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That's simply not true. If the rich are reinvesting all of their wealth... we wouldn't have a wealth gap. This is almost a tautology. Rich guy has wealth X. He
by yummyfajitas 10y ago
That's simply not true. If the rich are reinvesting all of their wealth... we wouldn't have a wealth gap. This is almost a tautology.
Rich guy has wealth X. He invests it all and 1 time period later he has X(1+R).
If the poor guy has worse investment opportunities (as Piketty claims), then the poor guy will have wealth only x(1+r). Here x < X is the poor guy's wealth, and r < R is the poor guy's investment growth rate.
The gap grows by (1+R)/(1+r).
In contrast, if the rich guy hoarded he would only have wealth X, while the poor guy would have x(1+r). The gap would shrink by 1/(1+r).
If, as you postulate, the rich guy invests k of his wealth and hoards (1-k) then the gap would change at the rate (1+kR)/(1+r). More hoarding = smaller k = slower growth (or shrinkage) of wealth gap.
Life is rarely black and white.
Try doing the math and you'll see it sometimes is.
- pdkl95 10y agoWhat you don't seem to understand is that "r" is 0 for a very large portion of the country, and in many cases is even negative. > the poor guy's investment Except in rare cases, this doesn't exist. > Try doing the math The math is simple. The problem is your data seems to be based more on wishful thinking than actual experience and research.
- yummyfajitas 10y agoMy arithmetic is based only on the definition of hoarding (holding wealth without investing it) and Thomas Picketty's claim - which you just agreed with - that R > r. Why don't you do your own arithmetic to demonstrate my error?
- dllthomas 10y agoWhile I am skeptical that it's the case, you seem to have missed the assertion that r < 0. In that case, the "shrinking" of the wealth gap by 1/(1+r) would be more accurately termed a growing by 1/(1-r).