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mk  ·  3591 days ago  ·  link  ·    ·  parent  ·  post: Thomas Piketty Responds to Criticism of His Data

    What about Britain? The sharpest attacks by The Financial Times — and those that most strongly undermined Mr. Piketty’s thesis about rising wealth inequality — concerned his use of wealth inequality data for Britain. By using more reliable survey data, as opposed to tax receipt data, the newspaper argues that no clear-cut trend on wealth inequality is evident. If true, that would undermine Mr. Piketty’s broader argument that wealth is on an upward march in the developed world, becoming ever more concentrated in the hands of the very rich.

    The difference is huge: Using the survey data, as The Financial Times does, results in a finding that the top 10 percent of British households control 44 percent of total wealth in 2010. Mr. Piketty’s preferred source puts that number at 71 percent.

    “This is a very large difference indeed,” Mr. Piketty concedes. The problem, he writes, is that for older periods the only data available are studies of estate tax data, including careful research based on estate tax data from the 1920s to 1980s. Mr. Piketty then updated that old research using estate tax data over the decades since then.

    He argues that The Financial Times’s approach requires apples-to-oranges comparisons, using estate tax data for older periods and then switching to surveys for more recent information. “This is problematic because we know that in every country wealth surveys tend to underestimate top wealth shares as compared to estimates based upon administrative fiscal data,” he writes. “Therefore such a methodological choice is bound to bias the results in the direction of declining inequality.”

    Indeed, if the survey data cited by The Financial Times is correct, it “would mean that Britain is currently one of the most egalitarian countries in history in terms of wealth distribution; in particular this would mean that Britain is a lot more equal than Sweden, and in fact more equal than what Sweden has ever been (including in the 1980s). This does not look particularly plausible.”

That seems an ultimately reasonable approach. If you are interested in the change over time, then you don't want to switch methodologies for gathering data. In fact, if you do, you are now also measuring differences in the methodologies, which at best could be adjusted for.

Not to say that Piketty isn't guilty of fitting data to his hypothesis, however in this case, the FT was doing it.

There has to be better ways to visualize this data when it can be so easily altered in 'reasonable' ways.