A discussion of the Book
The Agenda for Economics and Inequalityhttp://www.hup.harvard.edu/catalog.php?isbn=9780674504776
DELONG: Am I the only person who thinks the answer to this is pretty obvious—that Piketty made a mistake in calling the book Capital in the Twenty-First Century rather than Wealth in the Twenty-First Century? Because you may well believe—and in fact I firmly do believe—that the rate of return on actual useful machines and buildings declines as the proper physical capital-to-labor ratio increases.
The problem is that these marginal products of real physical capital, machines, and buildings is only a small part of the returns flowing to wealth, which are composed of monopoly rents of one sort or another, either acquired by antitrust forbearance on the one hand or by government license on the other, plus a whole bunch of other things, all the way down to the middle class and rich of the previous generation who don’t really understand that their investment advisors do not act as though they have a fiduciary duty toward them. Wealth deployed in order to maintain its own rate of return is a much easier thing to understand than how is it that if there are four machines competing for each worker, then workers are unable to drive down the price of renting any one of them.
( My impression: Michael Hudson has been saying this for a long time. Search FIRE sector http://www.fireeconomy.com )
Steinbaum: .......I mean, in fact you could say that the book is not really about a theory of why some people are rich and other people are poor, but by presenting the inequality statistics that he has spent his life putting together, he made that question and the fact that economics does not have a very convincing answer to that question front and center.
And so anybody who writes a paper about this or articulates a theory about why some people are rich and other people are poor owe something to Piketty, whether or not they want to admit that.