r > g

Posted: 16 October 2014 in Uncategorized
Tags: , , , ,

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No, the so-called expert opinion reported in the survey by the University of Chicago’s Initiative on Global Markets does not invalidate Thomas Piketty’s claim that r > g (that is, the rate of return on wealth being greater than the growth rate of output) is “the most powerful force pushing towards greater wealth inequality” in the United States.

r>g

As Jordan Weissmann explains, that was never Piketty’s claim in the first place:

I found myself wondering: How would Piketty himself weigh in?

“Well,” he told me in an email this morning, “I think the book makes pretty clear that the powerful force behind rising income and wealth inequality in the US since the 1970s is the rise of the inequality of labor earnings, itself due to a mixture of rising inequality in access to skills and higher education, and of exploding top managerial compensation (itself probably stimulated by large cuts in top tax rates), So this indeed has little to do with r>g.”

Let’s put it a different way: when more surplus is being pumped out of the direct producers, which is then distributed to a tiny minority at the top of the distribution of income, we can expect to see rising inequality in the distribution of income. Then, when that tiny minority that has managed to capture and keep a large portion of the surplus uses some portion of their income to purchase assets, as against the rest of the population that barely gets by on their wages and salaries, we can expect to see a more and more unequal distribution of wealth.

I can only imagine what the so-called experts would opine about that explanation. . .

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