Apr 21, 2012
The Grumpy Economist writes How to Lie With Statistics, 4/20/12.
John Cochrane takes to task the methods and conclusions of Emmanuel Saez and Thomas Piketty, that are commonly used to justify higher taxes on the wealthy. Saez and Piketty were also targets of Alan Reynolds in his book, Income and Wealth. Both Cochrane and Reynolds analyze carefully the data that is used to perpetuate the myth that the discrepancy in income an wealth has grown as large as many redistributionists contend.
Both Cochrane’s blog post and Reynold’s book deal with data and analysis that can quickly get a bit complicated. It takes some effort to understand the true picture underneath the reams of data. As we often find in such situations a piece of the truth can be more misleading than all of a lie.
I seem to keep returning to the prospect of bad policy originating from bad data. Too many people wish to believe there is a problem and will quickly jump on any study that confirms their suspicions. Few in the media seem qualified to critique complex studies. Economics bloggers like Mr. Cochrane do a great service performing the analysis that the main media are either unable or unwilling to perform.