SUTCH: Lesson Learned from Replicating Piketty — How Not To Do Economic History

[NOTE: This post refers to the article “The One Percent across Two Centuries: A Replication of Thomas Piketty’s Data on the Concentration of Wealth in the United States” by Richard Sutch. It appears in the current issue of the journal Social Science History].
When Thomas Piketty’s blockbuster on economic inequality, Capital in the Twenty-First Century, appeared several years ago, economists quickly praised and then passed over the data he had packaged in graphic form in order to scrutinize, criticize, and debate his interpretation and analysis. Even those most skeptical of Piketty’s theories offered uncritical praise for his data. Yet, there is a danger lurking here.
The British historian Herbert Butterfield warned that the “truth of history is no simple matter, all packed and parcelled ready for handling in the market-place. … The understanding of the past is not so easy as it is sometimes made to appear” [Butterfield 1931: 132]. Economists, perhaps more so than historians, are apt to take historical statistics as given, ready for interpretation and analysis. They forget that the ingenuity and the artistry that created the spreadsheet of numbers also produces an idiosyncratic picture of the past.
In my article I retrace the steps Piketty took to come up with his estimates for the fraction of the total wealth of the United States owned by the wealthiest one-percent and the wealthiest ten-percent of U.S. households. These time series span two centuries beginning in 1810. Piketty displayed his estimates, conveniently packed and parceled for easy reference, in a single chart (Figure 10.5, p. 348). The book does not go behind the scenes to describe how he came by the numbers; but, to his credit, Piketty made that information available in an online technical appendix.
I conclude that Piketty’s data for the wealth share of the top ten percent over the period 1870-1970 are unacceptable – they add nothing to the evidence base.  The values he reported are manufactured from the observations for the top one percent inflated by a constant 36 percentage points. He does not explain or defend this dubious procedure.  
Piketty’s data for the top one percent of the distribution for the nineteenth century (1810-1910) are also unhelpful. They are based on a single mid-century observation (for 1870) that provides no guidance about the antebellum trend in inequality and only very tenuous information about trends in inequality during the Gilded Age. 
The values for the top one percent that Piketty reported for the twentieth century (1910-2010) are based on more solid ground, but a smoothing procedure he applied to the noisy raw data muted the marked rise of inequality during the Roaring Twenties and the decline associated with the Great Depression.  The reversal of the sustained decline in inequality during the 1960s and 1970s and the subsequent sharp rise in the 1980s are hidden by a twenty-six-year interpolation.
Ironically, Piketty underestimated the rise in inequality over the last decade. This neglect of the shorter-run changes is unfortunate because it makes it difficult to discern the impact of policy changes (income and estate tax rates) and shifts in the structure and performance of the economy (depression, inflation, executive compensation) on changes in wealth inequality.
How serious are Piketty’s departures from good practice? On one level, you might say his major point of alarm is undisturbed. His sloppiness caused him to underestimate the seriousness of today’s problem by neglecting the increase in inequality produced by the Reagan-era tax cuts.
But, Piketty goes beyond presenting the numbers in his chart. He makes conjectures about how America became so unequal. He makes predictions about the future. He makes policy suggestions based on those conjectures. His rhetoric implies confidence in his reading of history. His projections and policy solutions imply that the confidence is warranted by a solid under-girding of data.
As an economic historian I am unhappy with his historical narrative. As a citizen I am concerned that policies based uncritically on his theoretical model and predictions will not remedy the problem.
The results I report inflict some damage to Piketty’s credibility. I fear that they also weaken the credibility of the economics profession’s ability to derive insight from a scientific examination of historical data. That is a shame since the increasing concentration of wealth is a serious problem that deserves to be studied by experts and addressed by policy makers.
Richard Sutch is Distinguished Professor of Economics at the University of California, Riverside (emeritus). He can be contacted via email at
Butterfield, Herbert (1931). The Whig Interpretation of History, W.W. Norton, 1965.
Piketty, Thomas (2014). Capital in the Twenty-First Century, translated by Arthur Goldhammer, Harvard University Press, 2014.
Sutch, Richard (2017). “The One Percent across Two Centuries: A Replication of Thomas Piketty’s Data on the Concentration of Wealth in the United States.” Social Science History 41 (4) Winter 2017: 587-613.

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