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Wednesday, May 28, 2014
Capital in the Twenty-First Century
This book by Thomas Piketty is an in-depth analysis going back to the 18th century, that supports the central thesis, of an exponential rise in world-wide wealth inequality into the 21st century. He includes an online index to disclose the data series used to support his conclusion.
The Financial Times used his data series to raise questions about Mr. Piketty's results. I also wondered about data integrity reading the book, as it included nearly 250 years of analysis. Mr. Justin Wolfers, of the New York Times, provides an analysis here of the questions raised by the Financial Times.
The questions are about methodology and data gaps. Although results do not vary substantially from Mr. Piketty's when the Financial Times uses their methodology. See the graph below:
In the end Mr. Piketty's conclusion should not be comprised; that is a market economy based on private property contains powerful forces of divergence that will undermine democracy. Although this conclusion probably did not need 577 pages of text, 108 pages of notes and an online index to reach.
Anyone paying attention the last 30 years, it is 'tell me something I do not already know'. A simple review of the following graph would be sufficient to reach the same conclusion as Mr. Piketty, without devoting 15 years of research:
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