Friday, May 02, 2014

The daily Piketty

The "Piketty Bubble" is more than hot air says John Cassidy
Piketty Fever from The Economist
Piketty vs Mankiw Mankiw says "I don’t see wealth increasing at the rate of return on capital. That’s simply because people spend their money when they have capital. " 
Clearly Mankiw has not read the book. Piketty says in Chapter 10, page 351,"For example, if g=1%, and r=5%, saving one-fifth of the capital from income (while consuming the other four-fifth) is enough to ensure that capital inherited from the previous generation grows at the same rate as the economy. If one saves more, because one's fortune is large enough to live well while consuming less than one's annual rent, then one's fortune will increase more rapidly than the economy, and inequality of wealth will tend to increase even if one contributes no income from labor."
P.S. Tyler Cowen of George Mason University keeps posting anti-Piketty reviews. The latest makes a similar mistake.
And Yves Smith keeps linking to anti-Piketty reviews from the left, this time about the definition of capital.

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