Nick Shaxson ■ The Piketty controversy and the offshore wealth problem


As many readers will already know, there’s a big controversy going on regarding Prof. Thomas Piketty’s world-famous economics work Capital in the 21st Century, with the Financial Times alleging that he faces a ‘Reinhardt-Rogoff moment’ because of data problems. Piketty responds that he’s been transparent about everything and the FT is being ‘ridiculous’ to suggest that it undermines his central conclusions that inequality, particularly at the top of the income scales, has been rising.

We aren’t going to plunge into this debate except to remark that – at the current moment — most pundits seem to agree that further investigation is warranted into the FT’s findings, but that even if the analysis is flawed, the problems that have been identified don’t undermine Piketty’s central conclusions. As The Economist puts it:

“Based on the information Mr Giles has provided so far, however, the analysis does not seem to support many of the allegations made by the FT, or the conclusion that the book’s argument is wrong.”

And of course, as many have remarked, the FT’s claim that inequality isn’t rising just doesn’t pass the “smell test,” as Paul Krugman and many others note. The evidence is everywhere. Just look at this latest tale, for example.

But that’s not really why we’re writing. We’re most interested in this comment in Piketty’s response:

“My estimates on wealth concentration do not fully take into account offshore wealth, and are likely to err on the low side.”

Which is another useful reminder that we think he is underestimating his own underestimation, because we think the main offshore wealth study he refers to (he also does refer to ours, in footnote 55 on p466) itself errs on the low side. Given that many, many trillions of dollars are sitting offshore – the large majority of them perched among the top 1.0 percent and 0.1 percent – that’s going to be quite a significant factor.

Read more here – with more to come.

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