I've started reading this book and find it interesting. I was wondering if anyone had thoughts on his idea of the fact that wealth inequality will continue to increase so long as the rate of return on capital is greater than actual economic growth and wage labor.
I'm not that far into the book yet, but from what I understand, he's essentially saying that as long as profits and valuations grow at a faster rate than wage labor, then wealth inequality will rise? Do you guys think he's correct in arguing that? Ignore whether or not wealth inequality is bad, I'm just wondering if his argument makes mathematical sense, or if it's too simple and not considering other important variables.
About 50% - 60% of Americans own some amount of stock, but I don't know what percent owns enough for it to actually benefit them greatly.
TIme to buy up the bear ETFs
Very interesting topic. When I was studying for my A-Levels (UK SAT I assume), my teacher always mentioned Piketty's theory when mentioning inequality and the tendency for the wealthy to a) save and b) invest in stocks etc. I'm not completely qualified to talk about the Quant. Econometrics behind it but it would be very interesting to see Piketty's data set etc, how he came to his thesis.
When reading Capital, keep in mind Piketty is an ardent socialist.
I think when liberals (Piketty) argue that there is wealth inequality, they are not wrong. However in my mind, their remedies are not correct as they don't address the route of the problem. We have had artificially low interest rates for 30 years allowing capital to decouple from labor, where those who had capital could financially leverage the capital(assets), for a return without doing any real work. Honestly buying at a 5% return unlevered return with 3% money does not require one to do too much work or take on any risk. It doesn't provide any real societal good, where-as value is not created such as during a re-positioning. So when people say, the average CEO pay decoupled with the average worker pay by multiples...they are also right. And this is a net negative for society. But, where I disagree from socialists is that I do not believe redistribution is the way to quell inequality, I believe it will only make it worse.
Given your background in CRE, what do you think of Georgism? I've only just heard of it recently but am not knowledgeable about it and would like to hear what others have to say. It sounds like it's trying to get an income inequality one way or another.
Well, I just read up on it, thank you for sharing.
My immediate conclusion is that, I know of several prima facie reasons why it wouldn't work. At least in NYC, tax revenue is 50-60% derived from commercial and residential property tax. Rent is in part a function of tax, the margin landlords make on a new purchased property is around 5%, not a high margin business by any means. Also, the wiki article quotes, that the land would be a public good. I have an issue with that called Tragedy of the commons - Wikipedia. One firm reason to back this up regarding real estate is that NYCHA(NYC Public Housing), is the city's biggest landlord, and they also have the largest amount of housing violations..big ones like lead paint and asbestos. I'm sure I can come up with a few more.
So you'd say high rates would do better to lessen wealth inequality than extremely high marginal taxes and wealth taxes? I've never been one to fully buy into wealth "trickling down" to the masses as much as some people argue, but I think there's no denying that when the pot dries up at the top, it hurts everyone, including the masses.
I think what you're saying is what his r > g is, but he does seem to focus more on tackling the symptoms instead of the root cause.
Then what do you think is a better answer? More regulation? Unfortunately, the tendency is for the wealthy to accumulate more wealth and power and to design measures to protect those privileges.
At the end of the day, what is it we've diverged from, what state of affairs should we be looking to return to? If the answer is this nebulous golden age of American manufacturing, that is really only from WWII to maybe the early 80s. A time characterized by extremely high progressive taxes. Other than that... capitalism in general, as a widely adopted economic system, is barely in its infancy from a historical perspective. The first half of it was characterized by extreme poverty and misery for most people, as it is in emerging economics, where wealth inequality is worse than here (the US, if that isn't clear).
All I'm saying is that the only solution for combating truly oppressive wealth inequality has been a combination of government regulation and high taxes for redistributive purposes. We have solid evidence to believe those tools work; and almost no evidence to suggest anything else works.
I thought I was pretty clear on what I believe is "the"(read: one of) cause(s) of wealth inequality.
The eras you described, are characterized by a strong dollar, higher interest rates, less socialism(zero socialism?), "high progressive taxes" is incorrect, as the net effective taxes have been roughly the same throughout time. Capitalism is in its infancy, relative to what, feudalism, imperialism, socialism?
I don't agree that the true solution have been high taxes for redistributive purposes, and we have yet to see how that plays out. Hint, the math does not work to keep this socialist experiment going on for much longer. For goodness sakes man, if you tax people making over $1mm 100%, you only come close to 1/3 of the national deficit. Where are you going to get the money for unlimited distribution, and redistribution. Have you seen Europe, there are rich people and poor people and nothing in between.
I had heard good things about the book years ago and started reading it, only to quickly realize Piketty is likely a socialist clown. Tried to keep reading anyway but only made it about halfway through and then just skimmed the rest. He uses 550 pages to say life is unfair and we need a wealth tax over and over and over. The whole book could have just been a short twitter thread. That book is now paying its fair share by being used as a work monitor riser. Not sure it's even worthy of that.
This post by a former Chicago economist on his blog is a good starting point for thinking through counterpoints to Piketty, both from the data and values standpoint: https://johnhcochrane.blogspot.com/2014/12/mccloskey-on-piketty-and-fri…
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