Greg Mankiw " I don’t see wealth as naturally growing at the rate of return on capital, and as a result I don’t see as wealth concentration as continuing to increase." April 29
Larry Sumners "His argument is that capital or wealth grows at the rate of return to capital, a rate that normally exceeds the economic growth rate." A few days ago
Yves Smith "In year 2, you multiply r by your year 1 capital plus r from year 1. Piketty’s definition of capital is extremely broad (it’s been criticized for that reason). Folks, this is basic compounding, and that’s where the fallacy in his reasoning lies. It’s bloomin’ obvious." and "As Piketty defines capital, the return on capital in one period becomes capital in the next time period by virtue of being capital-type assets (loans, stocks, investments in more production, etc.)" May 22
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.”
Dan Kervick points to some of these in his posts A proper Pile of Piketty Posts and also Matt Bruenig posts on Piketty's Capital
P.S. In the Yves Smith post quoted above, Dan Kervick has several useful points clarifying Piketty's book. See in particular the 10:35, May 22 remark. An excerpt "Look what’s going on here. The Marxists don’t like Piketty because they have an analysis that predicts capitalism leads to an endless increase in the capital share, a crisis of profitability, and then possibly revolution. The liberals don’t like Piketty because he is arguing that the problems with actually existing capitalism are deeper than those that can be fixed just by making markets more perfect while building a safety net. Piketty is arguing that capitalism can persist in a relatively stable condition for a very long time where the rich just keep getting richer. And in the end, even after returns to capital fall and this process of increasing inequality levels off, you don’t get crisis or collapse, but a stable neo-feudal system with a flat, but very high, capital share, and with rich people collecting their rents year after year." On the whole a useful discussion. Even though Yves Smith keeps posting anti-Piketty posts, she has allowed the discussion to go on. See also William Neil at 9.48 A.M. "As to the other factors which may affect capital accumulation and its rate of return, don’t underestimate the not fully explicated but suggestive implications of the words Piketty uses in Chapter 7, “Inequality and Concentration: Preliminary Bearings,” specifically on page 262: “Indeed, whether such extreme inequality is or is not sustainable depends not only on the effectiveness of the repressive apparatus but also, and perhaps primarily, on the effectiveness of the apparatus of justification.”"
This seems to be a discussion that I will go back to off and on.
Larry Sumners "His argument is that capital or wealth grows at the rate of return to capital, a rate that normally exceeds the economic growth rate." A few days ago
Yves Smith "In year 2, you multiply r by your year 1 capital plus r from year 1. Piketty’s definition of capital is extremely broad (it’s been criticized for that reason). Folks, this is basic compounding, and that’s where the fallacy in his reasoning lies. It’s bloomin’ obvious." and "As Piketty defines capital, the return on capital in one period becomes capital in the next time period by virtue of being capital-type assets (loans, stocks, investments in more production, etc.)" May 22
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.”
Dan Kervick points to some of these in his posts A proper Pile of Piketty Posts and also Matt Bruenig posts on Piketty's Capital
P.S. In the Yves Smith post quoted above, Dan Kervick has several useful points clarifying Piketty's book. See in particular the 10:35, May 22 remark. An excerpt "Look what’s going on here. The Marxists don’t like Piketty because they have an analysis that predicts capitalism leads to an endless increase in the capital share, a crisis of profitability, and then possibly revolution. The liberals don’t like Piketty because he is arguing that the problems with actually existing capitalism are deeper than those that can be fixed just by making markets more perfect while building a safety net. Piketty is arguing that capitalism can persist in a relatively stable condition for a very long time where the rich just keep getting richer. And in the end, even after returns to capital fall and this process of increasing inequality levels off, you don’t get crisis or collapse, but a stable neo-feudal system with a flat, but very high, capital share, and with rich people collecting their rents year after year." On the whole a useful discussion. Even though Yves Smith keeps posting anti-Piketty posts, she has allowed the discussion to go on. See also William Neil at 9.48 A.M. "As to the other factors which may affect capital accumulation and its rate of return, don’t underestimate the not fully explicated but suggestive implications of the words Piketty uses in Chapter 7, “Inequality and Concentration: Preliminary Bearings,” specifically on page 262: “Indeed, whether such extreme inequality is or is not sustainable depends not only on the effectiveness of the repressive apparatus but also, and perhaps primarily, on the effectiveness of the apparatus of justification.”"
This seems to be a discussion that I will go back to off and on.
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