Thomas Piketty Statement in Book - Where is the evidence?

[f252863]

The expression, "unsustainable inequalities" has some rather sinister connotations. Is he suggesting that those at the bottom will revolt?

No. I will skip the Ayn Rand diatribe and answer your question though. "Unsustainable" to an economist means a process that if not modified leads to a system collapse, i.e. is statically or dynamically unstable. Austrian economists have been in the forefront of depicting economic processes that they believe will inevitably lead to total economic collapse. They constantly warn of the dangers of inflation, for example, inevitably leading to Weimar results.

But that doesn't stop us from discussing what I have outlined in this post, if anyone is interested. Let me know what you think.

"My rumination is that Piketty's argument will turn out to be that any system redistributing income and wealth toward the top in the other conditions he specifies in the book (no offsetting public policy to reverse such redistribution; a marginal efficiency of capital greater the than the real rate of growth) will, because of the differential marginal propensities to consume among classes, result in lessened aggregate demand."

Am I reading this statement correctly?

Redistribution is by definition a policy matter, not an outcome of natural free markets.

 

[CrusaderFrank]

"When the rate of return on capital exceeds the rate of growth of output and income...." what does this even mean? The writer is an economic illiterate, on par with Paul Krugman and apparently does not know that businesses have fundamental economic differences.

"Return on capital" is a function of risk and analysis of the underlying economic of the investment. The "return on capital" of government bonds differs from the return on equities and differs from trading commodities or baseball cards or works of art.

The economic though that spawned Piketty's "insight" resembles Manmade Global Warming of Economics; it's just something all Liberals know to be "true" and is unaffected by facts, history and common sense

 

[Kimura]

"When the rate of return on capital exceeds the rate of growth of output and income, as it did in the nineteenth century and seems quite likely to do again in the twenty-first, capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meriocratic values on which democratic societies are based."


What is arbitrary about saving your money and earning a return higher than the GDP growth of your country?

What is arbitrary about inheritance? I want my kids to have everything I own when I die, this isn't an arbitrary decision.

What the hell is an unsustainable inequality? All around us we have evidence of permanent inequality in wealth, intelligence, looks, athletic ability, health, etc.

Capitalism is based on pure meriocratic values, what is he talking about? Other than inheritance (which is a red herring) how is wealth unearned if it is done so legally and without cronyism? Does Piketty think my kids don't deserve an inheritance? I worked hard all my life and lived frugally so I could provide my children a better life and he wants to tax that away?

Now that I’ve read Piketty’s book twice I’ll chime in.

Historically, if we look at the actual data, increasing levels of inequality are a very serious problem in many of the economies in the world today. Some of these problem are poverty rates, stagnant incomes/wages, especially for the have-not side of the equation. These problems are also a direct result of $$$$ in politics. This all culminates in decreased macroeconomic growth, massive distortions in wealth accumulation and, as Minsky pointed out, financial bubbles and instability.

The average person reads these figures which clearly demonstrate more income and wealth inequality and see that something doesn't make sense. In economics, we refer to this as rents: individuals, for whatever economic glitch, are being compensated way more than their marginal productivity. However, our econ textbooks tell us it’s all a fair deal.

I want to start a thread on what I didn't like about Piketty's book.

 

[f252863]

"When the rate of return on capital exceeds the rate of growth of output and income...." what does this even mean? The writer is an economic illiterate, on par with Paul Krugman and apparently does not know that businesses have fundamental economic differences.

"Return on capital" is a function of risk and analysis of the underlying economic of the investment. The "return on capital" of government bonds differs from the return on equities and differs from trading commodities or baseball cards or works of art.

The economic though that spawned Piketty's "insight" resembles Manmade Global Warming of Economics; it's just something all Liberals know to be "true" and is unaffected by facts, history and common sense

Pikettys mind works like all socialists, instead of encouraging growth by promoting accumulation of capital with the middle/lower "classes", his solution is to destroy the greatest producers.

If Social Security had been modeled after 401K plans (with the proviso that only hardship withdrawals would be allowed) all Americans would have been able to take advantage of capital growth.

 

[CrusaderFrank]

"When the rate of return on capital exceeds the rate of growth of output and income...." what does this even mean? The writer is an economic illiterate, on par with Paul Krugman and apparently does not know that businesses have fundamental economic differences.

"Return on capital" is a function of risk and analysis of the underlying economic of the investment. The "return on capital" of government bonds differs from the return on equities and differs from trading commodities or baseball cards or works of art.

The economic though that spawned Piketty's "insight" resembles Manmade Global Warming of Economics; it's just something all Liberals know to be "true" and is unaffected by facts, history and common sense

Pikettys mind works like all socialists, instead of encouraging growth by promoting accumulation of capital with the middle/lower "classes", his solution is to destroy the greatest producers.

