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Monday, May 26, 2014

New Debate Over Piketty’s Book On Economic Inequality

French economist Thomas Piketty, pictured here during a presentation at King's College in London on April 30, is drawing criticism and praise for his new book "Capitalism in the Twenty-First Century," in which he argues that capitalism leads to the concentration of wealth in the hands of those already rich. (Leon Neal/AFP/Getty Images)

French economist Thomas Piketty, pictured here during a presentation at King’s College in London on April 30, is drawing criticism and praise for his new book “Capitalism in the Twenty-First Century,” in which he argues that capitalism leads to the concentration of wealth in the hands of those already rich. (Leon Neal/AFP/Getty Images)

Economist Thomas Piketty is defending his book today, from charges that he got his math on rising inequality wrong.

Piketty’s nearly 600-page book, “Capital in the Twenty-First Century,” has been the most hotly debated book this spring over its key conclusion: “The central contradiction of capitalism” is that it leads to the concentration of wealth in the hands of those already rich.

Piketty arrived at this conclusion after analyzing troves of data, which he says show this basic truth about free markets: that they make the rich richer over time.

Piketty’s work set off a new round of debate over income inequality, and earned him praise from Nobel Prize-winning economists and invitations to the White House, the International Monetary Fund, and the United Nations.

But over weekend, the Financial Times published an analysis arguing that Piketty’s “estimates of wealth inequality are undercut by a series of problems and errors.”

Piketty has welcomed the open debate, saying that is why put all his data online, but is arguing that any mistakes with data do not change the fundamental conclusion of his work.

The Economist magazine agrees with Piketty, while critics like Harvard economist Martin Feldstein argue that Piketty’s estimate of increased income inequality in the U.S. is “based on a flawed interpretation of U.S. income data.”

Financial Times’ editor Chris Giles told Here & Now‘s Jeremy Hobson that he was not out looking for faults in Piketty’s work.

“There is a real need to look at this more carefully and try and find out what the truth is, because there are very important issues,” Giles said. “I’m absolutely not in any way saying that wealth inequality is not an important issue that shouldn’t be studied.”

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