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‘Assumed Distributions’ And ‘Motivated Conclusions’: Economists B&B Bring Out Pitfalls Of Piketty's Inequality Report
Piketty‘s Report On Inequality In India: Bhalla & Bhasin Critique Dubious Assumptions & Agendas
Economists Surjit Bhalla and Karan Bhasin (B&B) have published their critique of the report titled ‘Income and Wealth Inequality in India, 1922-2023: The Rise of the Billionaire Raj’, authored by Thomas Piketty, Nitin Kumar Bharti, Lucas Chancel, and Anmol Somanchi.
It claims that the top 1% hold 22.6% of income (2023) and 40.1% of wealth. For 1999, it is pegged at 21%.
The report remarked that ‘Billionaire Raj’ of India’s modern bourgeoisie is more unequal than British Raj. They also hinted at a major socio-political upheaval.
Close to the 2024 elections, the report appears dubious not only in its content but also in intent. Here is B&B’s critique of it.
Failure At The Footnote:
After looking at the footnote, B&B found that Piketty estimated and extrapolated income and wealth distribution instead of directly observing the data of the same sets of individuals.
To address this discrepancy Piketty and his colleagues at WIL came up with their own methods which is ‘tentative’ at best.
Exaggerated Data:
A 2005 study by Piketty and Nobel laureate Abhijit Banerjee showed a 9% wealth share for top 1%. When revised in 2018, it rose to 14.7% share. Such a large deviation from original study is abnormal.
Bhalla had asked in his critiques for the source of these revisions, but got no response from them.
Piketty's Questionable Past:
Exaggeration in US inequality data of income shares of the top 1%. A 2022 paper by Geloso and colleagues highlight Piketty’s bias towards showing high inequality levels.
A 2014 study by Magnes and Murphy questioned Piketty’s methodologies - cherry-picking sources, opacity, use of ambiguous data, and pervasive discrepancies. Pointing out massive errors in a data-rich country like US, B&B say there’s no guarantee they won’t do it in India, where data gathering is more tedious.
Methodological Concerns:
Piketty's reliance on unobserved data and lack of rigorous statistics.
B&B say, “Speculating and estimating a distribution conforming to your priors is not economic analysis”.
On Piketty’s policy suggestions like imposing a super tax on Indian billionaires and multimillionaires and restructuring taxes to include both income and wealth, B&B say that such structural overhaul needs rigorous statistics to back them up and “major investments are based on real data, not on upgraded and inflated estimates of distributions”.
In conclusion, B&B advise intellectuals to question the ‘assumed distributions’ and ‘motivated conclusions’ of such reports.
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