If Social Security had been modeled after 401K plans (with the proviso that only hardship withdrawals would be allowed) all Americans would have been able to take advantage of capital growth.

Well said.

The Socialist One Note Samba is always: Kill the Rich! It's said with a different accent with each generation (Kulaks, Jews, Capitalists, 1%er) but it means the same things and always has the same horrific result

 

[f252863]

"When the rate of return on capital exceeds the rate of growth of output and income, as it did in the nineteenth century and seems quite likely to do again in the twenty-first, capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meriocratic values on which democratic societies are based."


What is arbitrary about saving your money and earning a return higher than the GDP growth of your country?

What is arbitrary about inheritance? I want my kids to have everything I own when I die, this isn't an arbitrary decision.

What the hell is an unsustainable inequality? All around us we have evidence of permanent inequality in wealth, intelligence, looks, athletic ability, health, etc.

Capitalism is based on pure meriocratic values, what is he talking about? Other than inheritance (which is a red herring) how is wealth unearned if it is done so legally and without cronyism? Does Piketty think my kids don't deserve an inheritance? I worked hard all my life and lived frugally so I could provide my children a better life and he wants to tax that away?

Now that I’ve read Piketty’s book twice I’ll chime in.

Historically, if we look at the actual data, increasing levels of inequality are a very serious problem in many of the economies in the world today. Some of these problem are poverty rates, stagnant incomes/wages, especially for the have-not side of the equation. These problems are also a direct result of $$$$ in politics. This all culminates in decreased macroeconomic growth, massive distortions in wealth accumulation and, as Minsky pointed out, financial bubbles and instability.

The average person reads these figures which clearly demonstrate more income and wealth inequality and see that something doesn't make sense. In economics, we refer to this as rents: individuals, for whatever economic glitch, are being compensated way more than their marginal productivity. However, our econ textbooks tell us it’s all a fair deal.

I want to start a thread on what I didn't like about Piketty's book.

I concur with respect to crony government, I don't think there is anyone out there who would defend it.

Before addressing inequality we have to do some serious research.

Where does Piketty get income figures from? If they are tax returns that information is invalid. I might make $35,000 a year and my neighbor earns $42,000. I have a free employer provided $25,000 medical insurance policy that pays 100% of my expenses and my neighbor has no medical insurance through his employer. According to Pikettys simplistic analysis my neighbor is suffering from income inequality.

The second question I'd like to ask is the following; Why is naturally (purely market driven) derived income inequality bad?

 

[Kimura]

"When the rate of return on capital exceeds the rate of growth of output and income, as it did in the nineteenth century and seems quite likely to do again in the twenty-first, capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meriocratic values on which democratic societies are based."


What is arbitrary about saving your money and earning a return higher than the GDP growth of your country?

What is arbitrary about inheritance? I want my kids to have everything I own when I die, this isn't an arbitrary decision.

What the hell is an unsustainable inequality? All around us we have evidence of permanent inequality in wealth, intelligence, looks, athletic ability, health, etc.

Capitalism is based on pure meriocratic values, what is he talking about? Other than inheritance (which is a red herring) how is wealth unearned if it is done so legally and without cronyism? Does Piketty think my kids don't deserve an inheritance? I worked hard all my life and lived frugally so I could provide my children a better life and he wants to tax that away?

Now that I’ve read Piketty’s book twice I’ll chime in.

Historically, if we look at the actual data, increasing levels of inequality are a very serious problem in many of the economies in the world today. Some of these problem are poverty rates, stagnant incomes/wages, especially for the have-not side of the equation. These problems are also a direct result of $$$$ in politics. This all culminates in decreased macroeconomic growth, massive distortions in wealth accumulation and, as Minsky pointed out, financial bubbles and instability.

The average person reads these figures which clearly demonstrate more income and wealth inequality and see that something doesn't make sense. In economics, we refer to this as rents: individuals, for whatever economic glitch, are being compensated way more than their marginal productivity. However, our econ textbooks tell us it’s all a fair deal.

I want to start a thread on what I didn't like about Piketty's book.

I concur with respect to crony government, I don't think there is anyone out there who would defend it.

Before addressing inequality we have to do some serious research.

Where does Piketty get income figures from? If they are tax returns that information is invalid. I might make $35,000 a year and my neighbor earns $42,000. I have a free employer provided $25,000 medical insurance policy that pays 100% of my expenses and my neighbor has no medical insurance through his employer. According to Pikettys simplistic analysis my neighbor is suffering from income inequality.

The second question I'd like to ask is the following; Why is naturally (purely market driven) derived income inequality bad?

The book is 700 pages with hundreds of footnotes (I'm still busy cross-referencing in my spare time). He's collated data on a massive scale. I've never seen anything like it before.

