Curious to hear critiques & responses to the book.
amazon.com/Capital-Twenty…
When it's higher than that it's for 3 reasons:
1- high population growth
2- temporary bubbles
3- "catch up growth" (e.g. Germany & Japan after WWII)
A rentier is a person who lives off the interest on savings instead of working (e.g trust-fund kids, landlords)
Inequality grows when r > g – the rate of return from capital is greater than the growth rate.
Rentiers live of interest of their principal, so their income largely grows on rate of return on capital (one check on this is pop growth)
So in normal times, rentiers’ yearly incomes should be growing more than laborers’, which would increase inequality
Hyper inflation, asset destruction, gov't interference, wealth taxes, are all likely to hit rentiers the hardest. 1914-1945 was an example of this.
Even with someone who has 5x average income, it was necessary to spend most of one’s time attending to the needs of daily life.
Grateful for economic growth that has changed that for many.
This was due to the fact that America (as a new country) had less time to accumulate a rentier class, which takes a couple generations for the fortunes to really multiply.
- Have a bunch of super laborers who make money both on labor & on their principal (e.g CEOs). Fewer rich bums these days. :)
- Capital is disproportionately tied up in institutions (endowments, sovereign wealth funds)
CEO salary has been rising steadily. Why?
- Maybe it's just the market
- Maybe it's low taxes relative to 1980s
- Maybe it's corporate governance
People like Bill Gates grow their fortune at 8-10% a year, double Piketty's 4-5% return on capital.
The richest endowments grow at 10% yearly as well. Medium rich endowments grow at 7-8%. Avg person saving for retirement is 4-5%.
Which is why Piketty suggests a global tax on wealth.
Maybe fixing housing would help here, as that transfers wealth from laborers to rentiers.
Or fixing colleges, which also puts laborers in debt.
Or increasing birth rates.
Share the pie as you expand it.