In May of 2013, the Financial Times published a comprehensive take-down of Piketty’s math. The Financial Times found that when the numbers were examined, Piketty’s thesis fell apart. Piketty’s central theme — that the share of wealth held by the richest among us was rising to pre-WW1 levels — did not hold up under scrutiny.
Not surprisingly, a number of socialists and left-wing economists rushed to Piketty’s defense.
But, the hits kept coming. Several academic papers in early 2015 offered further repudiations of Piketty’s models and mathematics by finding that many of Piketty’s most radical propositions did not hold up to scrutiny when faced with empirical data. Those included a paper by Daron Acemoglu of the Massachusetts Institute of Technology and political scientist James Robinson, a study by Benjamin Bridgman of the Bureau of Economic Analysis, and an exercise by Scott Winship of the Manhattan Institute. These studies — and many others — found that the numbers, models, and historical data simply didn’t back up what Piketty’s claims.
Piketty’s propositions took another major hit last week.
Carlos Góes, an economist for the International Monetary Fund economist, offered a particularly brutal take-down of Piketty’s work. In a new paper published by the IMF, he writes, in part, that “[t]here is little more than some apparent correlations the reader can eyeball in charts[…]While rich in data, the book provides no formal empirical testing for its theoretical causal chain.” After testing Piketty’s thesis against three decades of data from 19 advanced economies, Góes wrote that he “[could] find no empirical evidence that dynamics move in the way Piketty suggests.” Indeed, in fourteen of the country’s he studied, inequality actually fell when capital returns accelerated swifter than output — the exact opposite of the results Piketty claimed.
The importance of all of this extends well beyond the dusty libraries and faculty lounges of academia. When Piketty’s work first became a smash hit, Leftists across the world put down their Little Red Books, picked up “Capital in the Twenty-First Century,” and offered it up as hard proof that socialist economics were the only cure for what ails the world.
That, of course, is hogwash. So too, apparently, are Piketty’s theories and conclusion.