You can find some of the US data he used here:

The problem with income inequality is that it's unsustainable - both economically and politically. The returns on capital are increasing faster than the growth of economies.

 

[The Rabbi]

The problem with income inequality is that it's unsustainable - both economically and politically. The returns on capital are increasing faster than the growth of economies.

Yeah people say that and then when pressed can't explain why not. Unless you think that 10 people will end up with all the money in the world while the rest of humanity rots in the gutter.

 

[oldfart]

So your response is, He must know what he's talking about.

No, my response is that Piketty is published on this issue and you should either wait until you have read his latest book to argue how well he makes his case or make your argument based on his other published works. Your position seems to be that because you have not read his work, he must be wrong.

I think the message board garbled the rest of your post when I went to reply, so I'll re-read and try to respond to the rest.

OK, it isn't the message board. The rest of the post was a drive-by.

 

[oldfart]

The expression, "unsustainable inequalities" has some rather sinister connotations. Is he suggesting that those at the bottom will revolt?

No. I will skip the Ayn Rand diatribe and answer your question though. "Unsustainable" to an economist means a process that if not modified leads to a system collapse, i.e. is statically or dynamically unstable. Austrian economists have been in the forefront of depicting economic processes that they believe will inevitably lead to total economic collapse. They constantly warn of the dangers of inflation, for example, inevitably leading to Weimar results.

But that doesn't stop us from discussing what I have outlined in this post, if anyone is interested. Let me know what you think.

"My rumination is that Piketty's argument will turn out to be that any system redistributing income and wealth toward the top in the other conditions he specifies in the book (no offsetting public policy to reverse such redistribution; a marginal efficiency of capital greater the than the real rate of growth) will, because of the differential marginal propensities to consume among classes, result in lessened aggregate demand."

Am I reading this statement correctly?

I certainly hope so.

Redistribution is by definition a policy matter, not an outcome of natural free markets.

One of Piketty's theses is that the marginal productivity theory of factor shares (your implied theory of distribution) is a necessary condition for his results. If you mean that some "pure" market distributes income in factor shares independent of the public policies that shape markets, I would disagree with you on the grounds made by Milton Friedman in "Essays On Positive Economics". All policies have the potential to alter the distribution of income, and most of this influence is manifested through the behavior of free markets.

 

[oldfart]

The book is 700 pages with hundreds of footnotes (I'm still busy cross-referencing in my spare time). He's collated data on a massive scale. I've never seen anything like it before.

Try reading Eugene Genovese.

 

[f252863]

The book is 700 pages with hundreds of footnotes (I'm still busy cross-referencing in my spare time). He's collated data on a massive scale. I've never seen anything like it before.

Try reading Eugene Genovese.

The implication being:

If you write a long book with reams of data, it must be right.

Some people need to attend a logic class. Universal truths are easily encapsulated in a paragraph or less.

 

[HelenaHandbag]

The book is 700 pages with hundreds of footnotes (I'm still busy cross-referencing in my spare time). He's collated data on a massive scale. I've never seen anything like it before.

Try reading Eugene Genovese.

The implication being:

If you write a long book with reams of data, it must be right.

Some people need to attend a logic class. Universal truths are easily encapsulated in a paragraph or less.

Or:

If they cannot dazzle you with their brilliance, they try to baffle you with their bull.

 

[oldfart]

The book is 700 pages with hundreds of footnotes (I'm still busy cross-referencing in my spare time). He's collated data on a massive scale. I've never seen anything like it before.

Try reading Eugene Genovese.

The implication being:

If you write a long book with reams of data, it must be right.

Some people need to attend a logic class. Universal truths are easily encapsulated in a paragraph or less.

Genovese was a first rate economic historian who wrote with a style that thoroughly laid out the evidence for his arguments; he was famous for it. My mention of him was an inside joke about Piketty's style which seems to be much the same. I think Kimura has at least heard of Genovese's style and would appreciate the reference.

Now if you want to talk about someone who did the same thing and took to the extreme of being unintelligible, you would have to read Joseph Schumpeter. In his "History of Economic Thought", he got to about page 3000 when he had the bad form to die. It took his widow 17 years to finish the book, and she had to skip a lot of topics he had outlined but for which his unfinished notes were inadequate to base a meaningful chapter on.

 

[The Rabbi]

Schumpeter is a tough author. I picked up hsi Creative Destruction (intro by one of my old professors) and read only a few pages into it.
Wasn't Michael Belesiles also noted for extensive foot notes of his sources? Which then turned out to have been fabricated?

 

[f252863]

Try reading Eugene Genovese.

The implication being:

If you write a long book with reams of data, it must be right.

Some people need to attend a logic class. Universal truths are easily encapsulated in a paragraph or less.

Genovese was a first rate economic historian who wrote with a style that thoroughly laid out the evidence for his arguments; he was famous for it. My mention of him was an inside joke about Piketty's style which seems to be much the same. I think Kimura has at least heard of Genovese's style and would appreciate the reference.

Now if you want to talk about someone who did the same thing and took to the extreme of being unintelligible, you would have to read Joseph Schumpeter. In his "History of Economic Thought", he got to about page 3000 when he had the bad form to die. It took his widow 17 years to finish the book, and she had to skip a lot of topics he had outlined but for which his unfinished notes were inadequate to base a meaningful chapter on.

Theories that form the foundation for higher taxes on wealthy would be met with less skepticism if the recipients who promote such ideas didn't stand to be on the receiving end of their professed munificence.

This is an age old behavior of the statist, religion employed the very same tactics. Give us your money and we promise you a better future. Behind this exhortation is the use of language designed to be impervious to the layman. "Why should I give you my money?" says the "slow witted" farmer. The economist says "You don't understand our language, G = \frac{1}{n}\left ( n+1 - 2 \left ( \frac{\sum\limits_{i=1}^n \; (n+1-i)y_i}{\sum\limits_{i=1}^n y_i} \right ) \right ) ". Religious authorities took it a step further, they prohibited translation of the Bible into Latin upon punishment by death.

Giving anyone the power to redistribute money is a proven recipe for corruption.

Mencken, the brilliant American journalist, stated it well in his chapter the Social Contract from Prejudices:

"“All government, in its essence, is a conspiracy against the superior man: its one permanent object is to oppress him and cripple him. If it be aristocratic in organization, then it seeks to protect the man who is superior only in law against the man who is superior in fact; if it be democratic, then it seeks to protect the man who is inferior in every way against both. One of its primary functions is to regiment men by force, to make them as much alike as possible and as dependent upon one another as possible, to search out and combat originality among them. All it can see in an original idea is potential change, and hence an invasion of its prerogatives. The most dangerous man to any government is the man who is able to think things out for himself, without regard to the prevailing superstitions and taboos. Almost inevitably he comes to the conclusion that the government he lives under is dishonest, insane and intolerable, and so, if he is romantic, he tries to change it. And even if he is not romantic personally he is very apt to spread discontent among those who are.”

 

[Rshermr]

F252863 says: "Giving anyone the power to redistribute money is a proven recipe for corruption."

Exactly. Which is what we have seen for the past 40 years. And what has been documented over and over and over. And what anyone interested in the subject knows. Redistribution has been done to the wealthy, from the middle class. Provably. And it has corrupted both private and political operatives. No question about it.
So, simple enough. While the conservative tool, like yourself, ALWAYS pushes the desires of the few very wealthy who always want MORE, the vast majority of people see what is happening today with the distribution of income and wealth as a huge problem. Con tool, no problem. Everyone else, big problem. That is the simple explanation of what is happening.
And while the few very wealthy have the bucks to push their agenda, and do so every second of every day, by the hundreds of millions of dollars in propaganda, they are loosing. Even though you continue to carry their water, even the poorly educated voting public is getting an understanding of the problem. And the economists who pushed that great old philosophy of economic Darwinism, or in your case, simply supply side economics, are today about as popular as a fart in church. Always happens, in every economy being ruined by abject selfishness.

 

[CrusaderFrank]

The best thing about Progressive and revolution is that the people on the bottom, like most of the USMB Progs end up either as slaves or fertilizer

 

[editec]

So your response is, He must know what he's talking about.
The truth is that there are no fixed classes here. It is an abstraction. Studies of the 3rd quintile of earners etc implicitly suggest it is the same people year after year. That is not true. It is an error, probably one made in the book.

You misunderstand my statement. You shouldn't be reading books as you will misunderstand them as well.

WQe note how carefully you insinuate the word FIXED into the discussion as though if there are not FIXED classes the concept of CLASS (as defined in the study of macroeconomics) is invalid.

Nonsense, lad.

Worse actually... your post is fairly typical right winger half-lie driven propagada

Hence the "fixed" insinuated into the discussion

 

[editec]

The problem with income inequality is that it's unsustainable - both economically and politically. The returns on capital are increasing faster than the growth of economies.

Yeah people say that and then when pressed can't explain why not. Unless you think that 10 people will end up with all the money in the world while the rest of humanity rots in the gutter.

Note how this knownothing implies that the opposing POV is proposing preposterous statistics?

This is a modified example of trying to turn your opposition into a STRAW MAN.

You really are a thoughly dishonest poster, Lad.

I fault you for this, son, because it is obvious that you are smart enough to know perfectly well that you are lying by rhetorical subterfuge.